BUSINESS STATISTICS

Assoc .Prof. Nguyen Huu Bao

Department of Mathematics !"U

BUSINESS STATISTICS Course sy##a$us
Instructor: Assoc.Prof .Nguyen Huu Bao - Department of Mathematics
E - mail: NghBao@Wru. eu. !n" phone: #$%&##'&&(
%ffice: Department of Mathematics"W)*%+, -ayson . Dong a - Hanoi
Cooperator: Mmath. Nguyen !an Dac Phone : #$/,,#,,#$
Prere&uisite: Basic Mathematics s0ills
Te't$oo(: Essentials of Moern Business 1tatistics 2ith Microsoft E3cel. Anerson
12eeney an William .
)aptop* 4ou 2ill 5e e3pecte to use your laptop in class an to complete the
Home2or0 5y using Microsoft E3cel soft2are. 1ome 6uestions on the mi - term
an final e3ams 2ill re6uire using 7aptop. Bring your laptop to class e!ery ay.
Course content: -his course 2ill introuce you to all the important 5usiness-
relate topics in applie statistics in one semester. -his semester 2e 2ill learn a5out
ata ac6uisition an analysis" ta5ular" graphical an numerical methos 2ill use of
escripti!e statistics" pro5a5ly istri5utions" statistical inference an regression
analysis. We 2ill use the statistical capa5ilities of Microsoft E3cel to reuce your
calculations
Tests* -hese 2ill 5e three -ests uring the course. -he -est 2ill 5e in at least '#
minus an each 2ill 5e score on the 5asic of %## points.
Home+or(: Home2or0 from the te3t5oo0 2ill 5e assigne an score regularly.
-here 2ill usually 5e home2or0 assignments ue on -uesay each 2ee0. 7ate
home2or0 2ill not 5e accepte. Missing home2or0 2ill 5e score -( points.
,ra-ing Stan-ar-s*
Tests * . / 0 122 points 3 /22 points
Home+or( Assignments . / 0 45 points each 3 65 points
Contri$ution to Team !or( 5 points
C#ass Atten-ance an- Participation 42 points

Tota# Possi$#e 722 points
/82 9 722 points : A ; /42 9 /5< points : B ; 4=2 9 /1< points : C
472 9 46< points : D ; Be#o+ 472 points : > . >ai# 3
,ra-ing Stan-ar-s in C#ass Atten-ance an- Participation *
- Each a5sent time : - , points
- 8ame late: - ( points
- Each missing Home2or0: - ( points
- Presentation: 9 , points
- 8orrection the e3amples at class: 9 , points
Course 9 Sche-u#e
Day Course Content
+-%# :ntrouce the course. 8hapter %: Data an 1tatistics . 8hapter ( : Bar chat
an
Pie chat
/-%# 8hapter &: Descripti!e statistics. Numerical Measures
%%-%# -eam Wor0 : Practice Microsoft E3cel
%(-%# 8hapter ;: :ntrouction to Pro5a5ility
1ome e3amples calculating Pro5a5ility of a e!ent A : P<A=
%&-%# 8hapter ,: Discrete Pro5a5ility Distri5ution- )e!ie2 for -est %
%;-%# Test 1 8hapter ' : 8ontinuous Pro5a5ility Distri5ution
*sing E3cel to computer Normal Distri5ution
%,-%# 8hapter + : 1ampling an 1ampling Distri5ution
1ampling Distri5ution of x an 8entral 7imit -heorem
%/-%# Point Estimation. 8hapter / :nter!al Estimation
%$-%# 8hapter / : :nter!al Estimation . )e!ie2 for -est (
(#-%# Test 4 8hapter $ : Hypothesis -esting .
(%-%# -est for Population Mean
((-%# 8hapter %(: 7est s6uare metho . 1imple 7inear )egression
E3cel>s )egression -ool
(,-%# -eam Wor0 : Dra2ing the 1imple 7inear )egression 7ine
('-%# )e!ie2 for -est &
(+-%# Test / :nform the 8lass a5out Attenance an Participation
1core

CHAPTE" 1 DATA AND STATISTICS
1.1 DATA* Data are the facts an the figures " analy?e an summari?e for
presentation an interpretation. All the ata collecte in a particular stuy are
referre as the ata set for the stuy


E#ements are the entities on 2hich ata are collecte
A ?aria$#e is characteristic of in interest for elements

Data sources* Data can 5e o5taine from e3isting sources or from sur!eys an
e3perimental stuies esigne to collect ne2 ata
1.4 Statistica# Stu-ies* 1ometime the ata neee for a particular application are not
a!aila5le through e3isting sources. :n these cases" the ata can often 5e o5taine 5y
conucting a statistica# stu-y.
1tatistical stuies can 5e classifie as either e3perimental or o5ser!ational

1./ Descripti@e Statistics
-here are t2o omains in 1tatistical 1tuies: Descripti!e 1tatistics an -heoretical
Most of the statistical information in ne2spapers" maga?ines" company reports an
other pu5lications consists of ata that are summari?e an presente in a form that is
easy to reaer to unerstan. 1uch summaries of ata 2hich may 5e ta5ular" graphical
or numerical are referre to as Descripti@e Statistics

1.7 Statistica# Inference
The popu#ation an- the samp#e*
Many situations re6uire information a5out a large group of elements < ini!iuals"
companies" !oters" househols" proucts" customers@
But" 5ecause of time" cost" an other consierations" ata can 5e collecte from only a
small portion of the group

