Statistics for Business

and Economics
Anderson Sweeney Williams
Slides by
John Loucks
St. Edward’s University

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 Chapter 10, Part A
Inference About Means and Proportions
with Two Populations

 Inferences About the Difference Between

Two Population Means: s 1 and s 2 Known
 Inferences About the Difference Between
Two Population Means: s 1 and s 2 Unknown
 Inferences About the Difference Between
Two Population Means: Matched Samples

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 Inferences About the Difference Between
Two Population Means: s 1 and s 2 Known
 Interval Estimation of m 1 – m 2
 Hypothesis Tests About m 1 – m 2

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 Estimating the Difference Between
Two Population Means
 Let 1 equal the mean of population 1 and 2 equal
the mean of population 2.
 The difference between the two population means is
1 - 2.
 To estimate 1 - 2, we will select a simple random
sample of size n1 from population 1 and a simple
random sample of size n2 from population 2.
 Let x1 equal the mean of sample 1 and x2 equal the
mean of sample 2.
 The point estimator of the difference between the
means of the populations 1 and 2 is x1  x2.

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 Sampling Distribution of x1  x2

 Expected Value
E ( x1  x2 )   1   2

 Standard Deviation (Standard Error)

12  22
 x1  x2  
n1 n2

where: 1 = standard deviation of population 1

2 = standard deviation of population 2
n1 = sample size from population 1
n2 = sample size from population 2
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 Interval Estimation of 1 - 2:
s 1 and s 2 Known
 Interval Estimate

12  22
x1  x2  z / 2 
n1 n2

where:
1 -  is the confidence coefficient

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 Interval Estimation of 1 - 2:
s 1 and s 2 Known
 Example: Par, Inc.
Par, Inc. is a manufacturer of golf equipment and
has developed a new golf ball that has been
designed to provide “extra distance.”
In a test of driving distance using a mechanical
driving device, a sample of Par golf balls was
compared with a sample of golf balls made by Rap,
Ltd., a competitor. The sample statistics appear on
the next slide.

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 Interval Estimation of 1 - 2:
s 1 and s 2 Known
 Example: Par, Inc.

Sample #1 Sample #2
Par, Inc. Rap, Ltd.
Sample Size 120 balls 80 balls
Sample Mean 275 yards 258 yards

Based on data from previous driving distance

tests, the two population standard deviations are
known with s 1 = 15 yards and s 2 = 20 yards.

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 Interval Estimation of 1 - 2:
s 1 and s 2 Known
 Example: Par, Inc.
Let us develop a 95% confidence interval estimate
of the difference between the mean driving distances of
the two brands of golf ball.

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 Estimating the Difference Between
Two Population Means
Population 1 Population 2
Par, Inc. Golf Balls Rap, Ltd. Golf Balls
m11 = mean driving m22 = mean driving
distance of Par distance of Rap
golf balls golf balls
m1 – m2 = difference between
the mean distances
Simple random sample Simple random sample
of n11 Par golf balls of n22 Rap golf balls
x11 = sample mean distance x22 = sample mean distance
for the Par golf balls for the Rap golf balls
x1 - x2 = Point Estimate of m1 – m2
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 Point Estimate of 1 - 2

Point estimate of 1 - 2 = x1  x2
= 275 - 258
= 17 yards
where:
1 = mean distance for the population
of Par, Inc. golf balls
2 = mean distance for the population
of Rap, Ltd. golf balls

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 Interval Estimation of 1 - 2:
 1 and  2 Known

12  22 (15) 2 ( 20) 2

x1  x2  z / 2   17  1. 96 
n1 n2 120 80
17 + 5.14 or 11.86 yards to 22.14 yards
We are 95% confident that the difference between
the mean driving distances of Par, Inc. balls and Rap,
Ltd. balls is 11.86 to 22.14 yards.

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Known
 Hypotheses

H0: 1  2  D0 H0: 1  2  D0 H0 : 1  2  D0
Ha : 1  2  D0 Ha : 1  2  D0 Ha : 1  2  D0
Left-tailed Right-tailed Two-tailed
 Test Statistic

( x1  x2 )  D0
z
 12  22

n1 n2

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Known
 Example: Par, Inc.
Can we conclude, using a = .01, that the
mean driving distance of Par, Inc. golf balls is
greater than the mean driving distance of Rap, Ltd.
golf balls?

