Business Statistics

Meaning, testing and types of hypothesis

Meaning of hypothesis:

It is a quantitative statement about population. It is some assumption or statement which may or may not be true about a population, which we want to test on the basis of evidence of random sample.

Testing  of hypothesis:

There is an element of risk of taking wrong decisions at the time of taking of decision. For example when a company launched a new product then they are interested to find out that it is going to be a big product in the market or not. It is here the modern theory of probability play an important role in decision-making which helps in arriving at a particular decision which is known as a testing of hypothesis. The theory of testing of hypothesis was initiated by J. Neyman and E. S. Pearson.  They use statistical techniques to arrive at a particular decision; in this sample size is fixed in advance.

There is another technique derived by Abhram Wald called Sequential Testing in which sample size is not fixed.

Types of hypothesis:

There are 2 types of hypothesis:

a)      Simple hypothesis

b)      Composite hypothesis

  If the hypothesis completely specifies the population then it is simple otherwise it is composite.

I hope you understood the meaning, testing and types of hypothesis.

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