a) The Ghana Economic Management Association wishes to have information on the mean income of store managers in the retail industry. A random sample of 256 managers reveals a sample mean of Ghc45,420. The standard deviation of this population is Ghc2,050. What is a reasonable range of values for the population mean? Interpret your results.
b) i. Briefly outline the steps involved in hypothesis testing
ii. Use a table to illustrate how Type I and Type II error can occur
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Expert's answer
2021-08-13T08:50:38-0400
Part a
90% CI for μ using Normal dist
Sample Mean ∣xˉ=45420
Since the sample size is large, sample standard deviation can be used to approximate population standard deviation.
Population Standard deviation =∣σ=2050
Sample Size =∣n=256
Significance level =α=1—Confidence=1−0.9=0.1
The Critical Value=zα/2=z0.06=1.645 (From z table , using interpolation 21 the distance between 164 and 1.65 )
Critical Values , ±zα/2=±1.645
Margin of Error =E=zα/2∗nσ=1.645∗2562050=210.765625
90% confidence interval is xˉ±E=45420±210.765625=(45209.234375,45630.765625)
90% CI using normal dist: (45202.234)<μ<(45630.766)
95% CI for μ using Normal dist
Sample Mean ∣xˉ=45420
Since the sample size is large, sample standard deviation can be used to approximate population standard deviation.
Population Standard deviation =∣σ=2050
Sample Size =∣n=256
Significance level =α=1—Confidence=1−0.95=0.05
The Critical Value=zα/2=z0.025=1.96
Critical Values , ±zα/2=±1.96
Margin of Error =E=zα/2∗nσ=1.96∗2562050=251.125
Margin of Error, E=251.125
Limits of 95% confidence interval are given by
Lower limit =xˉ−E=45420−251.125=45168.875
Upper limit =xˉ+E=45420+251.125=45671.125
95% confidence interval is xˉ±E=45420±251.125=(45168.875,45671.125)
90% CI using normal dist: (45168.875)<μ<(45671.125)
99% CI for μ using Normal dist
Sample Mean ∣xˉ=45420
Population Standard deviation =∣σ=2050
Sample Size =∣n=256
Significance level =α=1—Confidence=1−0.99=0.01
The Critical Value=zα/2=z0.005=2.58
Critical Values , ±zα/2=±2.58
Margin of Error =E=zα/2∗nσ=2.58∗2562050=330.5625
Margin of Error, E=330.5625
Limits of 99% confidence interval are given by
Lower limit =xˉ−E=45420−303.563=45089.438
Upper limit =xˉ+E=45420+303.5625=45750.563
99% confidence interval is xˉ±E=45420±303.5625=(45089.438,45750.503)
99% CI using normal dist: (45089.438)<μ<(45750.503)
The widest CI is the one with highest confidence level.
99% CI is the widest.
Part b
i)
Enter the Null Hypothesis.
Describe the Alternative Hypothesis.
Determine the Significance Level (a)
Determine the Test Statistic and the Corresponding P-Value.
Making a decision.
ii)
In statistics, a Type I error means rejecting the null hypothesis when it's actually true. In contrast, a Type II error means failing to reject the null hypothesis when it's actually false.
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