Hypothesis Testing and confidence interval
Reliable Housewares is a local store that sells many household items and issues its own credit card to its customers. The store manager wants to study the purchasing behavior of its “credit” customers. To that end, he has come to DeVry and asked our MBA students for help. The manager has brought with him data on five variables of 55 randomly selected credit customers.
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- LOCATION (Rural, Urban, Suburban – Household location of the credit customer)
- INCOME (in $1,000’s – be careful with this)
- SIZE (Household Size – number of people living in the household of credit customer)
- YEARS (the number of years that the customer has lived in the current location)
- CREDIT BALANCE ($ balance on customer’s store credit card)
Hypothesis Testing and Confidence Intervals
The Reliable Housewares store manager wants to learn more about the purchasing behavior of its “credit” customers. In fact, he is speculating about four specific cases shown below (a) through (d) and wants you to help him test their accuracy.
- The average annual income of credit customers is less than $50,000.
- The true population proportion of credit customers who live in an urban area exceeds 40%.
- The average number of years lived in the current home is less than 13 years.
- The average credit balance for suburban customers is at most $4,300.
- Using the dataset provided in the course shell, perform the hypothesis test for each of the above speculations (a) through (d) in order to see if there is an statistical evidence to support the manager’s belief. In each case, use the Seven Elements of a Test of Hypothesis, in Section 7.1 of your textbook (on or about Page 361). Use α=5% for all your analyses. Explain your conclusion in simple terms. Also be sure to indicate which hypothesis is the “claim”, compute the p-value, and interpret your results.
- Follow your work in (i) with computing a confidence interval for each of the variables described in (a) though (d). Interpret these intervals.
- Write an executive summary for the Reliable Housewares store manager about your analysis, distilling down the results in a way that would be understandable to someone who does not know statistics. Clear explanations and interpretations are critical.
- All DeVry University policies are in effect, including the plagiarism policy.
- Project Part B report is due by the end of Week 6.
- Project Part B is worth 100 total points. See grading rubric below.
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