LEVEL OF SIGNIFICANCE

Significance - is defined as the quality of being statistically significant.

Level of significance – refers to a criterion of judgement upon which a
decision is made regarding the value stated in a null hypothesis. Its value is
between 0 to 1 or between 0% to 100%. And its denoted by .
Alpha – is a probability of rejecting a true null hypothesis.

CRITICAL REGION
Critical Region – also known, as rejection region, is a range of values that
corresponds to the rejection of the null hypothesis. If the value of the test
statistic is within the critical region, then the null hypothesis is rejected.
Critical Value – are the numbers that determine the rejection region.
 Commonly Used Levels of Significance and its
Corresponding Critical Values

Test Types
Level of
Significance One-Tailed Two-Tailed

0.05 + 1.645 or -1.645

0.01 + 2.33 or -2.33

0.001 + 3.09 or -3.09
TYPES OF ERRORS IN HYPOTHESIS TESTING
To summarize the difference between the Type I and Type II
errors, take a look at the table below.

DECISION
Truth Don’t Reject Null Reject Null
Null is true Correct Type I Error
Null is false Type II Error Correct
EXAMPLES:
1. The average number of years a teacher works before
retiring is 30.
Type I Error: We conclude that the average number of years a teacher works
before retiring is not 30 years, when it is really 30 years.
Type II Error: We conclude that the average number of years a teacher
works before retiring is 30 years, when in fact it is not really 30 years.
 Now, complete the statements that follow

Direction: Analyze the possibilities of Sofia’s conclusion. Identify if it is a Type I

Error, Type II Error, or a Correct Decision.

If Sofia finds out that her null hypothesis is …

1. true and she fails to reject it, then she commits a ____________________.
2. true and she rejects it, then she commits a _____________________.
3. false and she fails to reject it, then she commits a __________________.
4. false and she rejects it, then she commits a _____________________.

Answers:
1. Correct Decision
2. Type I Error
3. Type II Error
4. Correct Decision
Another Example: Bryan is starting his own food cart business and he is
choosing cities where he will run his business. He wants to survey residents
and test at 5% level of significance whether or not the demand is high enough
to support his business before he applies for the necessary permits to operate
in his selected city. He will only choose a city if there is strong evidence that
the demand there is high enough. We can state the null hypothesis for his test
as:

𝐻𝑜: The demand is high enough.

1. What would be the consequence of a Type I error in this setting?

_____ He doesn't choose a city where demand is actually high enough.
_____ He chooses a city where demand is actually high enough.
_____ He chooses a city where demand isn't actually high enough.
2. What would be the consequence of a Type II error in this setting?
_____ He doesn't choose a city where demand is actually high enough.
_____ He chooses a city where demand is actually high enough.
_____ He chooses a city where demand isn't actually high enough.

3. What is the probability of Type I error?

_____ 0.10 _____ 0.25 _____ 0.05 _____ 0.01