00:01
Now we want to compare home prices in two small towns in pennsylvania.
00:06
To do that, we're going to use the procedure given at page 491 in the book.
00:11
Let's get started.
00:12
Step 1, we need to gather over data.
00:17
It's already written on this form, so i'm just going to use it's already given.
00:21
So for the first city, the first town, we have the sample, average sample price is 93.
00:32
3 ,430 and in the other town our sample price average is $98 ,043.
00:45
The means of the population, the standard deviation is $5 ,206.
00:54
In the second, second city, the standard deviation is $4 ,731.
01:04
And the sample size taken in the first city is 35 houses greater than 30 that's always good verification and in the second town it's 40 which is also greater than 30 which is also a good now that we have all the data available to us let's write down our hypotheses so no hypothesis alternative hypothesis so basically the means the average price the mean the mean price in both is the same or it's not the same.
01:44
We can draw it in this ugly drawing.
01:52
It's a two -tail test.
01:54
Therefore our rejection area will be over here and over here.
01:59
Now to complete this little graph here we need to go to step two which is to find a critical value.
02:06
Alpha is very small.
02:07
0 .01.
02:09
We are doing a two -tail test so we divide by 2 .0 .0 so 5.
02:17
Therefore, our critical values are plus or minus 2 .575...