The manager of a restaurant wants to know if there is a correlation between the
ID: 3370365 • Letter: T
Question
The manager of a restaurant wants to know if there is a correlation between the amount of a customer’s bill and the percent that they tip. In other words, as people spend more money do they tend to tip at different rates? With data from a random sample of 157 bills, he used StatKey to construct a 95% bootstrap confidence interval of [0.018, 0.292] for r.
A. What if the manager wanted to do a hypothesis test instead? What would be the appropriate null and alternative hypotheses?
B. Based on the 95% confidence interval, would you expect the manager to reject or fail to reject the null hypothesis at the 0.05 alpha level? Explain your reasoning.
C.Using this scenario, compare and contrast confidence intervals and hypothesis testing. List at least one similarity and at least one difference.
Explanation / Answer
a) H0: Spend less or equal money
H1: Spend more money
b) Reject the null hypothesis as the interval contains only positive values
c) Similarity-Both give same results related to hypothesis testing
Difference-Confidnce Interval are easier to calculate
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