Question

You are hired by Google to research how much people are willing to pay for a new cell phone in US. They are especially interested to know if their new phone, Pixel, should be priced similarly to Apple’s iPhone.

Google believes that there is a difference between what Android and iPhone users are willing to pay for high-end phones. You are hired to answer this question.

To analyze iPhone users your team randomly selects 16 individuals. The sample average is $1100. The sample standard deviation is $400.

To study Android users you collect data on 25 randomly chosen people. The sample average for Android users is $850. The sample standard deviation is $350.

d) Google executives believe they should charge the same amount for Pixel as Apple charges for its iPhone products. Test the hypothesis that the price iPhone users would pay for an iPhone is the same as the price of an Android user would pay for the phone. Google uses alpha (α) of 5%.

e) Based on your results, should Google price their new phone in the same range as Apple?

Answer 1

d)

1- iPhone

2- Android

Two-Sample T-Test and CI

Sample   N Mean StDev SE Mean
1       16 1100    400      100
2       25   850    350       70

Difference = μ (1) - μ (2)
Estimate for difference: 250
95% CI for difference: (10, 490)
T-Test of difference = 0 (vs ≠): T-Value = 2.11 P-Value = 0.041 DF = 39
Both use Pooled StDev = 370.0312

p-value = 0.041 < 0.05

we reject the null hypothesis

e)

we conclude that the price iPhone users would pay for an iPhone is not same as the price of an Android user would pay for the phone.

Google should not price their new phone in the same range as Apple.

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