Question

18. A global sportswear company is contemplating contributing money to political candidate in the next election. The managers of the company do not want to contribute unless they are sure the candidate will get the majority of the population vote and win the election. Otherwise,the company will not contribute to the candidates' campaign.

?? : p≤0.5(The company will not contribute the political candidates campaign.)

??0: p>0.5(The company will contribute to the political candidates a campaign.)

??

a) Write a description of a type1 error and possible consequences of that error in the context of the problem.

b) Write a description of a type 2 error and possible consequences of that error in the context of the problem.

Answer 1

a)In statistical hypothesis type 1 error means , rejection of a true null.

here if HH denotes null hypothesis. Which states p0.5 and the company will not contribute the political candidates campaign. But if type 1 error occurs then ,we would have rejected the null mistakenly. Which indicates that chance of winning of that political candidate is very poor ,still the company decides to contribute the campaign, which might lead to huge amount of loss for that company.

b)Now , type 2 error means, Non rejection of a false null. In this context type 2 error will interpret that, probability value of winning of that candidate is more than 0.5 . Which means it is pretty likely that the candidate will win .But still by mistake we fail to reject the null(that says the candidate is most likely to lose and so the company doesn't contribute in the campaign, when they should have. Which might let the company face trouble in future .