9.hypothesis Testing For The Mean and Variance of A Population

9.
Hypothesis Testing For The

Mean and Variance of a
Population
Adapted From :
Probability & Statistics for Engineers & Scientists, 8th Ed.
Walpole/Myers/Myers/Ye (c)2007
Introduction to Business Statistics, 5e
Kvanli/Guynes/Pavur (c)2000
South-Western College Publishing
Statistics for Managers
Using Microsoft® Excel 4th Edition
Statistics for Managers Using Microsoft Excel, 4e © 2004 Prentice-Hall, Inc. Chap 8-1
Chapter Goals
After completing this chapter, you should be
able to:
 Formulate null and alternative hypotheses for
applications involving a single population mean or
proportion
 Formulate a decision rule for testing a hypothesis
 Know how to use the critical value and p-value
approaches to test the null hypothesis (for both mean
and proportion problems)
 Know what Type I and Type II errors are
What is a Hypothesis?
 A hypothesis is a claim
(assumption) about a
population parameter:
 population mean
Example: The mean monthly cell phone bill
of this city is μ = $42
 population proportion
Example: The proportion of adults in this
city with cell phones is p = .68
The Null Hypothesis, H0
 States the assumption (numerical) to be

tested
Example: The average number of TV sets in
U.S. Homes is equal to three ( H0 : μ  3 )
 Is always about a population parameter,

not about a sample statistic
H0 : μ  3 H0 : X  3
The Null Hypothesis, H0
(continued)
 Begin with the assumption that the null

hypothesis is true
 Similar to the notion of innocent until
proven guilty
 Refers to the status quo
 Always contains “=” sign
 May or may not be rejected
The Alternative Hypothesis, H1
 Is the opposite of the null hypothesis
 e.g.: The average number of TV sets in U.S.
homes is not equal to 3 ( H1: μ ≠ 3 )
 Challenges the status quo
 Never contains the “=” , “≤” or “” sign
 May or may not be accepted
 Is generally the hypothesis that is believed
(or needs to be supported) by the
researcher
Hypothesis Testing Process
Claim: the
population
mean age is 50.
(Null Hypothesis:
Population
H0: μ = 50 )
Now select a
random sample
Is X 20 likely if μ = 50?
If not likely, Suppose
the sample
REJECT mean age Sample
Null Hypothesis is 20: X = 20
Statistics for Managers Using Microsoft Excel, 4e © 2004 Prentice-Hall, Inc.
Reason for Rejecting H0
Sampling Distribution of X
X
20 μ = 50
If H0 is true
... then we
If it is unlikely that
reject the null
we would get a
sample mean of ... if in fact this were hypothesis that
the population mean… μ = 50.
this value ...
Level of Significance, 
 Defines the unlikely values of the sample

statistic if the null hypothesis is true
 Defines rejection region of the sampling
distribution
 Is designated by  , (level of significance)
 Typical values are .01, .05, or .10
 Is selected by the researcher at the beginning
 Provides the critical value(s) of the test
Level of Significance
and the Rejection Region
Level of significance =  Represents
critical value
H0: μ = 3 /2 /2
H1: μ ≠ 3 Rejection
Two tailed test 0 region is
shaded
H0: μ = 3 
H1: μ > 3
Upper tail test 0
H0: μ = 3

H1: μ < 3
Lower tail test 0
Errors in Making Decisions
 Type I Error
 Reject a true null hypothesis
 Considered a serious type of error
The probability of Type I Error is 

 Called level of significance of the test
 Set by researcher in advance
Errors in Making Decisions
(continued)
 Type II Error
 Fail to reject a false null hypothesis
The probability of Type II Error is β
Outcomes and Probabilities
Possible Hypothesis Test Outcomes
Actual Situation
Decision H0 True H0 False
Do Not
No error Type II Error
Reject
Key: (1 -  ) (β)
Outcome H0
(Probability) Reject Type I Error No Error
H0 () (1-β)
Type I & II Error Relationship
 Type I and Type II errors can not happen at

the same time
 Type I error can only occur if H0 is true
 Type II error can only occur if H0 is false
If Type I error probability (  ) , then

Type II error probability ( β )
Factors Affecting Type II Error
 β when the difference between

hypothesized parameter and its true value
 β when 
 β when σ
 β when n
How to choose between Type I
and Type II errors
 Choice depends on the cost of the error

