E370

10/31/2014
Inferential Methods:
Hypothesis Tests
Week 11, Part 3
1. Write Hypotheses.
2. Choose a level of significance.
3. Decide on the test statistic and its distribution,
then draw a picture of the test.
4. Calculate critical value(s) if necessary.
5. Write a decision rule.
6. Draw the sample and calculate the test statistic.
7. Calculate the p-value if necessary.
8. Apply the decision rule and draw the conclusion.

Steps in a Hypothesis Test

 Joe's Television Repair and Tattoo Parlour claims that no
more than 10% of the TVs repaired there have to come back
for additional work. To prove this, Joe takes a random
sample of 100 repaired sets, and finds that 14 came back for
additional work. Test this at the 4% level of significance.
State hypotheses.
H0: < 0 .10
H1: > 0.10
Select a level of significance.
= 4%
Determine the test statistic and how it is distributed.
10% and a number of trials; 0.1*100=10>5 Sample
..
Proportion. ~(. , = . )

A test
 Calculate the critical value(s).
Right Tailed Test =NORM.S.INV(0.96) = 1.751
Draw a picture
of the test.

Continue the test . . .

 Write a decision rule.
If zOBS > zCRIT = 1.751, reject the null and conclude
that more than 10% of TVs must come back for
additional repair; otherwise fail to reject the null.
Calculate the test statistic and perform the test.
.. .
= = = .
.. .

Apply the results to the decision rule.

zOBS < zCRIT = 1.751, thus fail to reject the null. There
is no evidence to suggest that Joe is prevaricating.

Finish the test

Final Picture
 Company A's workers earn on average $14 per
hour. The CEO is now considering relocating
the factory to a place in which it can get
cheaper workers. In Normsville, a sample of 25
workers had an average wage of $12 per hour
with a sample standard deviation of $3.20.
Using a 1% level of significance, test whether
the sample data indicates significantly lower
wages in Normsville. Assume wages are
normally distributed.

Company Wages
 State hypotheses.
H0: > $14 an hour
H1: < $14 an hour
Select a level of significance.
= 0.01
Determine the test statistic and how it is distributed.
Testing a population mean, so test statistic is sample
.
mean: ~(, = . )

Calculate the critical value(s).
Left Tailed Test & Sample Standard Deviation
=T.INV(0.01,24) = -2.492

Begin the test

 Draw a picture of the test.

Continue the test

 Write a decision rule.
If tOBS < tCRIT = -2.492, reject the null and conclude
that the hourly wage in Normsville is significantly
lower than $14 an hour; otherwise fail to reject the
null.
Calculate the test statistic and perform the test.
$$
= = = .
. .
Apply the results to the decision rule.
tOBS = -3.125 < tCRIT = -2.492, thus reject the null
and conclude that the hourly wage in Normsville is
significantly lower than $14 an hour.

Finish the test

Final Picture
 Indiana University tells its newly admitted
students that the costs of textbooks are $520
on average per semester. A sample of 100
students enrolled in the university shows a
sample average of $530 with a standard
deviation of $45. Using 5% level of
significance, test whether the claim is accurate.

Textbook Costs
 State hypotheses.
H0: = $520
H1: $520
Select a level of significance.
= 0.05
Determine the test statistic and how it is distributed.
Testing a population mean, thus test statistic is the
$
sample mean: ~($, = . )

Calculate the critical value(s).
Two Tailed Test so 2 critical values
=T.INV(0.975,99) = 1.984

Begin the test

 Draw a picture
of the test.

Continue the test

 Write a decision rule.
If |tOBS| >|tCRIT = 1.984 |, reject the null and conclude
that the mean semester textbook cost claim of $520 is not
accurate, otherwise fail to reject the null.
Calculate the test statistic and perform the test.
$$
= = = .
. .
Apply the results to the decision rule.
|tOBS=2.222|>|tCRIT = 1.984|, thus reject the null and
conclude that the mean semester textbook cost claim of
$520 is not accurate, and it appears to be too low.

Finish the test

Final Picture