1 Week Four Discussion Question

Week Four: Understanding Statistics QNT/351 Caroline Mushashu January 3, 2014 Professor: Leonardo Ledezma

2 Week Four Discussion Question 1. What are the five steps in the hypothesis testing procedure? Are the steps followed in sequence? Explain why or why not. How does the five-step procedure for hypothesis testing differ when comparing two groups using a t- or z-test? How is the process similar? The five steps in the hypothesis testing procedure are: specifying the null hypothesis, specifying the alternative hypothesis, level of significance of the test, calculating the test statistic, and summarizing the results to obtain the conclusion (McClave, Benson, & Sincich, 2011). The steps must be followed in sequence as each step relies on the statistics from the previous step to determine accurate results. If the null hypothesis or accepted hypothesis were proven false, the alternative hypothesis would be utilized. In addition, the steps are followed in sequential order because the researcher comes up with a "status quo," in which they want to originally test, and then the alternative hypothesis would be tested next for additional evidence of the truth. The third step of the level of significance is next because it will determine if the null hypothesis was considered false, but was actually considered true, instead of the alternative hypothesis. Next is to test and calculate both hypotheses to determine which one is true. Then, the conclusion would sum up the results based on whether the hypotheses fall in the rejection region. (McClave, Benson, & Sincich, 2011). Here is an example, if the research question is does education level affect salary? The null hypothesis is, there is no significant effect of education level to the salary, and the alternative is there is significant effect. The test statistic used is one-way ANOVA. The probability of the test statistic is then determined along with the rejection region. 2. Why does the significance level differ among industries? Will the null hypothesis be more likely to be rejected at = 0.01 than = 0.10? As the significance level increases to = 0.10 from = 0.01, which type error is more likely to occur? What can be done to reduce the likelihood of incurring this error?

3 Week Four Discussion Question

Because industry standards differ widely (the criteria for making tires for vehicles is not the same as the standards in place for a bakery/deli), the significance levels will vary just as widely. Furthermore, because it is not possible to study every single unit within a population, it is possible for both Type I and Type II errors to occur. I believe after the null and alternate hypotheses are established, the level of significance should be identified (Lind, Marchal, & Wathen, 2011). The level of significance is also known as the level of risk. The level of significance is not the same for every test. The most commonly used levels are .01, .05, and .10. The researcher is responsible for determining the level of significance prior to formulating the decision rule or beginning to collect data. Only two decisions are possible in hypothesis testing: either accept or reject the null hypothesis (Lind, Marchal, & Wathen, 2011). Depending on the situation, it is possible to accept the null hypothesis when it actually is wrong and should be rejected. This defined as a Type II error. As the significance level increases (from 0.01 to 0.10), less room is available for error. Discussion in the textbook covered shipping computer boards to a customer. Since the quantity shipped was very large, only a sampling was taken to check for accuracy. If 10% of the boards are bad, it is far easier to reject the shipment and return it to the manufacturer as opposed to only 1% of the boards testing as defective. 3. What is the difference between a left-tailed, two-tailed, and right-tailed test. When would you choose a one-tailed test? How can you determine the direction of the test by looking at a pair of hypotheses? How can you tell which direction (or no direction) to make the hypothesis by looking at the problem statement (research question)?

4 Week Four Discussion Question The differences between the three types of test are their direction and nature. A one tailed test is when the value will only fall on one side of the null hypothesis value. A left tailed test will be less than (<) the null hypothesis value, and a right tailed test is when the value will be greater than (>) the null hypothesis value. One tailed test is used when there is an expected direction in the significant difference (either less than or more than the mean). For instance, if the test wants to detect whether a sample of scores is significantly more than the mean scores, it is a right-tailed test. Similarly, if it wants to detect whether it is significantly less, it is a left-tailed test. To determine the direction of the test from the hypotheses, we could see the alternative hypothesis. If the H1 indicates a directional expected difference (< or >), it means that it is a one-tailed test. To tell which direction to be used from the problem statement, assess whether the statement indicates that the differences are expected to be not equal, more than, or less than. If it is more than or less than, it is one-tailed. In summary, I believe that the direction of the test will be identified by the alternative hypothesis sign, either <,>, <>, and the = sign will always be in the null hypothesis. 4. What are some terms related to hypothesis testing with which you are already familiar? Why do null and alternative hypotheses have to be mutually exclusive? 5. What is the five-step process for hypothesis testing? Explain why or why not. Why do alphas differ among industries? How do ethics affect your chosen level of significance? Can you reject and accept the null hypothesis at the same time? Explain why or why not. 6. What is the difference between a left-tailed, two-tailed, and right-tailed test. When would you choose a one-tailed test? How can you determine the direction of the test by looking at a pair of hypotheses? How can you tell which direction (or no direction) to make the hypothesis by looking at the problem statement (research question)?

5 Week Four Discussion Question 7. Why does the significance level differ among industries? Will the null hypothesis be more likely to be rejected at = 0.01 than = 0.10? As the significance level increases to = 0.10 from = 0.01, which type error is more likely to occur? What can be done to reduce the likelihood of incurring this error? 8. Why is the coefficient of correlation an important tool for statisticians? Provide some specific examples from real life.

6 Week Four Discussion Question References McClave, J. T., Benson, P. G.,& Sincich, T. (2011).Statistics for business and economics (11th ed.).Boston, MA: Pearson-Prentice Hall. Price, I. (2000). Pearsons coefficient of correlation (r). In Descriptive statistics. Retrieved May 30, 2013 from