 Choose little type I error when the cost of rejecting the
maintained hypothesis is high
 A criminal trial: convicting an innocent person
 The Exxon Valdise: Causing an oil tanker to sink
 Choose large type I error when you have an interest in

changing the status quo
 A decision in a startup company about a new piece of
software
 A decision about unequal pay for a covered group.
Hypothesis Tests for the Mean
Hypothesis
Tests for 
 Known  Unknown
Z Test of Hypothesis for the
Mean (σ Known)
 Convert sample statistic ( X ) to a Z test statistic
Hypothesis
Tests for 
σ Known σ Unknown
The test statistic is:
X μ
Z 
σ
n
Critical Value
Approach to Testing
 For two tailed test for the mean, σ known:
 Convert sample statistic ( X ) to test statistic (Z
statistic )
 Determine the critical Z values for a specified
level of significance  from a table or
computer
 Decision Rule: If the test statistic falls in the
rejection region, reject H0 ; otherwise do not
reject H0
Two Tailed Tests
H0: μ = 3
 There are two
H1: μ  3
cutoff values
(critical values),
defining the
regions of /2 /2
rejection
3 X
Reject H0 Do not reject H0 Reject H0
-Z 0 +Z Z
Lower Upper
critical critical
value value
Review: 10 Steps in
Hypothesis Testing
 1. State the null hypothesis, H0
 2. State the alternative hypotheses, H1
 3. Choose the level of significance, α
 4. Choose the sample size, n
 5. Determine the appropriate statistical
technique and the test statistic to use
 6. Find the critical values and determine the
rejection region(s)
Review: 10 Steps in
Hypothesis Testing
 7. Collect data and compute the test statistic
from the sample result
 8. Compare the test statistic to the critical
value to determine whether the test statistics
falls in the region of rejection
 9. Make the statistical decision: Reject H0 if the
test statistic falls in the rejection region
 10. Express the decision in the context of the
problem
Hypothesis Testing Example
Test the claim that the true mean # of TV
sets in US homes is equal to 3.
(Assume σ = 0.8)
 1-2. State the appropriate null and alternative
hypotheses
 H0: μ = 3 H1: μ ≠ 3 (This is a two tailed test)
 3. Specify the desired level of significance
 Suppose that  = .05 is chosen for this test
 4. Choose a sample size
 Suppose a sample of size n = 100 is selected
(continued)
 5. Determine the appropriate technique

 σ is known so this is a Z test
 6. Set up the critical values
 For  = .05 the critical Z values are ±1.96
 7. Collect the data and compute the test statistic
 Suppose the sample results are
n = 100, X = 2.84 (σ = 0.8 is assumed known)
So the test statistic is:
X μ 2.84  3  .16
Z     2.0
σ 0.8 .08
n 100
(continued)
 8. Is the test statistic in the rejection region?
 = .05/2  = .05/2

Reject H0 if
Z < -1.96 or -Z= -1.96 0 +Z= +1.96
Z > 1.96;
otherwise
do not Here, Z = -2.0 < -1.96, so the
reject H0 test statistic is in the rejection
region
(continued)
 9-10. Reach a decision and interpret the result
 = .05/2  = .05/2
-Z= -1.96 0 +Z= +1.96

-2.0
Since Z = -2.0 < -1.96, we reject the null hypothesis
and conclude that there is sufficient evidence that the
mean number of TVs in US homes is not equal to 3
Pre-selecting  vs. using a P-Value
 In classical hypothesis testing, we typically pre-select 
to be .05 or .01 and then determine the critical region.
 We can then reject the hypothesis with that level of significance.
(Remember that in a 2-sided test, with  = .05, for example, the critical
region would have .025 in either tail.)
 The alternative is calculating the P-value, or probability
of obtaining the calculated result if H0 is true. The P-
value provides more information than just that the
hypothesis was rejected or not.
 If rejected, the P-value may be much less than .05 or .01, giving us additional
confidence in our decision.
 If not rejected, the P-value may be very close to .05 or .01, allowing us the
option of rejecting at a slightly reduced level.
 The judgment of the experimenter is used to interpret the calculated P-value
result.
P-Value Approach to Testing
 p-value: Probability of obtaining a test

statistic more extreme ( ≤ or  ) than the
observed sample value given H0 is true
 Also called observed level of significance
 Smallest value of  for which H0 can be

rejected
P-Value Approach to Testing
(continued)
 Convert Sample Statistic (e.g. X ) to Test

