Please answer following questions:- Pl share in word form and shorter answer for
ID: 3294719 • Letter: P
Question
Please answer following questions:- Pl share in word form and shorter answer for only 200 words.
1.Write down five situations where Testing of Hypothesis is required.
For each of those situations, state the Null and the Alternate hypotheses.
For each of those situations, explain Type I and Type II error. What do you think are the likely costs of each of these error.
Looking at the cost incurred due to the error, what level of confidence would you like to choose?
Illustration:
Situation: An automotive company has designed a new engine, which claims better fuel efficiency. The old engine gave fuel efficiency of 17 kmpl of diesel. After testing the new engine it reported an efficiency of 21 kmpl. The wish to test whether the sample mean of 21 kmpl is significantly different to population mean of 17kmpl.
Hypotheses:
Ho: Mean Fuel efficiency of new engine is not significantly different from the mean fuel efficiency of the old engine.
OR Ho: x 17
Ha: Mean Fuel efficiency of new engine is not significantly different from the mean fuel efficiency of the old engine
Ha: x >17
Type I Error: We accepted the alternate hypothesis that the new engine has significantly higher mean fuel efficiency and we launched the automobiles with the new engine. But, the new engine could not provide the claimed higher fuel efficiency. Hence, the company had to face financial loss and credibility loss. Further, a lawsuit was filed against them for following unfair trade practice. Expected cost of this is _________
Type II Error: We accepted the Null hypothesis that the new engine is not any better than the old engine in terms of mean fuel efficiency. Due to this, we had restart research for better engine again. But, actually the new engine did have better mean fuel efficiency.Previous expenses on R&D went waste and some other company launched similar engine and took the advantage of introducing an improved engine. Expected cost of this is __________
Decision on level of Confidence
Given that the TYPE I error is costlier to the company they would like to reduce the probability of rejecting the null hypothesis. This means that they would like to increase the length of confidence interval hence they use 99% level of confidence instead of 95%
Kindly follow the below guidelines for this discussion question.
Explanation / Answer
The null hypothesis is that the new engine's efficacy is no better than that of the old one.
The alternate hypothesis is that the new engine is indeed better than the old in terms of efficiency.
As per the info provided, it is more costlier for the company to commit a type ! error, which is the error of incorrect rejection. This means that the company wants to reduce the chances that the better efficiency of the new engine design could have occurred by chance.
In order to avoid wrong decision because of this chance happening, the best way is to decrease the significance level. This means there would be a wider acceptance region and a narrower rejection region. So if the new engine shows a better result, then there is lesser risk of this happening due to pure chance.
Hope this helps !