Hypothesis Testing for Amazon
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Question: Hypothesis Testing: Suppose a PM claims that users, on average, spend about $50 per month on Amazon. However, you doubt this claim and believe the average should be higher. You sample 100 users and find the sample mean is $85. Would you reject the PM's claim? Assume population standard deviation is 20.
We perform a one-sided z-test:
Since the p-value is far below the 0.05 threshold, we reject the null hypothesis and conclude that the average user spend is statistically greater than $50.
I would conduct a sample z-test because we have enough samples and the population variance is known.
H1: average monthly spending per user is $50 H0: average monthly spending per user is greater $50
One-sample z-test
x_bar = $85
mu = $50
s = $20
n = 100
x_bar - mu / (s / sqrt(n) = 17.5
17.5 is the z-score that we will need to associate with its corresponding p-value. However, the z-score is very high, so the p-value will be very close to zero, which is much less than the standard significance level of 0.05.
I'd reject the null hypothesis and conclude that the average monthly spending per user is indeed greater than $50.