Procedure of Hypothesis testing

• 1. Set up a null and alternative hypothesis• 2. set up a suitable significance level• 3. Determine a suitable test statistics• 4. Determine the critical region.• 5. Do the calculation of test statistics using

sample information• 6. Make a decision based on the whole

procedure

Test of Hypothesis: Mean(µ)

• 1. A bulb manufacturing company claims that the average longevity of their bulbs is 4 years with standard deviation of 0.16 years.

• A random sample of 90 bulbs gave a mean longevity of 3.45 years.

• Does the sample mean justify the claim of the manufacturer? Use 5% level of significance.

Tabulated ValueCritical value of Z

Level of significance 1%

Level of significance 5%

Level of significance 10%

One tail test -2.33 or 2.33 -1.64 or 1.64 -1.28 or 1.28

Two tail test -2.58 and 2.58 -1.96 and 1.96 -1.64 and 1.64

Problem

• 2. The mean and standard deviation of scores obtained from a random sample of 60 students of MBA were 2.8 and 0.35 respectively.

• Can we conclude that the sample has come from the entire group of students which has a mean score of 2.4?

• Use 1% level of significance and compute 99% confidence interval for the mean.