CHAPTER 11: HYPOTHESIS TESTING

11.1 Concepts of Hypothesis Testing

Hypotheses
1.

H 0=Null hypothesis

2.

H 1= A lternative hypothesis

=350 )

(the status quo) (e.g.

(taking some course of action) (e.g.

>350 )

Test statistic
1. If the test statistic is consistent with
2. If the test statistic is inconsistent with

H0

, do not reject it.

H1

, reject it.

Decisions
1. There is enough evidence to support

H1

2. There is not enough evidence to support

.
H1

Errors
1. Type I error = Rejecting a true null hypothesis
2. Type II error = Not rejecting a false null hypothesis
P (Type I error )= ( Significance level )

P (Type II error )=

and

are inversely related

11.2- - Testing the Population Mean

when the Population Standard
Deviation is Known
Rejection region

The rejection region is the range of values such that if the test
statistic falls into that range, we decide to reject the null hypothesis
H0
H1
(
) in favour of the alternative hypothesis (
).

P (Type I error )= =P ( x > x L ) =P Z >

x
=P ( Z > z )
n

-value

The

p -value of a test is the probability of observing a test statistic

at least as extreme as the one computed given that the null

H
hypothesis ( 0 ) is true.

p -value

The

P ( X > X observed )=P Z > observed

n

p -value measures the amount of statistical evidence that

supports the alternative hypothesis

( H 1 ) . A smaller p -value

means that there is more evidence to support

H1

value means that there is less evidence to support

o

p value<0.01 Highly significant

0.01< p value<0.05 Significant

0.05< p value< 0.10 Not statistically significant

p value>0.10 Littleno evidence support H 1

Rejection region &

. A larger
H1

p -

-value

p value< Reject null hypothesis ( H 0 )

p value> Donot reject null hypothesis ( H 0 )

Conclusions
( H 0 )= There is enough statistical evidence

Reject null hypothesis

to infer that the alternative hypothesis is true

H
Do not reject null hypothesis ( 0 ) = There is not enough statistical
evidence to infer that the alternative hypothesis is true

Two-tail test

Rejection region:

z<z 2z >z 2

z=

Test statistic:

x
n

p value=P ( Z<z 2 ) + P ( Z> z 2 ) =2 P ( Z >|z|)

Confidence interval estimators

Confidence interval estimators can be used in two-tail tests:

x z 2

Disadvantages:
o It might not answer a one-tail test.
o It does not have a p -value.

11.3 Calculating the Probability of a

Type II Error
Type II error

P (Type II error )= =P ( Z < z , giventhat thenull hypothesis is false )

and

are inversely related.

and

are inversely related.

Power of a test

Power of a test =1=Rejecting a false null hypothesis

Operating characteristic (OC) curve

The OC curve plots the probability of a Type II error

the population mean

( )

against

() .

As the population mean ( ) moves away from the hypothesised

mean, the probability of a Type II error ( ) falls.

Increasing the sample size ( n ) steepens the OC curve so that the
probability of a Type II error ( ) falls more quickly.

Determining Type I and II errors

The Type I error is directly controlled by the significance level ( ).

Therefore, the Type I error should be the more costly error.