You can follow six basic steps to correctly set up and perform a hypothesis test. For example, the manager of a pipe manufacturing facility wants to determine whether the average diameter of their pipes is different from 5cm. The manager follows the basic steps for doing a hypothesis test.
You should determine the criteria for the test and the required sample size before you collect the data.
First, the manager formulates the hypotheses. The null hypothesis is: The population mean of all the pipes is equal to 5 cm. Formally, this is written as: H0: μ = 5
|Condition to test||Alternative Hypothesis|
|The population mean is less than the target.||one sided: μ < 5|
|The population mean is greater than the target.||one sided: μ > 5|
|The population mean differs from the target.||two sided: μ ≠ 5|
Because they need to ensure that the pipes are not larger or smaller than 5 cm, the manager chooses the two-sided alternative hypothesis, which states that the population mean of all the pipes is not equal to 5 cm. Formally, this is written as H1: μ ≠ 5