Z-Test

Here are the four basic steps to completing a hypothesis z-test.

1. State the Hypotheses

-State the Null Hypothesis
-State the Alternative Hypothesis

2. Set the Decision Criteria

-Specify the significance level (otherwise known as the alpha level, and traditionally .05)
-Determine the critical value of z
Do this for the chosen significance level. For alpha=.05 we look up a Z that has .025 of the distribution beyond it. This is a Z of +1.96 and -1.96.

3. Gather Data

-Not too much explanation needed.

4. Evaluate the Hypothesis

-Determine the standard error of the mean by the following formula:

-Calculate the Test Statistic: To determine how unusual the mean of a sample is, use the following Z formula to calculate the Z value for our sample mean under the assumption that the null hypothesis is true. The Z formula is:

-Decision Making Time: look the obtained Z value up in a Z table to find the corresponding P, and compare it to the Critical Z value. If the obtained P is less than alpha, we reject the null hypothesis.