Understanding Business Statistics

CHAPTER 14

Chi-Square Tests

LEARNING OBJECTIVES

After completing the chapter, you should be able to

1. Describe the chi-square distribution and use a chi-square table.
2. Use the chi-square distribution to test for differences between population proportions.
3. Conduct a proper chi-square goodness-of-fit test.
4. Conduct a proper chi-square test of independence.

EVERYDAY STATISTICS

Bigger, Stronger, Faster

These days, “big data” is big news. In their book Big Data: A Revolution That Will Transform How We Live, Work, and Think, authors Viktor Mayer-Schonberger and Kenneth Cukier describe how dramatic increases in the availability of digitized information and the incredible growth of raw computing power will affect our future. Already these forces have expanded the role of statistics and, in some cases, changed the way statistical tools are used.

The ability to quickly pull together and analyze huge amounts of data from multiple sources allows statisticians to “muscle” new solutions to old problems. Banks and mortgage companies, for example, have begun to use big data programs to uncover fraud by tracking social networks for tell-tale activity. By linking the bank's data to information from social networking sites, lenders can promptly red flag someone who is defaulting on a loan but ...