Monday, May 9, 2011

The last time we looked at prices of 8 pairs of Payless sandals to find that:
1. The average price for each pair is $20.625
2. Standard deviation is $ 6.3

Suppose in our school, each person on average spends $25 on a pair of sandal. Is the price of sandals at Payless significantly cheaper than the average price we pay? (Use hypothesis testing with 95% level of confidence)


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  2. 1/H0 µ=25
    HA µ≠25
    2/ se= 6.3/sprt(8)= 2.227
    3/ 95% level of confidence=> .05
    Degree of confidence: 8-1=7
    One-tailed test
    =>t= 1.895

    =>critical region: µHo –t*se= 25-1.895*2.227= 20.78 > 20.625
    4/ Reject null hypothesis. The price of payless shoes is significantly cheaper than $25, the average amount we spend.