-he large group of elements in a particular stuy is calle the Popu#ation an the
smaller group is calle the samp#e
Some e'amp#es in c#ass
1.5 Statistica# Ana#ysis Using Microsoft E'ce#

%A :ntrouce Microsoft E3cel
(A Basic Bperations 2ith Microsoft E3cel
&A Bar chart 2ith Microsoft E3cel
CHAPTE" 4
DESC"ITI?E STATISTICS TABU)A" AND ,"APHICA)
P"ESENTATI%NS
4.1 SummariAing Categorica# Data
>re&uency Distri$ution

A >re&uency Distri$ution is a ta5ular summary of ata sho2ing the num5er
<fre6uency= of items in each of se!eral non-o!erlapping classes
E'amp#e: *sing E3cel>s 8B*N-:C function to construct a Cre6uency Distri5ution of
DBran PurchaseE
Bar Charts an- Pie Charts
E'amp#e: *sing E3cel>s -ool to 8onstruct a Bar 8hart an Pie 8hart of DBran
PurchaseE
4.4 SummariAing Buantitati@e Data
>re&uency Distri$ution
-he three steps necessary to efine the classes a fre6uency istri5ution 2ith
6uantitati!e Data are:
%. Determine the num5er of non-o!erlapping classes
(. Determine the 2ith of each class
&. Determine the class limits
E'amp#e: *sing E3cel>s P:FB--AB7E )EPB)- to 8onstruct a Cre6uency
Distri5ution
A ot place a5o!e the a3is
Dot p#ot* A hori?ontal a3is sho2s the range for the ata. Each ata !alue is
represente 5y <figure (./" page ;$=
Histogram* -his is a common graphical presentation ata 2hich can 5e prepare for
ata pre!iously summari?e in either a fre6uency" fre6uency or percent fre6uency
istri5ution <figure (.$" page ;$=
E'amp#e: *sing E3cel>s P:FB--AB7E )EPB)- to 8onstruct a Cre6uency
Distri5ution an a histogram
Cumu#ati@e Distri$utions* A !ariation of the fre6uency istri5ution that pro!ies
another ta5ular summary of 6uantitati!e ata < ta5le (.+" page ,&=
CHAPTE" /
DESC"ITI?E STATISTICS*
NUME"ICA) MEASU"ES
/.1 Measures of )ocation
Mean
:n statistics formulas it is customary to enote the !alue of !aria5le 3 for the first
o5ser!ation 5y 3
%
" for the secon o5ser!ation 5y 3
(
@. Cor a sample 2ith n
o5ser!ations" the formulas for the sample mean as follo2s

i
x
x
n
=

NB-:8E:
%. -he mean is the a!erage !alues
(. :f the Data are for a sample " the mean is enote 5y x
An if the ata are for the Population" the mean is enote 5y

Some e'amp#es at c#ass

Me-ian* -he Meian is the !alue in the mile 2hen the ata are arrange in
ascening orer
NB-:8E:
%. Cor an o num5er of o5ser!ation" the Meian is the mile !alue
(. Cor an e!en num5er of o5ser!ation " the Meian is the a!erage of the t2o mile
!alues

Some e'amp#es at c#ass
Mo-e* -he moe is the !alue that occurs 2ith greatest fre6uency

Using E'ce# to compute the Mean; Me-ian an- Mo-e
Some e'amp#es at C#ass
/.4 Measures of ?aria$i#ity
"ange* -he simplest of !aria5ility is )ange

"ange G 7argest !alue . 1mallest !alue
?ariance -he Fariance is a measure of !aria5ility that utili?es all the ata. :f the ata
for a Population" the a!erage of the s6uare e!iation is calle the Population
Fariance an is enote 5y
(

. :f the ata for a sample" 2e shall call 1ampling

Fariance an enote 1
(
:


(
(
< =
i
x x
s
n

(
(
< =
i
x
N

:


Stan-ar- De@iation*
Stan-ar- De@iation*
Population stanar e!iation:

G
(

1ample stanar e!iation: s G

(
s
Using E'ce# to compute the Samp#e ?ariance an- Samp#e stan-ar- -e@iation:
Some e'amp#es at C#ass
Coefficient of ?ariation
Coefficient of ?ariation
tan
< %##=H
s dard deviation
Mean

/./ Measures of Association $et+een 4 ?aria$#es

Co@ariance* Cor a sample of si?e n 2ith the o5ser!ation (- Dimension <3
%
"y
%
="
<3
(
"y
(
=@ <3
n
"y
n
= the relationship 5et2een element I an element 4 shall 5e consiere
5y
Samp#e Co@ariance
< =< =
%
i i
XY
x x y y
s
n

=

Corre#ation Coefficient* :n the fact" the relationship 5et2een element I an element

4 shall 5e consiere 5y
XY
XY
X Y
s
r
s s
=
Where
r
I4 G
sample correlation coefficient
s
I4
G sample co!ariance
s
I
G sample stanar e!iation of I
s
4
G sample stanar e!iation of 4
Using E'ce# to compute the Co@ariance an- the Corre#ation Coefficient
Some e'amp#es at c#ass
CHAPTE" 7
INT"%DUCTI%N T% P"%BABI)ITC
Pro$a$i#ity is a numerica# measure of #i(e#ihoo- that an e@ent +i## occur

