Question

A medical survey in 1990 indicated that 43% of Australian adults prefer to take a name brand prescription drug than pay less for the generic equivalent. A pharmaceutical company believes that with the financial crisis, the percentage of Australian adults willing to take a cheaper generic drug may have risen. The research department conducted a study where a random sample of Australian adults were asked whether or not they would accept a cheaper generic prescription drug.

1) What type of hypothesis test would be appropriate to investigate the pharmaceutical company’s prediction

2) The appropriate hypothesis test was conducted and a p-value of .143 was obtained. Based on the results of this study, the pharmaceutical company concludes that the percentage of Australian adults willing to take a cheaper generic prescription drug has remained steady at 43%. Comment on the validity of this conclusion. Provide justification for your answer.

Please state the null and alternative hypothesis.

Answer 1

Here, p = proportion of Australian adults who prefer to take a name brand prescription drug than pay less for the generic equivalent.
Null hypothesis = H₀: p = 0.43, Alternative hypothesis = H_a: p > 0.43.

(1) We would be conducting a "one sample proportion Z test" to determine whether the pharmaceutical company's assertion is true or not.

(2) The p-value of 0.143 is greater than 0.05 (level of significance), which indicates that the result is not significant. This means that we have to failed to reject the null hypothesis, which means that the percentage has remained steady at 43% (which was the null hypothesis). Hence, the conclusion of the study is valid.