Statistic (e.g. Z statistic )
 Obtain the p-value from a table or computer
 Compare the p-value with 
 If p-value <  , reject H0
 If p-value   , do not reject H0
P-Value Example
 Example: How likely is it to see a sample mean of
2.84 (or something further from the mean, in either
direction) if the true mean is  = 3.0?
X = 2.84 is translated
to a Z score of Z = -2.0
/2 = .025 /2 = .025
P(Z  2.0)  .0228
.0228 .0228
P(Z  2.0)  .0228
p-value
=.0228 + .0228 = .0456
-1.96 0 1.96 Z
-2.0 2.0
P-Value Example
(continued)
 Compare the p-value with 
 If p-value <  , reject H0
 If p-value   , do not reject H0
Here: p-value = .0456 /2 = .025 /2 = .025

 = .05
.0228 .0228
Since .0456 < .05, we
reject the null
hypothesis
-1.96 0 1.96 Z
-2.0 2.0
Connection to Confidence Intervals
 For X = 2.84, σ = 0.8 and n = 100, the 95%

confidence interval is:
0.8 0.8
2.84 - (1.96) to 2.84  (1.96)
100 100
2.6832 ≤ μ ≤ 2.9968
 Since this interval does not contain the hypothesized

mean (3.0), we reject the null hypothesis at  = .05

One Tail Tests
 In many cases, the alternative hypothesis

focuses on a particular direction
This is a lower tail test since the

H0: μ = 3
alternative hypothesis is focused on
H1: μ < 3 the lower tail below the mean of 3
H0: μ = 3 This is an upper tail test since the

alternative hypothesis is focused on
H1: μ > 3
the upper tail above the mean of 3
Lower Tail Tests
H0: μ = 3
 There is only one H1: μ < 3
critical value, since
the rejection area is
in only one tail 
Reject H0 Do not reject H0

-Z Z
0
μ X
Critical value
Upper Tail Tests
H0: μ = 3
 There is only one
critical value, since H1: μ > 3
the rejection area is
in only one tail 
Do not reject H0 Reject H0

Z Zα
0
X μ
Critical value
Example: Upper Tail Z Test
for Mean ( Known)
A phone industry manager thinks that
customer monthly cell phone bill have
increased, and now average over $52 per
month. The company wishes to test this
claim. (Assume  = 10 is known)
Form hypothesis test:

H0: μ = 52 the average is equivalent to $52 per month
H1: μ > 52 the average is greater than $52 per month
(i.e., sufficient evidence exists to support the
manager’s claim)
Example: Find Rejection Region
(continued)
 Suppose that  = .10 is chosen for this test
Find the rejection region: Reject H0
 = .10

0 1.28
Reject H0 if Z > 1.28
Review:
Finding Critical Value - One Tail
Standard Normal
What is Z given  = 0.10? Distribution Table (Portion)
.90 .10
Z .07 .08 .09
 = .10
1.1 .8790 .8810 .8830
.90
1.2 .8980 .8997 .9015
z 0 1.28
1.3 .9147 .9162 .9177
Critical Value
= 1.28
Example: Test Statistic
(continued)
Obtain sample evidence and compute the test

statistic
Suppose a sample is taken with the following
results: n = 64, X = 53.1 (=10 was assumed known)
 Then the test statistic is:
Xμ 53.1  52
Z    0.88
σ 10
n 64
Example: Decision
(continued)
Reach a decision and interpret the result:
Reject H0
 = .10

1.28
0
Z = .88
Do not reject H0 since Z = 0.88 ≤ 1.28

i.e.: there is not sufficient evidence that the
mean bill is over $52
p -Value Solution
(continued)
Calculate the p-value and compare to 

p-value = .1894
Reject H0 P( X  53.1| μ  52.0)