7.1 E'periments; Counting "u#es
E'periment is a process that generates 2ell-efine outcomes

. E'periment E'perimenta# %utcomes
-oss a coin Heat" -ail
1elect a part for inspection Defecti!e" Non-efecti!e
)oll a ie %"("&";","'
@

Samp#e space for an e3periment is the set of all e3perimental outcomes
E'amp#e
Counting Techni&ues
1D Mu#tip#ication "u#e: Assume an operation can 5e escri5e as se6uence of 0
steps an
-he num5er of 2ays of completing step % is n
%
an
-he num5er of 2ays of completing step ( is n
(
for each 2ay of completing step %
" an
-he num5er of 2ays of completing step & is n
&
for each 2ay of completing step (
" an so forth .
-he total num5er of 2ays of completing the operation is
n G n
%
. n
(
@ n
0
4D The num$er of permutation of n ifferent elements is nJ 2here nJ G
%.(.&@@.n
/D The num$er of permutations of su5sets of r elements selecte a set n ifferent
elements is

J
.< %=.< (=...< %=
< =J
n
r
n
P n n n n r
n r
= =

7D The num$er of com$inations " su5sets of si?e r that can 5e selecte from a set
of n elements is enote
n
r



or
n
r
C
J
J< =J
n
r
r
n
C
n r n r

= =

E'amp#e* Crom a es0 of ,; cars ra2 & at ranom. Ho2 many ifferent 2ays
ra2ingK
E'amp#e* A 5atch of %;# semiconuctors chips is inspecte 5y choosing a
sample of fi!e chips. Assume %# of the chips o not conform to customer
re6uirements
aA Ho2 many ifferent samples are possi5le K
5A Ho2 many samples of fi!e contain e3actly one nonconforming chipK
E&ua##y )i(e#y %utcomes* -he Pro5a5ility of an outcome can 5e interprete as our
su5Lecti!e pro5a5ility or -egree of $e#ief" that the outcome 2ill occur. Whene!er a
sample space consists N possi5le outcomes that are e6ually li0ely" the pro5a5ility of
each outcome is %AN
7.4 Pro$a$i#ity of a e@ent
>or a -iscrete samp#e space; the pro$a$i#ity of an e@ent E ; -enote $y P.E3 ;
e&ua#s the sum of pro$a$i#ities of the outcomes in E.
>or e@ery A in samp#e space; P.A3 :
m
n
!here m is the num$er of the
outcomes ha@ing e@ent A to appear an- n is the sum of possi$#e outcomes .
Assigning Pro$a$i#ity
Pro$a$i#ity is a num5er that is assigne to each mem5er of a collection of e!ents
from a ranom e3periment that satisfies the follo2ing properties:
%A P<1= G %
(A # P<E= %
&ACor t2o e!ents
% (
E E G

( )
% ( % (
<E E =GP<E = 9 P E P
Some e'amp#es at c#ass
E'amp#e 1* Thro+ a -ice into the p#ane ran-om#y. >in- the pro$a$i#ity of the
e@ent* the si-e of si' points occurs.
Solution: Denote the e!ent 2e are intereste in 5y AM -he num5er of elements of
iscrete sample space is ' an the pro5a5ility of each outcome is %A'. 1o P<A= G %A'

E'amp#e 4* >rom a -es( of 54 car-s -ra+ three at ran-om. >in- the pro$a$i#ity
that there +i## $e e'act#y one ace among them.
Solution: Denote the e!ent 2e are intereste in 5y AM -he num5er of elements of
iscrete sample space is
,(
&
C . -he num5er of 2ays ra2ing one ace is
;
%
C . -he
num5er of 2ays ra2ing ( others cars < is not ace = is
;/
(
C . -hat means the num5ers
of 2ays ha!ing A to appear shall 5e
; ;/
% (
. C C . 1o " P<A= G
; ;/
% (
,(
&
. C C
C

E'amp#e /* There are / peop#e going in a #ift of a $ui#-ing +hich contains 6 f#oors
to rent the room an- each peop#e go out ran-om#y each f#oor. >in- the
pro$a$i#ity of the e@ent*
AD / peop#e go out at the same f#oor
BD Each peop#e go out at the -ifferent f#oor
CD A## peop#e go out at the 6th f#oor
E'amp#e 7* Samp#ing +ithout "ep#acement
A $in of 52 manufacture- parts contains / -efecti@es parts. A samp#e of 8 parts is
se#ecte- from this $in +ithout rep#acement . >in- the pro$a$i#ity of the e@ent in a
samp#e has e'act#y 4 -efecti@e parts

7./ Some Basic "e#ationships of pro$a$i#ity

A--ition )a+
Union of t+o e@ents* *nion of t2o e!ents A an B is shae in &-th figure a5o!e" that
means A appear or A appear
Intersection of t+o e@ents* :ntersection of A an B is shae in ;-th figure a5o!e" that
means A appear an B also appear
A--ition )a+*
< = < = < = < = P A B P A P B P A B = +
NB-:8E: :f A an B are e3clusi!e e!ents then

< = < = < = P A B P A P B = +
Some e'amp#es at c#ass
B
A
A
B
B
A
B
A
B
A
A
A B A B A B A B A N B

A
c
G N A
NA
Con-itiona# Pro$a$i#ity

Cor any gi!en e!ent A an B" the pro$a$i#ity of the e@ent A appeare- +ith the
con-ition e@ent B appear is the ratio:

