Module 7

Question 1

What are the four steps of hypothesis testing?

Answer 1

1) Define the null hypothesis (𝐻0) and alternative hypothesis (HA)
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2) Establish null distribution.

3) Conduct the statistical test.

4) Draw scientific conclusions.

Question 2

What is the null hypothesis (H0)?

Answer 2

A statement representing the default assumption or no effect/difference.

Includes an equality statement (e.g., =, ≤ ≥)

Example: “There is no difference in mean ticket prices between Airline A and Airline B ( TA = TB)

Question 3

What is the alternative hypothesis>

Answer 3

A statement that contradicts H0, representing a specific effect or inference.

Example: There is a difference in the mean tickets (TA cannot equal TB).

Must be mutually exclusive and exhaustive

Question 4

What is the null distribution?

Answer 4

• The sampling distribution of a test statistic if H0 is true,

Used to evaluate how likely observed data are under H0.

Question 5

What is a directional hypothesis?

Answer 5

A hypothesis that tests for any difference without specifying a direction.

Example: HA : TA cannot equal TB (Airline prices differ).

Question 6

What are type 1 and type 2 errors?

Answer 6

Type 1: Rejecting H0, when it is true (False positive).

Type 2: Failing to Reject H0, when it is false (false negative).

Question 7

What is the tradeoff between type 1 and 2 errors?

Answer 7

• Reducing the type 1 errors increase type 2 error and vice versa.
• Increasing sample size can reduce both errors.

Question 8

What is the P-Value?

Answer 8

The probability of observing data as extreme as your sample, assuming the H0 is true.

If P < α, reject the H0

If 𝑝 ≥ 𝛼, failed to reject the H0

Question 9

What is statistic significance?

Answer 9

• Indicates whether the observed data are unlikely under H0
• Used to determine if the results are practically significant

Question 10

What is effect size?

Answer 10

• A measure of the magnitued of the observed difference or effect.
• Are the results significant?

Question 11

What is the critical region in hypothesis testing?

Answer 11

The range of test statistic values that leads to rejecting H0

Defined by the significance levels..

Question 12

How are Confidence Intervals (CI) related to hypothesis testing?

Answer 12

If a confidence interval excludes the null value, H0 can be rejected.