The average cost of tuition plus room and board for a small...

The average cost of tuition plus room and board for a small private liberal arts college is reported to be $8,500 per term, but a financial administrator believes that the average cost is higher. A study conducted using 350 small liberal arts colleges showed that the average cost per term is $8,745. The population standard deviation is $1,200. Let ? = 0.05. Based on the computed test statistic or p-value, what is our decision about the average cost? Not equal to $8,500 Greater than $8,500 Equal to $8,500 Less than $8,500

Transcript

00:01 In this situation, they tell us that the average cost of tuition at a school is 8 ,500 per term.

00:09 But the financial administration believes the average cost is higher.

00:12 So here we have a situation where we have a belief, we have a claim that it's higher, and we want to test this.

00:20 So what we should start doing when all these type of problems is setting up the hypothesis, the no hypothesis and the alternate hypothesis.

00:31 You always want to start with the alternate hypothesis first.

00:35 So the alternate hypothesis is the claim.

00:37 He believes that the average is higher.

00:39 So the average is higher than 8 ,500.

00:45 And your no hypothesis will be, well, that is not higher.

00:49 It's equal to 8500 or less or equal.

00:52 In some schools they like to, in some books too, they like to do it this way with a mathematically correct situation.

01:00 But in many books and i like to do it this way because it's more in the spirit of what we're testing.

01:08 So in this case what we do is we want to test with this.

01:11 We want to test the receptor significance level and in this case the significance level is right here.

01:18 It's 5%.

01:20 So aphi is 0 .05.

01:25 So we're going to test this.

01:26 In this case it's very important to determine what standard deviation we have.

01:30 Here they tell us that the population standard deviation is 1200.

01:36 That determines what type of test we're going to do.

01:39 So in this case we're going to do a hypothesis testing with a z test, with a normal distribution because we have the population standard deviation.

01:47 So to do this, the best way to do it is with a graphical calculator.

01:51 We can use the ti84, which is a very popular high school calculator, which is very good for statistics, by the way...

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