< =
< O =
< =
P A B
P A B
P B

=
-he pro5a5ility of e!ent B appeare 2ith the conition e!ent A appeare is efine 5y
similar 2ays
Some e'amp#es
In-epen-ent E@ents* -2o e!ents A an B are inepenent if

< O = < = P A B P A =
or
< O = < = P B A P B =
Mu#tip#ication )a+

Multiplication 7a2:
< = < = < O = P A B P B P A B =
Br
< = < = < O = P A B P A P B A =
NB-:8E: :f A an B are t2o :nepenent e!ents then
< = < = < = P A B P A P B =
T%TA) P"%BABI)ITC "U)E
A collection of sets E
%
" E
(
" @" E
0
such that E
%

E
(

E
0
G 1 is sai to 5e
e'c#usi@e

Assume E
%
" E
(
" @" E
0
are 0 mutually e3clusi!e an e3hausti!e e!ents . -hen
% % ( (
%
< = < O = < = < O = < = ... < O = < =
< O = < =
k k
k
i i
i
P B P B E P E P B E P E P B E P E
P B E P E
=
= + + +
=

Some e'amp#es at c#ass
:n the case only t2o e!ents A
%
an A
(
2e ha!e
BACESES THE%"EM
% % % %
%
% % ( (
< = < O = < = < O =
< O =
< = < = < O = < = < O =
P A P B A P A P B A
P A B
P B P A P B A P A P B A
= =
+
Some e'amp#es at c#ass
Using E'ce# to compute Posterior Pro$a$i#ities
E3ample in page %/$
CHAPTE" 5
DISC"EETE P"%BABI)ITC
DIST"IBUTI%NS
5.1 "an-om ?aria$#es
Discrete "an-om ?aria$#es* A ranom Faria5le that may either a finite num5er or an
infinite se6uences of !alues such as %"( "@
EIAMP7E:
E'periment "an-om ?aria$#e Possi$#e ?a#ues
%. 8ontact fi!e Num5er of 8ostumers #.%.(@,
costumers @
(. Bperate a restaurant Num5er of 8ostumers #"%"("@.
Continuous "an-om ?aria$#es* A ranom !aria5le that may assume any numerical
!alue in an inter!al or collection of inter!als

EIAMP7E:
E'periment "an-om ?aria$#e Possi$#e ?a#ues
%. Bperate a Ban0 -ime 5et2een customer 3 #
arri!als in minutes

(. -est a ne2 chemical -emperature < min %,#
#
C %,# 3(%(
process an ma3 (%(
#
C=
5.4 Discrete Pro$a$i#ity Distri$utions
-he Pro$a$i#ity Distri$ution for a ranom !aria5le escri5es ho2 pro5a5ilities are
istri5ute o!er the !alues of the ranom !aria5le .

Cor a iscrete ranom !aria5le 3" the Pro5a5ility Distri5ution is efine 5y a
pro$a$i#ity function enote 5y f<3=
NB-:8E: )e6uire conitions for a Discrete Pro5a5ility Cunction
f<3= # an
< = % f x =

E'amp#e* Ta$#e 5./ page 425

5./ E'pecte- ?a#ue an- ?ariance
E'pecte- ?a#ue*
E'pecte- ?a#ue or mean of a ranom !aria5le is a measure of the central location
for the ranom !aria5le
?ariance
We use the Faria5le ?ariance in chapter & to summari?e the !aria5ility in ata. No2
2e use ?ariance to summari?e the !aria5ility in the !alues of a ranom !aria5le
E'pecte- ?a#ue or mean of a Discrete ranom !aria5le:
< = < = E x xf x = =

?ariance of a Discrete ranom !aria5le:

( (
< = < = < = Var x x f x = =

Some e'amp#es
Using E'ce# to compute the E'pecte- ?a#ue; ?ariance an- Stan-ar- De@iation
E<I=G1*MP)BD*8-<3
%
:3
n
"f<3
%
=.f<3
n
==
5.7 Binomia# Pro$a$i#ity Distri$ution
A Binomia# E'periment*
%. -he e3periment consists of n ientical trials
(. Bnly t2o outcomes are possi5le on each trial" one success" the other failure
&. -he pro5a5ility of a success enote 5y p" oes not change from trial to trial
;. -he trials are inepenent

7et I 5e the num5er of success in n Binomial E3periments. I is calle the
Binomial )anom Faria5le
The Binomia# Pro$a$i#ity >unction

< =
< = <% =
x n x
n
f x p p
x


=


Using E'ce# to compute Binomia# Pro$a$i#ities
B:NBMD:1-<3"n"p"CA71E=G
< =
< = <% =
x n x
n
f x p p
x


=



E3pecte Falue an Fariance for the Binomial Distri5ution

(
< =
< = <% =
E x np
Var x np p

= =
= =
Some e'amp#es at c#ass
5.5 Poisson Pro$a$i#ity Distri$ution
Poisson E'periment*
1.-he pro5a5ility of an occurrence is the same for t2o inter!als of e6ual length
4. -he occurrence or non-occurrence in any inter!al is inepenent of the
occurrence or non-occurrence in any other inter!al

Poisson Pro$a$i#ity >unction
< =
J
x
e
f x
x

=
2here

is e3pecte !alue or mean num5er of occurrence in inter!al

Some e'amp#es an- using E'ce# to compute Poisson Pro$a$i#ities
< =
J
x
e
f x
x

= :PB:11BN<3"

