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Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Chapter 12

Sections 12.1 and 12.3

Chi-Square Tests

Basic Business Statistics
10th Edition

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Learning Objectives

In this chapter, you learn:

How and when to use the chi-square test for contingency tables

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Contingency Tables

Contingency Tables

  • Useful in situations involving two or more variables that are in categories.
  • Used to classify sample observations according to two or more characteristics
  • Also called a cross-classification table.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Contingency Table Example

Left-Handed vs. Gender

Dominant Hand: Left vs. Right

Gender: Male vs. Female

  • 2 categories for each variable, so

called a 2 x 2 table

  • Suppose we examine a sample of

size 300

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Contingency Table Example

Sample results organized in a contingency table:

(continued)

120 Females, 12 were left handed

180 Males, 24 were left handed

sample size = n = 300:

Gender Hand Preference
Left Right
Female 12 108 120
Male 24 156 180
36 264 300

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Hypothesis

  • If H0 is true, then the proportion of left-handed females should be the same as the proportion of left-handed males
  • The two proportions above should be the same as the proportion of left-handed people overall

H0: π1 = π2 (Proportion of females who are left

handed is equal to the proportion of

males who are left handed)

H1: π1 ≠ π2 (The two proportions are not the same –

Hand preference is not independent

of gender)

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Critical Value

2

2U

Decision Rule:

If statistic 2 > 2U, reject H0, otherwise, do not reject H0

The 2 test statistic approximately follows a chi-squared distribution with df = (r-1)(c-1)

r: number of rows

c: number of columns

0

Reject H0

Do not

reject H0

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

The Chi-Square Test Statistic

  • where:

fo = observed frequency in a particular cell

fe = expected frequency based on the total sample

2 for the 2 x 2 case has 1 degree of freedom

The Chi-square test statistic is:

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Observed vs. Expected Frequencies

Gender Hand Preference
Left Right
Female Observed = 12 Expected = 14.4 Observed = 108 Expected = 105.6 120
Male Observed = 24 Expected = 21.6 Observed = 156 Expected = 158.4 180
36 264 300

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Finding Expected Frequencies

  • To obtain the expected frequency for left handed females, multiply the average proportion left handed (56/300 = 0.12) by the total number of females
  • To obtain the expected frequency for left handed males, multiply the average proportion left handed (0.12) by the total number of males

we expect (.12)(120) = 14.4 females to be left handed

(.12)(180) = 21.6 males to be left handed

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

The Chi-Square Test Statistic

The test statistic is:

Gender Hand Preference
Left Right
Female Observed = 12 Expected = 14.4 Observed = 108 Expected = 105.6 120
Male Observed = 24 Expected = 21.6 Observed = 156 Expected = 158.4 180
36 264 300

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Conclusion

Decision Rule:

If 2 > 3.841, reject H0, otherwise, do not reject H0

Here,

2 = 0.7576 < 2U = 3.841,

so we do not reject H0 and conclude that there is not sufficient evidence that the two proportions are different at  = 0.05

2

2U=3.841

0

Reject H0

Do not

reject H0

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Example: 2 Test of Independence

  • Similar to the 2 test for equality of more than two proportions, but extends the concept to contingency tables with r rows and c columns

H0: The two categorical variables are independent

(i.e., there is no relationship between them)

H1: The two categorical variables are dependent

(i.e., there is a relationship between them)

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

2 Test of Independence

  • where:

fo = observed frequency in a particular cell of the r x c table

fe = expected frequency in a particular cell if H0 is true

2 for the r x c case has (r-1)(c-1) degrees of freedom

(Assumed: each cell in the contingency table has expected frequency of at least 1)

The Chi-square test statistic is:

(continued)

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Decision Rule

  • The decision rule is

If 2 > 2U, reject H0, otherwise, do not reject H0

Where 2U is from the chi-squared distribution with (r – 1)(c – 1) degrees of freedom

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Example

  • The meal plan selected by 200 students is shown below:
Class Standing Number of meals per week Total
20/week 10/week none
Fresh. 24 32 14 70
Soph. 22 26 12 60
Junior 10 14 6 30
Senior 14 16 10 40
Total 70 88 42 200

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Example

  • The hypothesis to be tested is:

(continued)

H0: Meal plan and class standing are independent

(i.e., there is no relationship between them)

H1: Meal plan and class standing are dependent

(i.e., there is a relationship between them)

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Observed:

Expected cell frequencies if H0 is true:

Example for one cell:

Example:
Expected Cell Frequencies

(continued)

Class Standing Number of meals per week Total
20/wk 10/wk none
Fresh. 24 32 14 70
Soph. 22 26 12 60
Junior 10 14 6 30
Senior 14 16 10 40
Total 70 88 42 200
Class Standing Number of meals per week Total
20/wk 10/wk none
Fresh. 24.5 30.8 14.7 70
Soph. 21.0 26.4 12.6 60
Junior 10.5 13.2 6.3 30
Senior 14.0 17.6 8.4 40
Total 70 88 42 200

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Example: The Test Statistic

  • The test statistic value is:

(continued)

2U = 12.592 for  = 0.05 from the chi-squared distribution with (4 – 1)(3 – 1) = 6 degrees of freedom

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

Chap 12-*

Example:
Decision and Interpretation

(continued)

Decision Rule:

If 2 > 12.592, reject H0, otherwise, do not reject H0

Here,

2 = 0.709 < 2U = 12.592,

so do not reject H0

Conclusion: there is not sufficient evidence that meal plan and class standing are related at  = 0.05

2

2U=12.592

0

Reject H0

Do not

reject H0

Basic Business Statistics, 10e © 2006 Prentice-Hall, Inc.

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