Question

How can a business use hypothesis tests to compare the quantity demanded of new products and old products?

Answer 1

Solution:

Suppose you have an online system for procurement of order and the order. The vendor places the order in your system and accordingly the fulfilling team processes the order.

On an average, the vendor gives and order of say 10 products per month. In one month, the order of 100 products arrives. Is it an error? or should you process the order?

You can device an hypothesis test as under:

Null Hypotheses : Mean = 10

Alternate Hypotheses: Mean ≠ 10

You will have the standard deviation from the previous orders. You can calculate the test statistic such and Z or T depending on your sample size and check for 5% significance level.

If you happen to reject the null hypotheses, then it is an unsual order, you should check up with the vendor to re-confirm before fulfilling this order.

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