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Known
 p –Value and Critical Value Approaches

1. Develop the hypotheses. H0: 1 - 2 < 0 

Ha: 1 - 2 > 0
where:
1 = mean distance for the population
of Par, Inc. golf balls
2 = mean distance for the population
of Rap, Ltd. golf balls
2. Specify the level of significance. a = .01

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Known
 p –Value and Critical Value Approaches

3. Compute the value of the test statistic.

( x 1  x 2 )  D0
z
 12  22

n1 n2
(235  218)  0 17
z   6.49
(15) 2
(20 ) 2 2.62

120 80

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Known
 p –Value Approach

4. Compute the p–value.

For z = 6.49, the p –value < .0001.

5. Determine whether to reject H0.

Because p–value < a = .01, we reject H0.
At the .01 level of significance, the sample evidence
indicates the mean driving distance of Par, Inc. golf
balls is greater than the mean driving distance of Rap,
Ltd. golf balls.

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Known
 Critical Value Approach

4. Determine the critical value and rejection rule.

For a = .01, z.01 = 2.33

Reject H0 if z > 2.33

5. Determine whether to reject H0.

Because z = 6.49 > 2.33, we reject H0.
The sample evidence indicates the mean driving
distance of Par, Inc. golf balls is greater than the mean
driving distance of Rap, Ltd. golf balls.
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 Inferences About the Difference Between
Two Population Means: s 1 and s 2 Unknown
 Interval Estimation of m 1 – m 2
 Hypothesis Tests About m 1 – m 2

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 Interval Estimation of 1 - 2:
s 1 and s 2 Unknown
When s 1 and s 2 are unknown, we will:
• use the sample standard deviations s1 and s2
as estimates of s 1 and s 2 , and
• replace za/2 with ta/2.

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 Interval Estimation of 1 - 2:
s 1 and s 2 Unknown
 Interval Estimate

s12 s22
x1  x2  t / 2 
n1 n2

Where the degrees of freedom for ta/2 are:

2
s s  2 2

  
1 2

 n1 n2 
df 
2 2 2 2
1  s1  1  s2 
    
n1 1  n1  n2 1  n2 

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 Difference Between Two Population Means:
s 1 and s 2 Unknown
 Example: Specific Motors
Specific Motors of Detroit has developed a new
Automobile known as the M car. 24 M cars and 28 J
cars (from Japan) were road tested to compare miles-
per-gallon (mpg) performance. The sample statistics
are shown on the next slide.

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 Difference Between Two Population Means:
s 1 and s 2 Unknown
 Example: Specific Motors

Sample #1 Sample #2
M Cars J Cars
24 cars 28 cars Sample Size
29.8 mpg 27.3 mpg Sample Mean
2.56 mpg 1.81 mpg Sample Std. Dev.

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 Difference Between Two Population Means:
s 1 and s 2 Unknown
 Example: Specific Motors
Let us develop a 90% confidence interval estimate
of the difference between the mpg performances of
the two models of automobile.

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 Point Estimate of m 1 - m 2

Point estimate of 1 - 2 = x1  x2
= 29.8 - 27.3
= 2.5 mpg
where:
1 = mean miles-per-gallon for the
population of M cars
2 = mean miles-per-gallon for the
population of J cars

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 Interval Estimation of m 1 - m 2:
s 1 and s 2 Unknown
The degrees of freedom for ta/2 are:
2
 (2.56) (1.81)  2 2

  
 24 28 
df  2 2
 24.07  24
1  (2.56)2  1  (1.81)2 
    
24 1 24  28 1 28 

With a/2 = .05 and df = 24, ta/2 = 1.711

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 Interval Estimation of m 1 - m 2:
s 1 and s 2 Unknown

s12 s22 (2.56)2 (1.81)2

x1  x2  t /2   29.8  27.3  1.711 
n1 n2 24 28
2.5 + 1.069 or 1.431 to 3.569 mpg

We are 90% confident that the difference between

the miles-per-gallon performances of M cars and J cars
is 1.431 to 3.569 mpg.

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 Hypotheses

H0: 1  2  D0 H0: 1  2  D0 H0 : 1  2  D0
Ha : 1  2  D0 Ha : 1  2  D0 Ha : 1  2  D0
Left-tailed Right-tailed Two-tailed
 Test Statistic

( x1  x 2 )  D 0
t
s12 s 22

n1 n 2

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 Example: Specific Motors
Can we conclude, using a .05 level of significance,
that the miles-per-gallon (mpg) performance of M cars
is greater than the miles-per-gallon performance of J
cars?