 = .10
 53.1  52.0 
 P Z  
0  10/ 64 
1.28  P(Z  0.88)  1  .8106
Z = .88
 .1894
Do not reject H0 since p-value = .1894 >  = .10
Z Test of Hypothesis for the
Mean (σ UnKnown)
 Convert sample statistic ( X ) to a t test statistic
Hypothesis
Tests for 
σ Known σ Unknown
The test statistic is:
X μ
t n-1 
S
n
Example: Two-Tail Test
( Unknown)
The average cost of a

hotel room in New York
is said to be $168 per
night. A random sample
of 25 hotels resulted in
X = $172.50 and H0: μ = 168
S = $15.40. Test at the H1: μ  168
 = 0.05 level.
(Assume the population distribution is normal)
Example Solution:
Two-Tail Test
H0: μ = 168 /2=.025 /2=.025

H1: μ  168
  = 0.05 Reject H0 Do not reject H0 Reject H0

t n-1,α/2
-t n-1,α/2 0
 n = 25 -2.0639 2.0639
1.46
  is unknown, so X μ 172.50  168
t n1    1.46
use a t statistic S 15.40
 Critical Value: n 25
t24 = ± 2.0639 Do not reject H0: not sufficient evidence that

true mean cost is different than $168
Connection to Confidence Intervals
 For X = 172.5, S = 15.40 and n = 25, the 95%

confidence interval is:
172.5 - (2.0639) 15.4/ 25 to 172.5 + (2.0639) 15.4/ 25
166.14 ≤ μ ≤ 178.86
 Since this interval contains the Hypothesized mean (168),

we do not reject the null hypothesis at  = .05

Hypothesis Tests for Proportions
 Involves categorical values

 Two possible outcomes
 “Success” (possesses a certain characteristic)
 “Failure” (does not possesses that characteristic)
 Fraction or proportion of the population in the

“success” category is denoted by p
Proportions
(continued)
 Sample proportion in the success category is
denoted by ps
X number of successesin sample
 ps  n  samplesize
 When both np and n(1-p) are at least 5, ps

can be approximated by a normal distribution
with mean and standard deviation
 μps  p p(1 p)
σ ps 
n
Hypothesis Tests for Proportions
 The sampling
distribution of ps Hypothesis
is approximately Tests for p
normal, so the test
statistic is a Z
value: np  5 np < 5
and or
ps  p n(1-p)  5
Z n(1-p) < 5
p(1  p)
Not discussed
n in this chapter
Z Test for Proportion
in Terms of Number of Successes
 An equivalent form
to the last slide, Hypothesis
but in terms of the Tests for X
number of
successes, X:
X5 X<5
and or
X  np n-X  5 n-X < 5
Z
np(1  p) Not discussed
in this chapter
Example: Z Test for Proportion
A marketing company
claims that it receives
8% responses from its
mailing. To test this
claim, a random sample
of 500 were surveyed Check:
with 25 responses.
Test at the  = .05
n p = (500)(.08) = 40

n(1-p) = (500)(.92) = 460
significance level.
Z Test for Proportion: Solution
H0: p = .08 Test Statistic:
H1: p  .08 ps  p .05  .08
Z   2.47
p(1 p) .08(1 .08)
 = .05
n 500
n = 500, ps = .05
Critical Values: ± 1.96 Decision:
Reject Reject Reject H0 at  = .05
Conclusion:
.025 .025
There is sufficient
-1.96 0 1.96 z evidence to reject the
-2.47 company’s claim of 8%
response rate.
p-Value Solution
(continued)
(For a two sided test the p-value is always two sided)
Do not reject H0
Reject H0 Reject H0 p-value = .0136:
/2 = .025 /2 = .025
P(Z  2.47)  P(Z  2.47)
.0068 .0068
 2(.0068)  0.0136
-1.96 0 1.96
Z = -2.47 Z = 2.47
Reject H0 since p-value = .0136 <  = .05
Other Example : Z Test for Proportion
H0: p = .8 Test Statistic:

H1: p  .8 ps  p .741  .8
Z   2.086
p(1 p) .8(1  .8)
 = .1
n 200
n = 200, ps = .741
Critical Values: ± 1.645 Decision:
Reject Reject Reject H0 at  = .1`
Conclusion:
.05 .05
There is sufficient
z evidence to reject the
-1.645 0 1.645
-2.086 company’s claim of
80%
p-Value Solution
(continued)
(For a two sided test the p-value is always two sided)
Do not reject H0
Reject H0 Reject H0 p-value = .0376:
/2 = .05 /2 = .05
P(Z  2.09)  P(Z  2.09)

