According to the Annual survey of drugs expenditure in country X, the annual expenditure for prescription drugs is $838 per person in the Northeast region of the country.A sample of 60 individuals in the Midwest shows a per person expenditure for prescription drugs of $745. Further, it is given that the population standard deviation of $300. Formulate hypotheses for a test to determine whether the sample data support the conclusion that the population annual expenditure for prescription drugs per person is lower in the Midwest than in the Northeast and Identify whether it is a two-tail test or a one tail test (Left or right tail). Decide the suitable test statistics and justify your selection. III. Calculate the value of the relevant test statistics and identify the P value Based on the p value in part (III), at 99% confidence level, decide the decision criteria. Make the final conclusion based on the analysis.
According to the Annual survey of drugs expenditure in country X, the annual expenditure for prescription drugs is $838 per person in the Northeast region of the country.A sample of 60 individuals in the Midwest shows a per person expenditure for prescription drugs of $745. Further, it is given that the population standard deviation of $300.
- Formulate hypotheses for a test to determine whether the sample data support the conclusion that the population annual expenditure for prescription drugs per person is lower in the Midwest than in the Northeast and Identify whether it is a two-tail test or a one tail test (Left or right tail).
- Decide the suitable test statistics and justify your selection.
III. Calculate the value of the relevant test statistics and identify the P value
- Based on the p value in part (III), at 99% confidence level, decide the decision criteria.
- Make the final conclusion based on the analysis.
(1)
State the hypotheses.
That is, there is no evidence that the population annual expenditure for prescription drugs per person is lower in the Midwest than in the Northeast.
That is, there is evidence that the population annual expenditure for prescription drugs per person is lower in the Midwest than in the Northeast.
Determine the tail of the test used.
The tail of the test used here is left tail because the word “lower”, indicates the left tail test.
Correct option: left tail test.
(2)
Determine the tail of the test statistic used.
The type of the test statistic is used here is Z, since, because the value of the population standard deviation is known and also the sample is large greater than 30.
Therefore, type of the test statistic used here is Z.
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