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Computing the criterion value


  • Standard deviation for the sample of 100 households is $4,000. The standard error of the mean (sx) is given by:


  • Critical mean household income xc  through the following two steps:
    • Determine the critical z-value, zc. For α = 0.05:
      • zc = 1.645
    • Substitute the values of zc, s, and μ (under the assumption that H0 is "just" true )
      • xc = μ + zcs = $19,658


Decision Rule:
If the sample mean household income is greater than $19,658, reject the null hypothesis and introduce the new course


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