"CA71E=
5.8 Hypergeometric Pro$a$i#ity Distri$ution
>rom a set of n e#ements +hich contains r e#ements +ith the property A ta(e a
samp#e N e#ements at ran-om. )et F $e the e'act#y ' e#ements +ith property A
among the samp#e. F is ca##e- to $e a Hyper ,eometric Distri$ution ran-om
@aria$#e
Hypergeometric Pro$a$i#ity >unction*

< =
x n x
r N r
n
N
r N r
x n x C C
f x
N C
n

= =



.for # 3 r=
Some e'amp#es an- using E'ce# to compute Hypergeometric Pro$a$i#ities


< =
x n x
r N r
n
N
r N r
x n x C C
f x
N C
n

= =



:H4PPEBMD:1-<3"N"r"n=
CHAPTE" 8
C%NTINU%US P"%BABI)ITC
DIST"IBUTI%NS
8.1 The Pro$a$i#ity Density >unction


Cor e!ery )anom !aria5le I " a funcion f<3= shall 5e calle Pro5a5ility Density
function if it satisfies the follo2ing conitions
iA f<3= # for any 3
iiA
< = % f x dx
+

iiiA
< = < = P X f x dx

8.4 Uniform Pro$a$i#ity Distri$ution

The Uniform Pro$a$i#ity Density >unction on inter@a# Ga;$H
%
< = Q
#
f x
b a
=
for a 3 5

NB-:8E: Cor The Uniform Pro$a$i#ity Density >unction on inter@a# Ga;$H

< =
(
a b
E x
+
=
an-
(
< =
< =
%(
b a
Var x

=
8./ Norma# Pro$a$i#ity Distri$ution

Norma# Pro$a$i#ity Density >unction N.

;
(

3*

(
(
< =
(
%
< =
(
x
f x e

=
Stan-ar- Norma# Pro$a$i#ity Distri$ution N.2;13
Stan-ar- Norma# Density >unction*

(
(
%
< =
(
x
f x e

=
NB-:8E: Area as a Measure of Pro$a$i#ity
Because 2e ha!e
< = < = P X f x dx

so"
< = P X
is the Area uner the cur!e
of the f<3= 2hen
x
Computing Pro$a$i#ities for any Norma# Pro$a$i#ity Distri$ution
Theorem* :f I has the Normal Distri5ution N<
(
< " = N then
-hen
x

= shall has the 1tanar Normal Distri5ution N<#"%=

Computing Pro$a$i#ities for any Norma# Pro$a$i#ity Distri$ution
E'amp#es* ,rear Tire Company Pro$#em . See page 457 3
1uppose I has the Normal Pro5a5ility Distri5ution N< &'",## " ,##
(
= . Cin P< I R
;#"### = " P< I ;#"###= G K
Solution: We ha!e P< I R ;#"### = G P<I R ;#"###=G P<
;#" ### &'" ,## &,###
#.+
,### ,###
X

< = =
=G #.+,/# < 5y using 1tanar Normal Pro5a5ility
-a5le =
1o that " P< I ;#"### = G %- P< I R ;#"### = G %- #.+,/# G #.(;(#
Using E'ce# to compute Norma# Pro$a$i#ities
Some e'amp#es at c#ass*
f<3=GNB)MD:1-<3"

"

"CA71E=
Cor fining the !alue 3 if
< = x
G p 2e use 3 G NB)M1:NF<p=
CHAPTE" 6
SAMP)IN, I SAMP)IN,
DIST"IBUTI%NS
6.1 Se#ecting a Samp#e
Simp#e "an-om samp#e* A 1imple )anom sample of si?e n from a finite
population of si?e N is a sample selecte such that each possi5le sample of si?e n has
the same pro5a5ility of 5eing selecte

Some E'amp#es*
6.4 Point Estimation
-o estimate the !alue of a population parameter" 2e ha!e to compute a corresponing
characteristic of the sample" referre to as a Samp#e Statistic

-he Point Estimation of

is
i
x
x
n
=

"
-he Point Estimation of

is
(
%
< =
%
n
i
i
x x
s
n
=

-he Point Estimation of Pro$a$i#ity p is fre&uency

x
n
6./ SAMP)IN, DIST"IBUTI%NS
-he ranom !aria5les I
%
" I
(
" @" I
n
are a ran-om samp#e of si?e n if
aA -he I
n
>s are inepenent ranom !aria5les
5A E!ery I
L
has the same pro5a5ility istri5ution
A statistic is any function of the o5ser!ations in a ranom sample
-he pro5a5ility istri5ution of a statistic is calle a samp#ing -istri$ution
:f I
%
" I
(
" @" I
n
are a ranom sample of si?e n ta0en from a population 2ith
mean

an finite !ariance
(

then
A
X

=
as n

" is the stanar Normal

istri5ution
6./ Samp#ing Distri$ution of
p
-he sample proportion
p
is the point estimator of the population p.

