A Human Resources officer is directing a hypothesis test to determine if her com

Question

A Human Resources officer is directing a hypothesis test to determine if her

company’s hiring practices are resulting in disparate impact (that is, unintentional)

employment discrimination. The null hypothesis for the test isthat there is no

disparate impact discrimination. The alternative hypothesisis that there is.

Considering the relative consequences of Type I and Type II errors, should the

significance level () be set relatively low (around 0.01) or relatively high (around

0.10)?

Please Explain

Explanation / Answer

HERE IN THIS WE MUST BE THE SIGNIFICANCE LEVEL MUST BE HIGH AROUND 0.10 AS THE SIGNIFICANCE LEVEL AT RELATIVELY LOW OF 0.01 WILL TELL ABOUT THE PROBABILITY OF WRONG DECISION WHEN THE NULL HYPOTHESIS IS TRUE. LARGE ALPHA IS CHOOSEN WHEN WE ARE CERTAIN THAT WE WILL NOT MISS THE DIFFERENCE THAT MIGHT EXIST. AS IN THIS CASE THE CHANCES OF MISSING IS LOW THEREFORE RELATIVELY HIGH SIGNIFICANCE LEVEL WILL BE USED.

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