Today’s lecture

 Hypothesis testing

 Sample Size Calculation

 Hypothesis Testing; The Logic
 Four Steps of The Test
 Two-tail and Single-tail Tests
 Hypothesis Tests for a Proportion
 Errors and Avoiding These Errors
confidence intervals; Summary

Confidence interval for mean

Known

Unknown

Confidence interval for proportions

SAMPLE SIZE CALCULATION

 If a pollster needs to make a prediction about a particular

candidate's vote share in the US presidential election, then how
many voters should the pollster survey to make this prediction?
 A quality control manager at a battery manufacturer wanting to
estimate the average number of defective batteries contained in a
box shipped by the company. How many boxes does she need to
open to figure out the average number of defective batteries
contained in a box?
Sample Size Calculation

 The pollster while predicting the proportion of votes for a

particular candidate, may want to have a margin of error with a
confidence level of 95%.
 The quality control manager, while estimating the average
number of defective batteries contained in a box, may want to
assess this population parameter, the average number of
defectives in a box with a margin of error of plus minus 0.3
batteries, and a confidence level of 95%.
Sample Size Calculation

Confidence interval for mean

Known

Margin of error:
Sample Size Calculation

Confidence interval for proportions

Margin of error:
HYPOTHESIS TESTING; THE LOGIC

 You make an assumption (The null hypothesis)

 If your data contradicts the assumption, you conclude that
the assumption is wrong

 The application of the central limit theorem and

The Level of Significance (doubt in our decision)
 The probability of rejecting the null hypothesis when it is
true.
HYPOTHESIS TESTING; THE LOGIC

 If we take a random sample from any population data,

then the mean of the sample, denoted by , has a
distribution that is normal with mean equal to the
population mean , and a standard deviation equal to
HYPOTHESIS TESTING; THE LOGIC

 You are a production manager at a beverage manufacturer

and you receive a bottling unit that has been recently re-
adjusted so that it puts 200 ml of liquid in disposable
plastic bottles.
 You need to test that the bottling unit indeed puts 200 ml
of liquid.
 You fill out 10 bottles using the unit at different times so
as to obtain a random sample and measure the amount of
beverage inside each bottle
Hypothesis testing; The four steps

Step 1: Step 2:

Defining the null hypothesis and the Translate the hypothesis test onto the
alternative hypothesis t-distribution

Step 3: Step 4:

Determine the cutoff values for the t- Check where the t-statistic falls
statistic based on our level of
significance
HYPOTHESIS TESTING; SINGLE- OR TWO-TAIL
TEST

 A fuel additive manufacturer claims that, through the use of its fuel
additive, automobiles in the small car category should achieve, on
average, an increase of 3 miles or more per gallon of fuel.
 Claim: The average increase in the fuel efficiency is 3 gallon or more.

 A random sample of 150 automobiles from the small car category is taken,
and their fuel efficiency in terms of miles per gallon is carefully measured.
 Sample mean: 2.9 mpg, Sample standard Deviation: 1.35 mpg
HYPOTHESIS TESTING; PROPORTION

 The university operates the lunch facility for a few months and then decides
to survey the student body. The university conducts a survey with 750
randomly selected students on campus. and finds that 510 of these students,
or 68% of the sampled students, approve of the new facility. The remaining
240 students, or 32% students, do not approve of it.
 Based on the criteria set by the university, should the facility be made
permanent?
Hypothesis testing; The four steps

Step 1: Step 2:

Defining the null hypothesis and the Translate the hypothesis test onto the
alternative hypothesis z-distribution

Step 3: Step 4:

Determine the cutoff values for the z- Check where the z-statistic falls
statistic based on our level of
significance
Hypothesis testing; type I and II errors

 We should be aware that we are susceptible to these two kinds of errors while
doing a hypothesis test.

 Type 1 error: When is rejected but it is true

 Type II error: Not rejecting when it is false.