.0188 .0188
0,4812  2(.0188)  0.0376
-1.96 0 1.96
Z = -2.09 Z = 2.09
Reject H0 since p-value = .0376 <  = .1
Chapter Summary
 Addressed hypothesis testing methodology

 Performed two tailed Z Test for the mean
(σ known)
 Discussed critical value and p–value
approaches to hypothesis testing
 Performed one-tail and two-tail tests . . .
Chapter Summary
(continued)
 Performed t test for the mean (σ

unknown)
 Performed Z test for the proportion
 Discussed pitfalls and ethical issues
EXERCISES
Problem 1
The Daytona Beach Tourism Commission recently claimed that the average
amount of money a typical college student spends per day during spring break
is over $70. Based upon previous research, the population standard deviation
is estimated to be $17.32. The Commission surveys 35 students and find that
the mean spending is $67.57. Is there evidence that the average amount
spent by students is less than $70 at  5% ?
Problem 2
The manufacturer of a new product claims that his product will increase output
per machine by 29 units per hour. A line manager adopts the product on 15 of
his machines, and finds that the average increase was only 26 with a standard
deviation of 6.2. Is there evidence to doubt the manufacturer’s claim at  5%?
EXERCISES
Problem 3
The supervisor of a production line believes that the average time to assemble an
electronic component is 14 minutes. Assume that assembly time is normally
distributed with a standard deviation of 3.4 minutes. The supervisor times the
assembly of 14 components, and finds that the average time for completion was 11.6
minutes. Is there evidence that the average amount of time required to assemble a
component is something other than 14 minutes at  10% ?
Problem 4
The manufacturer of a certain chewing gum claims that four out of five dentists
surveyed prefer their type of gum. You decide to test their claim. You find that in a
sample of 200 doctors, 74.1% do actually prefer their gum. Is this evidence sufficient
to doubt the manufacturer’s claim  10% ?
Hypothesis Testing for Differences/Changes in the
Variance of a Population
The Chi-Square (2) Test of Variance
Intended to determine whether a change has

occurred in the dispersion of a population, as
measured by the variance of the data; or
 Whether it is reasonable that a sample with a
particular s2 value could have been randomly drawn
from a population with a hypothesized value of X
Hypothesis Testing for Differences/Changes in the
Variance of a Population

 Employs the 2 family of distributions
 The specific distribution to be employed depends
on the degrees of freedom (df ) for the test
 The 2 distribution originates at 0, and is
positively skewed, but becomes normal as df
increases
The Chi-Square Family of
Distributions
df = 1
df = 4
df = 6
df = 10
0 2 4 6 8  2
12 14 16
Underlying Assumptions
 The population is normally distributed with a

mean of  and a standard deviation of 
 The sample was randomly drawn from the
population associated with the hypothesis
test / experiment / study
Sample Problem # 1
 A management professor has given

careful thought to the design of
examinations. In order for him to be
reasonably certain that an exam does a
good job of distinguishing the differences
in achievement shown by the students, the
standard deviation cannot be too small.
On the other hand, if the standard
deviation is too large, there will tend to be
a lot of very low scores, which is bad for
student morale. Past experience has led
the professor to believe that a standard
The professor just gave an exam
deviation of 13 points on a 100-pt exam
indicates that the exam does a good job of to his class of 31 students. The
balancing these two objectives. mean score was 72.7 and the
standard deviation was 15.9.
Does this exam meet his criterion
At  0.1 ?
Sample Problem # 1
Summary of Data:
H0  13 <---- hypothesized value of standard deviation
s  15.9 <--- sample standard deviation
n  31 <----- sample size
1. H0: 2  169 2.   0.10

H1: 2  169
Sample Problem # 1
 Step 3: State the Associated Test Statistic (2)
2 = (n  1) s 2
2
• Step 4: 2 = 2 (n-1) df if H0 is True

Sample Problem # 1
Step 5: Determine the critical values of 2

2 1 2, df = 2 1  0.10/2, n  1
= 2 0.95, 31  1
= 2 0.95, 30
= 18.493
2 2, df = 2 0.10/2, n  1
= 2 0.05, 31  1
= 2 0.05, 30
= 43.773
Sample Problem # 1
Step 5: Determine the critical values of 2

