01Lecture-HypotheisTest (1).doc

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Economics for Management Studies
Victor Yu

Department of Management UTSCMGEB12 Quantitative Methods in Economics IILecture 01Chapter 9Introduction to Hypothesis TestingTesting of Mean1 IntroductionHypothesis testinguse to determine if statement made about value of population parameter meanproportion p standard deviationshould or should not be rejectedExampleAmbulance companyAn ambulance company says they can respond to emergencies with mean time of 12min or lessYou take 40 observations and the mean time was 1325 min Can you conclude that the true mean responds time is less than 12minHow about if mean time from observations was 125minIf the true mean is12 min what is the chance of you getting mean125min Getting mean1325 Hnull hypothesis tentative assumption about population parameteroHalternate hypothesis opposite of HaoProcedure1State hypothesis you want to test and the desired test significance level2Take observations3Calculate the test statistic based on the observed data4Determine if reject H or cannot reject HooConventionsManufacture claims usually given benefit of doubt and stated as null hypothesisResearch question should be expressed as HaThe should be used in HoThe should be used in H a1Example 1Car currently can do 24 milesgallon of gas on averageWondering if new fuel system allows it to go furtherState hypothesis to be testedExample 2Manufacture of soft drink says each bottle filled with at least 676 ouncesYou want to know if this is true State hypothesis to be testedType I and type II errorsBecause hypothesis test base on sample data eg 40 observations and not entire population errors can be made Define test significance levelPmaking type I errorPincorrectly rejecting H given H true ooTypical value of forused in practice is 1 005 or 001 There are 2 approaches to testing1Critical value approach2Pvalue approach 2
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