Five Step Hypothesis Testing Paper - National Average Gas Price

Essay by rooster25University, Bachelor's January 2007

download word file, 6 pages 5.0


Team C will test the validity of the national average gas price of $2.297 by using a 5 Step Hypothesis testing technique. The testing will begin with our null and alternate hypothesis statements. Second, we will determine the level of significance or probability of rejecting the null hypothesis when it is true (Lind, Marchal, Wathwn, 2004). Third we will select a test statistic or value from the sample. Fourth we will formulate the decision rule which will determine whether we accept or reject the null hypothesis. Finally we will compare our test statistic to our critical value and decide to accept or reject the hypothesis. Our sample will consist of 54 gas prices obtained through observation of local gas stations across the country as well as prices found on internet sources.

Five Step Hypothesis Testing Paper - National Average Gas Price

By using a 5 Step hypothesis testing technique Team C will analyze national gas prices and determine if our sample is not different from the national average of $2.297.

The following will show our sample data and the possibility of rejecting the null hypothesis when it is true. In addition, we will determine the chances of a Type I or Type II error occurring in the process.

Identification of Hypothesis

Team C is researching the following hypothesis: The Energy Information Administration states that the National Average gas price is $2.297 per gallon. The sample for the Motor Gasoline Price Survey was drawn from a frame of approximately 115,000 retail gasoline outlets. The Energy Information Administration conducted their research by first sampling counties. They then sampled the outlets from the gasoline outlet frame within those counties within each sampling cell. Sampling cells are the smallest basic geographical units formed by the boundaries of the geographic and formulation areas for...