The local government of country X is committed to curb the consumption of tobacco among youngsters owing to its severe health effects. Previous attempts to regulate tobacco consumption have failed to produce any fruitful results. The only possible way out is to tax the consumption of tobacco. Optimal taxation would require a proper knowledge of how price sensitive the consumers are to tobacco consumption. Data is collected by selecting a small sample of individuals at random. It is known that the price elasticity of tobacco consumption follows a normal distribution. Similar studies carried out earlier report that the price elasticity of tobacco consumption has a mean 0.30. The current survey aims to verify whether the value of the mean population price elasticity is actually 0.30 or not. The given table summarises the findings from the survey: The standard deviation of the sample (sy) The sample mean of price elasticity (Y) Number of individuals surveyed (n) 25 0.34 0.49 Given that the sample size relatively small, is it reliable to assume a normal approximation to the rstatistic for hypothesis testing? O A. Yes, a normal approximation to the t-statistic is reliable if the population distribution is itself normal and the sample size is greater than 15. O B. Yes, a normal approximation to the t-statistic can be used for hypothesis testing, but only with n-2 degrees of freedom. O c. No, since the t-statistic follows an F distribution small samples. O D. Yes, since a normal approximation to the t-statistic is independent of the sample size. Let uy denote the average price elasticity of tobacco consumption among youngsters in the entire country. Based on the above information, the t-statistic for the test Hg: uy= 0.30 vs. H,: uy+0.30 is: 2.62 (Round your answer two decimal places).
The local government of country X is committed to curb the consumption of tobacco among youngsters owing to its severe health effects. Previous attempts to regulate tobacco consumption have failed to produce any fruitful results. The only possible way out is to tax the consumption of tobacco. Optimal taxation would require a proper knowledge of how price sensitive the consumers are to tobacco consumption. Data is collected by selecting a small sample of individuals at random. It is known that the price elasticity of tobacco consumption follows a normal distribution. Similar studies carried out earlier report that the price elasticity of tobacco consumption has a mean 0.30. The current survey aims to verify whether the value of the mean population price elasticity is actually 0.30 or not. The given table summarises the findings from the survey: The standard deviation of the sample (sy) The sample mean of price elasticity (Y) Number of individuals surveyed (n) 25 0.34 0.49 Given that the sample size relatively small, is it reliable to assume a normal approximation to the rstatistic for hypothesis testing? O A. Yes, a normal approximation to the t-statistic is reliable if the population distribution is itself normal and the sample size is greater than 15. O B. Yes, a normal approximation to the t-statistic can be used for hypothesis testing, but only with n-2 degrees of freedom. O c. No, since the t-statistic follows an F distribution small samples. O D. Yes, since a normal approximation to the t-statistic is independent of the sample size. Let uy denote the average price elasticity of tobacco consumption among youngsters in the entire country. Based on the above information, the t-statistic for the test Hg: uy= 0.30 vs. H,: uy+0.30 is: 2.62 (Round your answer two decimal places).
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The local government of country X is committed to curb the consumption of tobacco among youngsters owing to its severe health effects. Previous attempts to regulate tobacco consumption have failed to produce any fruitful results.
The only possible way out is to tax the consumption of tobacco. Optimal taxation would require a proper knowledge of how price sensitive the consumers are to tobacco consumption. Data is collected by selecting a small sample of
individuals at random. It is known that the price elasticity of tobacco consumption follows a normal distribution. Similar studies carried out earlier report that the price elasticity of tobacco consumption has a mean 0.30. The current
survey aims to verify whether the value of the mean population price elasticity is actually 0.30 or not.
The given table summarises the findings from the survey:
Number of individuals
The standard deviation
The sample mean of
surveyed (n)
of the sample (Sy)
price elasticity (Y)
25
0.34
0.49
Given that the sample size is relatively small, is it reliable to assume a normal approximation to the -statistic for hypothesis testing?
O A. Yes, a normal approximation to the t-statistic is reliable if the population distribution is itself normal and the sample size is greater than 15.
O B. Yes, a normal approximation to the t-statistic can be used for hypothesis testing, but only with n-2 degrees of freedom.
OC. No, since the t-statistic follows an F distribution in small samples.
O D. Yes, since a normal approximation to the t-statistic is independent of the sample size.
Let uy denote the average price elasticity of tobacco consumption among youngsters in the entire country.
Based on the above information, the t-statistic for the test Ho: uy = 0.30 vs. H,: py# 0.30 is: 2.62.
(Round your answer to two decimal places).
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