A company is looking at the results of a marketing survey and trying to establis

Question

A company is looking at the results of a marketing survey and trying to establish whether men and women value the product differently. They have data on the willingness to pay for the product for 50 men and 50 women.

Design a hypothesis test of whether or not the mean willingness to pay for the product is different for men and women.

Which, if any, is more important to minimize in this case, the type I or type II error? Why?

How does the choice of the critical value affect the tradeoff between the type I and type II error?

Explanation / Answer

The suitable test is 2-sample t test.

H0:mum-muw=0 (Willingness to pay for product is same for men and women)

H1:mum-muw not equal to 0 (Willingness to pay for product is different for mean and women).

Type I error is rejecting a true null hypothesis, therefore, if willingness for paying for a product is sam efor men and women and researcher concludes it to be different, then much loss will not be there if the researcher fails to reject a false null hypothesis (Type II error) and concludes that willingness to pay for product is same for men and women, then strategically it will be a wrong decision.

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