Samuel is running a 3-mile race. He would like to finish the race in under 33 minutes. He has already run for 10.5 minutes.
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Using hypothesis test, we conclude that there is evidence to believe that the average household income has increased.
According to the question,
The average household income for a recent year (x₁⁻) = $30,000
The average household income for a recent year (x₂⁻) = $24,500
sample sizes n₁ = n₂ = 34
standard deviation of both samples were $24,500. Thus, s₁ = s₂ = $5928.
Null hypothesis: There is no evidence to believe that the average household income has increased.
H₀ : μ₁ ≤ μ₂
Alternative hypothesis: There is evidence to believe that the average household income has increased.
H₁: μ₁ > μ₂
To check hypothesis we have the formula
Standard error=
=
= 1437.7512
Thus, standard error is $1437.7512.
Formula for test statistic = [(x₁⁻ - x₂⁻) - (μ₁ - μ₂)]/standard error
= [(30000 - 24500) - 0]/1437.7512
= 3.8254
The critical value of z at 5% level of significance is 1.6449.
Here, the calculated value is greater than the critical value so we reject H₀.
Hence using hypothesis test, we conclude that there is evidence to believe that the average household income has increased.
Learn more about hypothesis test here
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