The average price of homes sold in the U.S. in the past year was $220,000. A random sample of 81 homes sold this year showed an average price of $210,000. It is known that the standard deviation of the population is $36,000. At a 5% level of significance, test to determine if there has been a significant decrease in the average price of homes.
a.
State the null and alternative hypotheses to be tested. List Type I and Type II error and what it means
b.
Compute the test statistic.
c.
Determine the critical value for this test.
d.
What do you conclude atα= .01? Discuss the overall comparisons of the two levels of significance and what they represent in terms of home prices.
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