Question

2. Best Buy claims there is a negative relationship between the selling price of Canon PowerShot digital camera and the demand for it. They take a sample of 7 weeks and find that the correlation coefficient is -0.892. Is there enough evidence to support Best Buy’s claim? Test using α=0.10.

a. Set up the null and alternate hypotheses.

b. Calculate an appropriate test statistic.

c. What is the p-value? Explain your conclusion in the context of the question.

Answer 1

Solution:

n = 7

r = -0.892

Claim: there is a negative relationship i.e.   < 0

Test using α=0.10.

a. Set up the null and alternate hypotheses.

H₀ : = 0 vs H₁ : <   0

b. Calculate an appropriate test statistic.

The test statistic is given by

t =

=  

= -4.412

c. What is the p-value? Explain your conclusion in the context of the question.

d.f. = n - 2 = 7 - 2 = 5

< sign in H1 indicates that the left tailed test.

t = -4.412

So , p value = 0.003472

p value is less than α=0.10

So , reject the null hypothesis

We can conclude that there is significant negative relationship between the selling price of Canon PowerShot digital camera and the demand for it.