E<
p
= G p
<% =
p
p p
n

=
E'amp#es
:f np S , an n<%-p= S , " the sample proportion
p
can 5e appro3imate 5y
Normal Distri5ution function
CHAPTE" =
INTE"?A) ESTIMATI%N
An inter!al estimate for a population parameter is calle a conJ-ence inter@a#. We
cannot 5e certain that the inter!al contains the true" un0no2n population parameterT
2e only use a sample from the full population to compute the point estimate an the
inter!al. Ho2e!er" the conUence inter!al is constructe so that 2e ha!e high
conUence that it oes contain the un0no2n population parameter. 8onUence
inter!als are 2iely use in engineering an the sciences.
=.1 C%N>IDENCE INTE"?A) %N THE MEAN %> A N%"MA)
DIST"IBUTI%N; ?A"IANCE KN%!N
If x is the samp#e mean of a ran-om samp#e of siAe n from a norma# popu#ation
+ith (no+n @ariance

4
; a 122.1

3L CI on is gi@en $y

A ( A (
A A x ! n x ! n

+
!here
A (
!

is the upper 122

D4 percentage point of the stan-ar- norma#

-istri$ution.
E'amp#e
=.4 C%N>IDENCE INTE"?A) %N THE MEAN %> A N%"MA)
DIST"IBUTI%N; ?A"IANCE UNKN%!N

If x is the samp#e mean of a ran-om samp#e of siAe n from a norma# popu#ation
+ith un(no+n @ariance; a 122.1

3L CI on is gi@en $y

A ( A (
A A x t s n x t s n

+
!here
A (
t

is the upper 122

D4 percentage point of the t -istri$ution +ith n1

-egrees of free-om .
E'amp#es
=./ Determining the samp#e SiAe
If x is use- as an estimate of ; +e can $e 122.1

3L conJ-ent that the error

M x

M +i## not e'cee- a speciJe- amount E +hen the samp#e siAe is

(
A(
< =
!
n
E

;
E'amp#es
=/ C%N>IDENCE INTE"?A) %N THE ?A"IANCE AND STANDA"D
DE?IATI%N %> A N%"MA) DIST"IBUTI%N
7et I
%
" I
(
"@" I
n
5e a ranom sample from a normal istri5ution 2ith un0no2n
!ariance
(

. :f s
(
is the sample then a 122.1

3L confi-ence inter@a# on
(

is

( (
(
( (
A(" % % A(" %
< %= < %=
n n
n s n s

2here
(
A(" % n

an
(
% A(" % n

are the upper an the lo2er %## A ( percentage points
of the chi-s6uare istri5ution 2ith <n-%= egrees of freeom " respecti!ely . A
confi-ence inter@a# for

has the lo2er an upper limits that are s6uare root of the
corresponing limits in a5o!e e6uation
E'amp#es
=.7 A )A",ESAMP)E C%N>IDENCE INTE"?A) >%" A
P%PU)ATI%N P"%P%"TI%N
:f
p
is the proportion of o5ser!ation in a ranom sample of si?e n that 5elong to a
class of interest " an appro'imate 122.1

3L confi-ence inter@a# on the

proportion p of the popu#ation that 5e long to this class is

A( A(
<% = <% =
V
p p p p
p ! p p !
n n


+
Where
A(
!

is the upper A ( percentage point of the stanar normal istri5ution

Some e'amp#es
A samp#e SiAe for a Specifie- Error on a Binomia# Proportion

(
A (
< = <% =
!
n p p
E

=
:f notice that p<%-p= #.(, 2e shall ha!e

(
A (
< = #.(,
!
n
E

=
Some e'amp#es
CHAPTE" <
HCP%THESIS
TESTS
<.1 HCP%THESIS TESTIN,
:n the pre!ious chapter 2e illustrate ho2 to construct a confience inter!al estimate of a
parameter from sample ata. Ho2e!er" many pro5lems in engineering re6uire that 2e
ecie 2hether to accept or reLect a statement a5out some parameter. -he statement is
calle a hypothesis" an the ecision-ma0ing proceure a5out the hypothesis is
calle hypothesis testing. -his is one of the most useful aspects of statistical inference"
since many types of ecision-ma0ing pro5lems" tests" or e3periments in the engineering
2orl can 5e formulate as hypothesis-testing pro5lems. Curthermore" as 2e 2ill see"
there is a !ery close connection 5et2een hypothesis testing an confience inter!als.
1tatistical hypothesis testing an confience inter!al estimation of parameters are the
funamental methos use at the ata analysis stage of a comparati!e e3periment" in
2hich the engineer is intereste" for e3ample" in comparing the mean of a population to a
specifie !alue. -hese simple comparati!e e3periments are fre6uently encountere in
)EA"NIN, %BNECTI?ES
practice an pro!ie a goo founation for the more comple3 e3perimental esign
pro5lems that 2e 2ill iscuss in 8hapters %& an %;. :n this chapter 2e iscuss
comparati!e e3periments in!ol!ing a single population" an our focus is on testing
hypotheses concerning the parameters of the population.
We no2 gi!e a formal efinition of a statistical hypothesis.
A statistica# hypothesis is a statement a$out the parameters of one or more
popu#ations
Cor e3ample" suppose that 2e are intereste in the 5urning rate of a soli propellant use to
po2er aircre2 escape systems. No2 5urning rate is a ranom !aria5le that can 5e
escri5e 5y a pro5a5ility istri5ution. 1uppose that our interest focuses on the mean
5urning rate <a parameter of this istri5ution=. 1pecifically" 2e are intereste in eciing
2hether or not the mean 5urning rate is ,# centimeters per secon. We may e3press this
formally as
H
#
:
=
,# centimeters per secon
H
%
:

