CHAPTER -5-

HYPOTHESIS TESTING
o Hypothesis is : the assumptions we make about the
values of population parameters.
o It is something that has not yet been proven to be
true.
o It is some statement about a population parameter or
about a population distribution.

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 The Null and Alternative Hypothesis
1. A null hypothesis: (Ho)
It is an assertion that we hold as true
unless we have sufficient statistical
evidence to conclude otherwise.
It is tentative assumption and is
denoted by Ho- it is the assumption we
wish to test.
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 2. Alternative Hypothesis (Ha)
Itis the opposite of what is stated in the null
hypothesis.
This alternative hypothesis specifies all possible
values of the population parameter that are
not specified in the null hypothesis, and in
denoted by Ha.

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 Example
 The manager of a hotel has stated that the mean guest bill
for a weekend is Br. 400 or less.
Required: State the null and Alternative hypotheses
Ho:μ  Birr 400
Ha:  Birr 400
 The equality part of the expression (either =, or)
always appears in the null hypothesis.

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Example 2
Production workers at XY Company have been trained
in their jobs by using two different training programs.
The company training director would like to know
whether there is a difference in mean productivity for
workers trained in the two programs.
Required: Develop the null and alternative hypotheses.
Solution
Ho: 1 = 2 or 1 - 2 = 0
Ha: 1  2 1 - 2  0
 Type I and Type II Errors
Type I Error
 It will be committed if we wrongly reject the null
hypothesis which is actually true.
Type II Error
 It will be committed by failing to reject a false null
hypothesis. That is to say that, accepting a null
hypothesis when it is false is called a Type II error.

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Two – Tailed Vs One – Tailed Tests
1. Two – Tailed test
If the alternate hypothesis not states the direction (i.e. ),
the test of significance has two tails
Example: Ho: μ = 20
H1: μ  20
2. One Tailed test
If the alternate hypothesis states the direction, the test
of significance has one tail
Example: Ho: μ > 20
H1: μ < 20 8
Steps in Hypothesis Testing
1.Determine/state the null and alternative Hypothesis
Eg. Ho:   
Ha:   
2. Select the test statistic that will be used to decide whether
or not to reject the null hypothesis.
3. Select the level of significance
Eg.  = 0.05 Z012 = 1.96  Reject Ho if /Sample Z/  1.96
4. Collect the sample data, and compute the value the test
statistic. E.g sample Z=2.0
5. Compare the value of the test statistic to the critical value(s)
& make the decision (either reject Ho or accept HO).
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 Hypothesis Test about a population mean
Popn Normal, Standard deviation known
 In hypothesis testing if the population is normal and
standard deviation is known, we use Z-Value to test
the hypothesis; regardless of the sample size, n.
 It is also applicable when n  30 regardless of the
pop distn.
 We use “t” table only if n < 30 and
σ is unknown
otherwise we use Z table
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 Example:
Addis Tire Share Company claims that its tires have a mean life
of 35,000 miles. A random sample of 16 of these tires is tested
if the sample mean in 33,000 miles. Assume that the
population standard deviation is 3,000 miles and the lives of
tires are approximately normally distributed. Test the share
company’s claim using a 5% level of significance.
Solution
1. Ho:  = 35,000 miles 2. Z – Distribution, two tailed test
Ha:  ≠ 35,000 miles
3.  = 0.05 4. X = 33,000 miles
/2 = 0.025  = 3,000 miles
Z0.025 = ± 1.96 n = 16 tires
Reject Ho if /Sample Z/ > 1.96 Zcal =? 11
 33,000  35,000
Zcal    2.67
3,000
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5. Reject Ho because /-2.67/ > 1.96 12

Example 2:
A Employees’ union is on strike for higher wages. The union
claims that the mean salary for teachers is at most Birr 8,400
per year. The legislator does not want to reject the union’s
claim, however, unless the evidence is very strong against.
Assume that salaries follow a normal distribution and the
population standard deviation is known to be Br. 3000.

