Question

Review the steps involved in a statistical hypothesis test. How do we set up the null and alternative hypotheses? How do we set the level of significance? Can you think of a business research situation where you could apply such processes?

Answer 1

There are many steps involved in the statistical hypothesis testing beginning from the hypothesis to upto the conclusion.Some of the steps are stated below,

1. Hypothesis

Null hypothesis : it assumes that there is no significant differences in the two group.

Alternative hypothesis: it is an opposite reaction to the null hypothesis .it assumes that there is significant difference in between the groups.

According to specific statistical test and research problem the hypothesis changes accordingly.

Test statistic :

It is an formulation for testing the null hypothesis whether it is true or false. We calculate the test statistic value for the test in this step.

Critical table value:

We choose the table value for the test eg t table, F table etc

From which we compare the critical value with calculated test statistic. Then we can make decision about the null hypothesis.

Conclusion:

To conclude we first check either comparing critical value with calculated test statistic or p value with the level of significance.

If p value is greater than level of significance then we accept the null hypothesis.

Choosing level of significance:

We decide the level of significance 1%,5%,10%etc . Which is the error can be tolerated.if the problem is very sensitive or risky then we must choose lower level of significance.

Use of hypothesis test in real business problem:

A company manufactures the biscuits of 100gm packet.And company quality analyst wants to test the actual weights of biscuit packets whether satisfying the 100gm criteria. Therefore he take sample of biscuit packets and test their average weight with the 100gm.

In this case we can use the t test for testing the hypothesis that there is significant difference in the mean sample weight of biscuit packets and 100gm