Three years ago, the mean price of an existing single-family home was
$243,708.
A real estate broker believes that existing home prices in her neighborhood are
higherhigher.
(a) |
Determine the null and alternative hypotheses. |
(b) |
Explain what it would mean to make a Type I error. |
(c) |
Explain what it would mean to make a Type II error. |
a)
Null hypothesis;H0: mu=$243,708 i.e. ( mean price of single family home is $243,708
Vs
Alternative hypothesis;H1: mu>$243.708 i.e. ( mean price of single family is higher.
b) Type I error occurs when we are rejecting the true hypothesis.
If we reject that mean price of single family home is $243,708 inspite of the fact that mean price is actually$243,708 then we commit type I error.
c) Type II error means accepting false hypothesis.
If we accept H0 when H1 is trues i.e. we take mean as $243,708 instead of taking mean higher than$243,708 then we will commit type II error.
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