Introduction to Quantitative Methods

SUMMARY: Many problems arise in the daily life of a manager where a decision has to be made on the basis of sample data. The decision made by the managers always has an inherent risk of being wrong. Hence, managers need to verify whether the parameters selected for making decisions are being influenced by sampling fluctuations alone or by some other factors also. Hypothesis testing is a handy tool for this purpose.

Hypothesis testing is a process of testing the significance regarding a parameter of the population on the basis of a sample. The hypothesis being tested is called the null hypothesis, and generally specifies an exact parameter value. Any hypothesis complementary to the null hypothesis is called an alternative hypothesis. There are two-tailed tests and one-tailed tests of hypothesis. A two-tailed test of a hypothesis will reject the null hypothesis if the sample mean is significantly