Hypothesis testing
Decisions are made under uncertainty. The idea behind hypothesis testing is to
develop a statistical tool to minimize the probability of error.
It consists of selecting a sample to check the validity of a conjecture or
hypothesis. It provides an approach to making inference about a population on
the basis of sample information.
Elements of a test of hypothesis
1. Null Ho
2. Alternative H1
3. Test statistic
4. Rejection region (or level of significance)
5. Assumptions about population
6. Sample and compute the test statistic
7. Perform the test
8. Conclusion of the test