You want to attempt to direct market magazine subscriptions

You want to attempt to direct market magazine subscriptions only if there is strong evidence that more than 10% of potential customers would respond. If for a sample mailing to160 potential customer, 23 of these responded: a.) Express the situation as a hypothesis testing problem b.) If you were to use an = 0.01 significance level what would you do in the circumstances given? Explain clearly why or why not.

Solution

a)

expressing this situation in hypothesis problem

Ho : p = 0.10

H1 : p > 0.10

b)

P = 23 / 160 = 0.14

Z = ( 0.14 - 0.10) / [ srqt ( 0.10*0.90 / 160 ) ]

Z = 0.04 / 0.02372

Z = 1.69

for alpha = 0.01

critical value is ( using tables of normal distribution Z ) = 2.32

what would you do in the circumstances given?

so we fail to reject Ho because Z < critical value