Homework SourseCan you think of an example where you may want to try harder
Can you think of an example where you may want to try harder to avoid one type or another?
My example would be the underwriter at a mortgage company.
Can you think of a health related policy (or political, social, economic, etc. policy) that pushes people toward avoiding one type or another?
Most mortgage companies follow a policy of Equal Opportunity Lending. An underwriter must ensure that they process the applicants information correctly or else they could inadvertently shatter a person\'s/family\'s dreams.
What are the repercussions of such policies?
An error during the processing could cause an unqualified person to get approved for a home loan that they cannot truly afford. This would place the person/family into a situation that they could not financially handle. However, if the underwriter made an error that denied a qualified person/family for a home loan, then it could leave the applicant in a less than desirable living situation along with causing stress and frustration from being denied.
| The Conclusion of the underwriter concering a loan applicant. | Population Condition (Underwriter at a mortgage company) | |
| H0: Approved for a loan | Ha: Denied a loan | |
| Fail to Reject H0 (Person can financially handle a loan) | Correct conclusion | Incorrect Conclusion: Type 2 Error (Person is denied a loan and is stuck in a bad living situation) |
| Reject H0: (Person can not handle the loan) | Incorrect Conclusion: Type 1 error (Person loses new home due to inability to make payments and winds up homeless) | Correct conclusion |
Solution
Type 1 error
when you reject ho but actually Ho is true
Type 2 error
when you accept Ho but actually Ho is false
