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# Hypothesis Testing for Population Mean

## Arun Kumar, Ravindra Gokhale, and Nagarajan

Krishnamurthy
Quantitative Techniques-I, Term I, 2012
Indian Institute of Management Indore

## Case: Quality Wireless B

Daily hold time at the service call center has mean 79.50
seconds and standard deviation 16.86 seconds.
Performance over ten day in Ray Jacksons absence:
Average hold time is 86.6 seconds.
Performance over ten day in Ray Jacksons presence:
Average hold time is 74.4 seconds.

## To ascertain whether 74.4 and 86.6 seconds wait time, which

is different than known average wait time of 79.5, can be
attributed to the natural process variation.

Statistical problem?

Statistical problem?

## To ascertain whether wait time of 74.4 seconds (or 86.6

seconds) is an outlier even when process variation is taken into
account.

Framing a Hypothesis

Null Hypothesis
Stating what would be considered normal if no change
happened.
H0 : = 79.5

Framing a Hypothesis

Null Hypothesis
Stating what would be considered normal if no change
happened.
H0 : = 79.5
Alternative Hypothesis
Stating what would happen when a change happens.
HA : 6= 79.5

## We fail to reject the null hypothesis.

We reject the null hypothesis.

## Two types of error

Truth

Conclusion
Not Reject
Reject
Not Reject OK
Type I Error ()
Reject
Type II error () OK

sample size.

## Controlling Type II error

Effect of sample size on Type II error
Increasing the sample size reduces Type II error keeping Type I
error constant. Of course, you can reduce both type I and type
II error to a desirable level by having a sufficiently large sample
size but cost will be a factor.

## Controlling Type II error

Effect of sample size on Type II error
Increasing the sample size reduces Type II error keeping Type I
error constant. Of course, you can reduce both type I and type
II error to a desirable level by having a sufficiently large sample
size but cost will be a factor.
Power of a test
Reduction in implies that 1 increases. 1 is also
known as the power of the test.

## Controlling Type II error

Effect of sample size on Type II error
Increasing the sample size reduces Type II error keeping Type I
error constant. Of course, you can reduce both type I and type
II error to a desirable level by having a sufficiently large sample
size but cost will be a factor.
Power of a test
Reduction in implies that 1 increases. 1 is also
known as the power of the test.
Be aware of tests that do not have much power.

Significance Level

## Acceptable value of Type I error is also known as significance

level.

Significance Level

## Acceptable value of Type I error is also known as significance

level.
The best practice is to set the significance level before data is
collected.

## What significance level you want to set for Quality

Wireless Example?

## What significance level you want to set for Quality

Wireless Example?

## Find out the test statistic.

Find out the critical value.

## Find out the test statistic.

Find out the critical value.
If the absolute value of the test statistic is greater than
the absolute value of the critical value then we reject the
hypothesis. Otherwise we conclude that the data does
not provide sufficient evidence to reject the hypothesis.

z=

x 0

/ n

z=

(74.479.5)

(16.86/ 10)

= 0.95

Critical value

## For = 0.05, critical value is 1.96. We fail to reject the null

hypothesis because | 0.95| < 1.96.

## At significance level of 5%, we fail to reject the null hypothesis

that the performace of the call center was significantly
different than 79.5 seconds.

Conclusions

Conclusions

Conclusions

Conclusions

## System was not out of control.

What if significance level is changed?

Exercise 1

## A Vice President in charge of sales for a large corporation

claims that salesperson are averaging no more than 15 sales
per week. Ideally the number should be higher. In order to
check the claim, 36 salespersons are selected at random, and
the number of contacts made by each is recorded for a week.
The mean and the variance of the 36 measurements were 17
and 9, respectively. Does the evidence contradict the vice
presidents claim? Use a test with level = 0.05.

p-value

## Probability of observing a data that is more extreme than the

observed data is known as p-value.
We reject the null hypothesis if p-value < significance level.

## p-value is 2 P(Z |z|) when alternative is 6=. Z is the

standard normal random variable and z is the test statistic.

## Quality Wireless Example

p-value=2*P(Z | 0.95|)=0.34.
You will fail to reject the Null Hypothesis at both 1% and 5%
significance level because p-value is much bigger than 0.01
and 0.05.

Exercise 1...

## A Vice President in charge of sales for a large corporation

claims that salesperson are averaging no more than 15 sales
per week. Ideally the number should be higher. In order to
check the claim, 36 salespersons are selected at random, and
the number of contacts made by each is recorded for a week.
The mean and the variance of the 36 measurements were 17
and 9, respectively. Does the evidence contradict the vice
presidents claim? Answer the question using p-value.

## Under null hypothesis,

large.

n 0
X

/ n

N(0, 1) as long as n is

## Understanding the z-test

0 N(0, 1) as long as n is
Under null hypothesis, X/n
n
large.
Now if significance level is then any x (sample mean)
that is more than z/2 or less than z/2 provides
evidence against = 0 .

## Understanding the z-test

0 N(0, 1) as long as n is
Under null hypothesis, X/n
n
large.
Now if significance level is then any x (sample mean)
that is more than z/2 or less than z/2 provides
evidence against = 0 .

## Understanding the z-test

0 N(0, 1) as long as n is
Under null hypothesis, X/n
n
large.
Now if significance level is then any x (sample mean)
that is more than z/2 or less than z/2 provides
evidence against = 0 .

What if is unknown?

## Understanding the z-test

0 N(0, 1) as long as n is
Under null hypothesis, X/n
n
large.
Now if significance level is then any x (sample mean)
that is more than z/2 or less than z/2 provides
evidence against = 0 .

What if is unknown?
Ans. Old friend t-distribution will help.

t-test

n 0
X

s/ n

t-test

n 0
X

s/ n

## Now if significance level is then any x (sample mean)

that is more than t(/2,n1) or less than t(/2,n1)
provides evidence against = 0 .

## Test statistic in Quality Wireless case

Assuming s = 16.86, z =

(74.479.5)

(16.86/ 10)

= 0.95

distribution

## For = 0.05, critical value is 1.96. We fail to reject the null

hypothesis because | 0.95| < 1.96.

t-distribution

## For = 0.05, critical value is t(/2,9) = 2.262. We fail to

reject the null hypothesis because | 0.95| < 2.262.

t-distribution?

p-value>0.2

Exercise 1...

## A Vice President in charge of sales for a large corporation

claims that salesperson are averaging no more than 15 sales
per week. Ideally the number should be higher. In order to
check the claim, 36 salespersons are selected at random, and
the number of contacts made by each is recorded for a week.
The mean and the variance of the 36 measurements were 17
and 9, respectively. Does the evidence contradict the vice
presidents claim? Calculate p-value using t-distribution.