,# centimeters per secon
-he statement H
#
:
= =
,# centimeters per secon in E6uation $-% is calle the
null hypothesis" an the statement H
%
:

,# centimeters per secon is calle the
alternati!e hypothesis. 1ince the alternati!e hypothesis specifies !alues of that coul 5e
either greater or less than ,# centimeters per secon" it is calle a t+osi-e- a#ternati@e
hypothesis. :n some situations" 2e may 2ish to formulate a onesi-e- a#ternati@e
hypothesis; as in H
%
:
,# >
centimeters per secon" or
,# <
centimeters per secon
Tests of Statistica# Hypothesis
-he sample mean can ta0e on many ifferent !alues. 1uppose that if ;/., 3 ,%.," 2e
2ill not reLect the null hypothesis H#: ,# " an if either 3 ;/., or 3 ,%.," 2e 2ill
reLect the null hypothesis in fa!or of the alternati!e hypothesis H%: ,# . -his is
illustratin Cig. $-%. -he !alues of 3 that are less than ;/., an greater than ,%., constitute
the criticalregion for the test" 2hile all !alues that are in the inter!al ;/., 3 ,%., form a
region for 2hich 2e 2ill fail to reLect the null hypothesis.
By con!ention" this is usually calle the acceptance region. -he 5ounaries 5et2een
the critical regions an the acceptance region are calle the critical !alues. :n our e3ample
the critical !alues are ;/., an ,%.,. :t is customary to state conclusions relati!e to the null
hypothesis H
#
. -herefore" 2e reLect H
#
in fa!or of H%
if the test statistic falls in the critical region an fail to reLect "
#
other2ise
"eOecting the nu## hypothesis H
2
+hen it is true is -efine- as a type I error

>ai#ing to reOect the nu## hypothesis H
2
+hen it is fai#se is -efine- as a type II error

= P.type I error3 : P.reOect H

2
+hen H
2
is true3
Sometimes the type I error pro$a$i#ity is ca##e- the significance
#e@e#; or the

error; or the siAe of the test.

The po+er of a statistica# test is the pro$a$i#ity of reOecting the nu## hypothesis H
2

+hen the a#ternati@e hypothesis is true.
<.4 %neTai#e- an- T+oTai#e- Tests
%neTai#e- Tests*

H
2
*
#
=
P H
1
*
#
<

%r
H
2
*
#
=
P H
1
*
#
>
T+o Tai#e- Tests*
H
2
*
#
=
P H
1
*
#

-his -est is calle a t2o-sie test" 5ecause it is important to etect ifferences from the
hypothesi?e !alue of the mean # that lie on either sie of #. :n such a test" the critical
region is split into t2o parts" 2ith <usually= e6ual pro5a5ility place in each tail of the
istri5ution of the test statistic. Many hypothesis-testing pro5lems naturally in!ol!e a one-
sie alternati!e hypothesis
<./ ,enera# Proce-ure for Hypothesis Tests
This chapter -e@e#ops hypothesistesting proce-ures for many practica#
pro$#ems. Use of the fo##o+ing se&uence of steps in app#ying hypothesis
testing metho-o#ogy is recommen-e-.
1. Crom the pro5lem conte3t" ientify the parameter of interest.
4. 1tate the null hypothesis" "
#
.
/. 1pecify an appropriate alternati!e hypothesis" "
%.
7. Determine an appropriate test statistic
5. 1tate the reLection region criteria for the null hypothesis
8. 8ompute any necessary sample 6uantities" su5stitute these into the
e6uation for the test statistic" an compute that !alue.
6. Decie 2hether or not "
#
shoul 5e reLecte an report that in
the pro5lem conte3t.
<.7 P%PU)ATI%N MEAN %> A N%"MA) DIST"IBUTI%N;
KN%!N
1uppose that 2e 2ish to test the hypotheses H
#
:
#

H
%
:
#
=


Test Statistics
#
#
A
X

=
:f the null hypothesis "
#
:
#
=

is true" EIG
#

" an it follo2s that the istri5ution of
#

is the stanar normal istri5ution Wenote N<#" %=X. 8onse6uently" if "
#
:
#
=

is
true" the

pro5a5ility is %-

that the test statistic

#

falls 5et2een -
A(

an
A(

2here
A(

is the
%## A
( percentage point of the stanar normal istri5ution. -he regions
associate 2ith
-
A(

an
A(

are illustrate in Cig. $-'<a=. Note that the pro5a5ility is

that the test statistic
#

2ill fall in the region
#
S
-
A(

or
#
R
A(

2hen "
#
:
#
=

is
true. 8learly" a sample
proucing a !alue of the test statistic that falls in the tails of the
istri5ution of
#
2oul 5e unusual if "
#
:
#
=

is trueM therefore" it is an inication that
"
#
is false. -hus" 2e shoul reLect "
#
if the o5ser!e !alue of the test statistic Y
#
is
either
#
R
-
A(

or
#
S
A(

<$-$=
an 2e shoul fail to reLect "
#
if -
A(

#
R
A(

<$-%#=
EFAMP)E
Aircre2 escape systems are po2ere 5y a soli propellant. -he 5urning rate of this
propellant is an important prouct characteristic. 1pecifications re6uire that the mean
5urning rate must 5e ,# centimeters per secon. We 0no2 that the stanar e!iation of
5urning rate is ( centimeters per secon. -he e3perimenter ecies to specify a type :
error pro5a5ility or significance le!el of #.#, an selects a ranom sample of n =
(, an o5tains a sample a!erage 5urning rate of x = ,%.& centimeters per secon.
What conclusions shoul 5e ra2nK
Solution:
We may sol!e this pro5lem 5y follo2ing the eight-step proceure outline in 1ection $-
%.;. -his results in
1.-he parameter of interest is

" the mean 5urning rate.