2 1 2, df = 2 1  0.10/2, n  1
= 2 0.95, 31  1
Acceptance
= 2 0.95, 30 Region
/2
= 18.493 = .05 of
2 2, df = 2 0.10/2, n  1 area
= 2 0.05, 31  1
0 18.493 43.773
=  0.05, 30
2
= 43.773
Sample Problem # 1
 Step 6: Calculate the Value of the Test Statistic (2)
(n  1) s 2 (31  1) 15.9 2
2 = =
2 13 2
(30)(15.9) 2
=
(132
= 44.88
Sample Problem # 1
 Step 7 :
Do Not Reject H0 region
/2 Sample 2
/2
.05 of of 44.88
.05 of
area area
p-Value
0 18.493 43.773
DECISION : reject Ho
Conclusion : The exam didn’t meet the professor’ criterion
Sample Problem # 2 : Self-Review
 Precision Analytics manufactures a wide line of
precision instruments and has a fine reputation
in the field for quality of its instruments. It will
not release an analytic balance for sale unless
that balance shows a variability significantly
below one microgram when weighing
quantities of about 500 grams.
 A new balance has just been delivered to the

quality control division from the production line.
It is tested to weigh the same 500-gm standard
weight 30 different times. The sample
standard deviation turns out to be 0.73
microgram. Should the balance be sold at 
0.1 ?

9.hypothesis Testing For The Mean and Variance of A Population

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9.hypothesis Testing For The Mean and Variance of A Population

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9.

Hypothesis Testing For The

 States the assumption (numerical) to be

 Is always about a population parameter,

 Begin with the assumption that the null

 Defines the unlikely values of the sample

The probability of Type I Error is 

The probability of Type II Error is β

Possible Hypothesis Test Outcomes

 Type I and Type II errors can not happen at

If Type I error probability (  ) , then

 β when the difference between

 Choice depends on the cost of the error

 The Exxon Valdise: Causing an oil tanker to sink

 Choose large type I error when you have an interest in

The test statistic is:

 5. Determine the appropriate technique

 8. Is the test statistic in the rejection region?

Reject H0 Do not reject H0 Reject H0

Reject H0 Do not reject H0 Reject H0

-Z= -1.96 0 +Z= +1.96

 p-value: Probability of obtaining a test

 Smallest value of  for which H0 can be

 Convert Sample Statistic (e.g. X ) to Test

Here: p-value = .0456 /2 = .025 /2 = .025

 For X = 2.84, σ = 0.8 and n = 100, the 95%

 Since this interval does not contain the hypothesized

Statistics for Managers Using Microsoft Excel, 4e © 2004 Prentice-Hall, Inc.

 In many cases, the alternative hypothesis

This is a lower tail test since the

H0: μ = 3 This is an upper tail test since the

Reject H0 Do not reject H0

Do not reject H0 Reject H0

Form hypothesis test:

Find the rejection region: Reject H0

Do not reject H0 Reject H0

Reject H0 if Z > 1.28

Obtain sample evidence and compute the test

Do not reject H0 Reject H0

Do not reject H0 since Z = 0.88 ≤ 1.28

Calculate the p-value and compare to 

Reject H0 P( X  53.1| μ  52.0)

The test statistic is:

The average cost of a

H0: μ = 168 /2=.025 /2=.025

  = 0.05 Reject H0 Do not reject H0 Reject H0

t24 = ± 2.0639 Do not reject H0: not sufficient evidence that

 For X = 172.5, S = 15.40 and n = 25, the 95%

172.5 - (2.0639) 15.4/ 25 to 172.5 + (2.0639) 15.4/ 25

 Since this interval contains the Hypothesized mean (168),

Statistics for Managers Using Microsoft Excel, 4e © 2004 Prentice-Hall, Inc.

 Involves categorical values

 Fraction or proportion of the population in the

 When both np and n(1-p) are at least 5, ps

Reject H0 since p-value = .0136 <  = .05

H0: p = .8 Test Statistic:

P(Z  2.09)  P(Z  2.09)

Reject H0 since p-value = .0376 <  = .1

 Addressed hypothesis testing methodology