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 p –Value and Critical Value Approaches
1. Develop the hypotheses.
H0: 1 - 2 < 0 
Ha: 1 - 2 > 0
where:
1 = mean mpg for the population of M cars
2 = mean mpg for the population of J cars

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 p –Value and Critical Value Approaches
2. Specify the level of significance. a = .05

3. Compute the value of the test statistic.

( x1  x2 )  D0 (29.8  27.3)  0
t   4.003
s12 s22 (2.56) 2 (1.81) 2
 
n1 n2 24 28

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 p –Value Approach
4. Compute the p –value.
The degrees of freedom for ta are:
2
 (2.56) (1.81) 2 2

  
 24 28 
df  2 2
 40.566  41
1  (2.56)2  1  (1.81)2 
    
24 1  24  28 1  28 
Because t = 4.003 > t.005 = 1.683, the p–value < .005.

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 p –Value Approach
5. Determine whether to reject H0.
Because p–value < a = .05, we reject H0.
We are at least 95% confident that the miles-per-
gallon (mpg) performance of M cars is greater than
the miles-per-gallon performance of J cars?.

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 Hypothesis Tests About m 1 - m 2:
s 1 and s 2 Unknown
 Critical Value Approach
4. Determine the critical value and rejection rule.
For a = .05 and df = 41, t.05 = 1.683
Reject H0 if t > 1.683

5. Determine whether to reject H0.

Because 4.003 > 1.683, we reject H0.
We are at least 95% confident that the miles-per-
gallon (mpg) performance of M cars is greater than
the miles-per-gallon performance of J cars?.

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 Inferences About the Difference Between
Two Population Means: Matched Samples
 With a matched-sample design each sampled item
provides a pair of data values.
 This design often leads to a smaller sampling error
than the independent-sample design because
variation between sampled items is eliminated as a
source of sampling error.

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 Inferences About the Difference Between
Two Population Means: Matched Samples
 Example: Express Deliveries
A Chicago-based firm has documents that must
be quickly distributed to district offices throughout
the U.S. The firm must decide between two delivery
services, UPX (United Parcel Express) and INTEX
(International Express), to transport its documents.

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 Inferences About the Difference Between
Two Population Means: Matched Samples
 Example: Express Deliveries
In testing the delivery times of the two services,
the firm sent two reports to a random sample of its
district offices with one report carried by UPX and
the other report carried by INTEX. Do the data on
the next slide indicate a difference in mean delivery
times for the two services? Use a .05 level of
significance.

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 Inferences About the Difference Between
Two Population Means: Matched Samples

Delivery Time (Hours)

District Office UPX INTEX Difference
Seattle 32 25 7
Los Angeles 30 24 6
Boston 19 15 4
Cleveland 16 15 1
New York 15 13 2
Houston 18 15 3
Atlanta 14 15 -1
St. Louis 10 8 2
Milwaukee 7 9 -2
Denver 16 11 5
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 Inferences About the Difference Between
Two Population Means: Matched Samples
 p –Value and Critical Value Approaches
1. Develop the hypotheses.
H0: d = 0 
Ha: d 
Let d = the mean of the difference values for the
two delivery services for the population
of district offices

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 Inferences About the Difference Between
Two Population Means: Matched Samples
 p –Value and Critical Value Approaches
2. Specify the level of significance. a = .05

3. Compute the value of the test statistic.

 di ( 7  6... 5)
d    2. 7
n 10
2
 ( di  d ) 76.1
sd    2. 9
n 1 9
d  d 2.7  0
t   2.94
sd n 2.9 10
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 Inferences About the Difference Between
Two Population Means: Matched Samples
 p –Value Approach
4. Compute the p –value.

For t = 2.94 and df = 9, the p–value is between

.02 and .01. (This is a two-tailed test, so we double
the upper-tail areas of .01 and .005.)

5. Determine whether to reject H0.

Because p–value < a = .05, we reject H0.
We are at least 95% confident that there is a
difference in mean delivery times for the two
services?

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 Inferences About the Difference Between
Two Population Means: Matched Samples
 Critical Value Approach
4. Determine the critical value and rejection rule.

For a = .05 and df = 9, t.025 = 2.262.

Reject H0 if t > 2.262

5. Determine whether to reject H0.

Because t = 2.94 > 2.262, we reject H0.
We are at least 95% confident that there is a
difference in mean delivery times for the two
services?

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 End of Chapter 10
Part A

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