4. "
#
:

= ,# centimeters per secon

/. "
% :

,# centimeters per secon

7. #.#, =
5. -he test statistic is
#
#
A
x

=

8. )eLect "
#
if !
#
> %.$' or if !
#
< - %.$'. Note that this results from step ;"
2here 2e specifie #.#, = " an so the 5ounaries of the critical region are at
A(
!

=
!
#.#(,
= %.$'
6. 8omputations: 1ince
x =
,%.& an

= ("

#
! =
#
,%.& ,#
&.
(. (,
!

= =
(,
=. 8onclusion: 1ince !
#
G
&.(, > %.$'" 2e reLect "
#
:
=
,# at the #.#,
le!el of
significance. 1tate more completely" 2e conclue that the mean 5urning rate
iffers from ,# centimeters per secon" 5ase on a sample of (, measurements. :n fact"
there is strong e!ience that the mean 5urning rate e3cees ,# centimeters per secon.
We may also e!elop proceures for testing hypotheses on the mean 2here the
a#ternati@e hypothesis is onesi-e-. 1uppose that 2e specify the hypotheses as
H
#
:
#
=
H
%
:
#
<
:n efining the critical region for this test" 2e o5ser!e that a negati!e !alue of the test
statistic
#
2oul ne!er lea us to conclue that "#:
#
=
is false. -herefore" 2e
2oul place the critical region in the upper tai# of the stanar normal istri5ution an
reLect "
#
if the compute !alue of !
#
is too large. -hat is" 2e 2oul reLect "
#
if
?
#
S ?

as sho2n in Cigure $-'<5=. 1imilarly" to test
H
#
:
#
=
H
%
:
#
<
2e 2oul calculate the test statistic
#
an reLect "
#
if the !alue of !
#
is too small. -hat
is" the critical region is in the #o+er tai# of the stanar normal istri5ution as
sho2n in Cigure $-'<c=" an 2e reLect "
#
if
?
#
R - ?

<.5 P%PU)ATI%N MEAN %> A N%"MA) DIST"IBUTI%N;
UNKN%!N
We no2 consier the case of hypothesis testing on the mean of a population 2ith
un(no+n @ariance (. -he situation is analogous to 1ection /-&" 2here 2e
consiere a confi-ence inter@a# on the mean for the same situation. As in that section"
the !aliity of the test proceure 2e 2ill escri5e rests on the assumption that the
population istri5ution is at least appro3imation Normal
-he important result upon 2hich the test proceure relies is that if X
%
" X
(
"@ " I
n
is a
ranom sample from a normal istri5ution 2ith mean

an !ariance
(

" the ranom

!aria5le
A
X
#
$ n

=
has a t istri5ution 2ith n % egrees of freeom. )ecall that 2e use this result in
1ection /-& to e!ise the t-confience inter!al for

.
No2 consier testing the hypotheses
H
#
:

#
H
%
:

#
We 2ill use the 1tatistic:

Test Statistics
#
#
A
X
#
$ n

=
:f the null hypothesis is true" #
#
has a t istri5ution 2ith n%% egrees of freeom. When
2e 0no2 the istri5ution of the test statistic 2hen "
#
is true <this is often calle the
reference -istri$ution or the nu## -istri$ution=" 2e can locate the critical region to
control the type : error pro5a5ility at the esire le!el. :n this case 2e 2oul use the t
percentage points t

A
("n% %
an t

A
("n% %
as the 5ounaries of the critical region so that
2e 2oul reLect "
#
:

#


if t
#
R t

A
("n% % or
t
#
S t

A
("n% %
<.5 P%PU)ATI%N P"%P%"TI%N

The pro$#ems: H
#
: p p
#
H
#
: p p
#
H
#
: p p
#
H
a
: p R p
#
H
a
: p S p
#
H
a
: p

p
#

Test Statistics
#
# #
<% =
p p

p p
n

EFAMP)E
CHAPTE" 12
SIMP)E )INEA" "E,"ESSI%N
1. Simp#e )inear "egression Mo-e#
)EA"NIN, %BNECTI?ES
*sing regression analysis" 2e can e!elop an e6uation sho2ing ho2 the epenent
!aria5le y is relate to the inepenent !aria5le 3
1imple 7inear regression e6uation

# %
< = E y x = +
Simp#e )inear regression e&uation

# %
V y b b x = +
12.1 )EAST SBUA"ES METH%D
E'amp#e* Stu-ent Popu#ation . Ta$#e 14.1 ; p 7<73


# %
V
i i
y b b x = +
V
i
y =
estimate !alue of 6uarterly sales < Z %###= for the ith restaurant

#
b =
the y intercept of the estimate regression line

%
b =
the slope of the estimate regression line

i
x =
si?e of the stuent population < Z %###= for the restaurant

S#ope an- yIntercept for the Estimate- "egression E&uation

(
#
< =< =
< =
i i
i
i
i
x x y y
b
x x
b y b x

=

12.4 USIN, EFCE)ES CHA"T T%%) T% C%NST"UCT A SCATTE" DIA,"AM