A random sample of 64 teachers is obtained, and the sample

mean is Br, 9,400.
Test if the legislator accepts the unions’ claim or not at 1%
significance level.
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Solution:
1. Ho:  ≤ Birr 8,400 2. Z – distribution, Right – tailed test
Ha:   Birr 8,400
3.  = 0.01
Z = Z0.01 = 2.33
Reject Ho if sample Z  + 2.33
4. n = 64
X = Birr 9,400
 = Birr 3,000
Sample Z =?
9,400  8,400
Z 9, 400   2.67
3,000
64
5. Reject Ho because + 2.67  2.33
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 Hypothesis testing about : Population normal,  unknown, n small
We use of the t-distribution is appropriate when  is unknown,
the sample size is small (n30), and population is normally
distributed. X μ S
t S 
S X
X
n
Example:
#1.A contractor assumes that construction workers are idle 75
minutes or less per day. Random samples of 25 construction
workers were taken and the mean idle time was found to be 84
minutes per day with a sample standard deviation of 20 minutes.
Assume that the population is approximately normally
distributed; use a 5% level of significance test the contractor’s
assumption 15
 Solution
1. Ho:  ≤ 75 minutes
iii. Ha:   75 minutes
iv. t – distribution, Right – tailed test  = 0.05
n = 25  = n – 1 = 25 – 1 = 24
t, = t0.05,24 = 1.711  Reject Ho if sample t  1.711
vii. n = 25
viii. X = 84 minutes S = 20 minutes Sample t =?
84  75
ix. t 84   2.25
20
25

Reject Ho; because + 2.25  1.711. Workers are idle for more than 75 minute s/ day.

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Example 2:
A director of a secretarial school claims that its
graduates can type at least 50 words per minute on
average. Suppose you want to hire some of these
graduates if the director’s claim is true; and you test the
typing speed of 18 of the graduates and obtain a mean
of 40 wards per minute with a sample variance of 720.
Assuming the typing speed for the graduates of the
secretarial school is normally distributed, test the
director’s claim and decide whether to hire the
graduates or not, using a 5% level of significance.
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 Solution
1. Ho:   50 words
Ha:  50 words
t – distribution, Left – tailed test  = 0.05 n = 18
 = n – 1 = 18 – 1 = 17 t, = t0.05, 17 = 1.74
 Reject Ho if sample t  -1.74
X = 40 words n = 18 s2 = 720
viii. tcal =?
40  50
ix. tcal   1.58
720
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Do not reject Ho because –1.58 > -1.74

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Hypothesis testing about a population proportion (p)
A proportion is a value between 0 and 1 that expresses the part
of the whole that possesses a given characteristic. Similar to that
of hypothesis testing about a population mean, hypothesis
testing about a population proportion has three terms.

1. Ho: P = y 2. Ho: P  y 3. Ho: P  y

Ha: P  y Ha: Py Ha: P y
 The first form is a two – tailed test, whereas the second and
third forms are one – tailed tests.
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 Examples
#1.A magazine claims that 25% of its readers are college
students. A random sample of 200 readers is taken. It is
found that 42 of these readers are college students. Use a
10% level of significance and test the magazine’s claim.
i. Solution
1. Ho: P = 0.25
i. Ha: P  0.25
2. Z – distribution; two tailed test
3.  = 0.1 /2 = 0.05
i. Z/2 = Z0.05 = 1.64
ii. Reject Ho if /sample Z/  1.64
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1. n = 200
i. x = 42
ii. p = 0.21
iii. Sample Z =?
0.21  0.25
iv. Z 0.21   1.31
0.25 * 0.75
200
2. Do not reject Ho because / -1.31/ < 1.64

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Example 2:
An Economist states that more than 35% of Addis’s labor force
in unemployed you don’t know if the economists estimate is
too high or too low. You want to test the economists claim
using a 5% level of significance. You obtain a random sample
of 400 people in the labor force, of whom 128 are unemployed.
Would you reject the economist’s claim?

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Solution
1. Ho: P ≤ 0.35
Ha: P > 0.35
2.Z – distribution , right-tailed test
3.𝜎 = 0.05 Z 0.05 = 1.645
Reject Ho if sample Z > 1.645
4.n = 400 x = 128 P ഥ = 0.32
Sample Z =? Z 0.32  0.35
  1.26
0.32 0.35 * 0.65
400
5.Do not reject Ho because / -1.26/ < 1.645
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Hypothesis testing about the difference in two means
1. Ho: 1-2 = 0 2. Ho: 1-2  0 3. Ho: 1-2  0
Ha: 1-2  0 Ha: 1-2  0 Ha: 1-2  0
Two tailed test One tailed test

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The above formulas are simplified as follows:

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The computed z of + 3.32 is in the region of rejection
Therefore, the null hypothesis is rejected, and the
alternative hypothesis, that the average weekly wage in
the two firms is different, is accepted.

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 EXERCISE
Use the following information to test the hypothesis that there is
no difference between the means using 5 % level of Significance.
 END OF
CHAPTER 5
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