Hypothesis Testing (Gas Prices)

In the last regard, Team C compared the national burn out expenditure average as reported by AAA.com to various gas prices in different cities in the Eastern US. Taking the study a step further, Team C elected to mental test the gas prices in twain states, Florida and dinero, to further research such(prenominal) prices. After further research, results reported that the gas averages in Florida and Michigan were calculated at $2.60 and $2.61, respectively. Team C decided to deliver this a step further and determine if the $.01 difference could be tested as an accepted hypothesis that the gas prices in Florida are in fact cheaper by one centime rather than a null hypothesis that prices in the two states are the same.

ProcedureAs in any hypothesis test, the procedure begins by identifying null and alternate hypothesis statements. Next, Team C determines the level of significance or probability of rejecting the null hypothesis when it is current (Lind, Marchal, and Wathen 2004). The third step is selecting a test statistic or nourish from the sample. A decision rule formulates, which will determine acceptation or rejection of the null hypothesis. Finally, Team C compares the test statistic to the full of life value and reports the results. Team C?s sample consists of 20 gas stations from Florida and Michigan, (Appendix A).

Identification of Hypothesis:Ho: umichigan >= ufloridaH1: umichigan

take aim of SignificanceAlpha is also known as the level of significance. Note that important is the confidence interval, which is ?the range of values within which we expect the tribe parameter to occur? (Lind, Marchal, Wathen 2004). Therefore, a level of significance of .05 corresponds to 95%. Once again Team C chose a atomic number 23 percent significance level because this is the standard level use for consumer research projects. This level of significance describes the risk the test...

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