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Five years ago the average household income in BC was $77,500 with a population standard deviation of $8000. Last year a survey of 40 randomly selected households in BC had an average income of $79,500. Can we conclude that the average household income in BC has gone up since? Use a 5% level of significance.
a) Define the parameter of interest and set up the hypotheses in terms of the parameter.
b) Briefly explain why the z statistic should be used in this case.
c) Calculate the test statistic.
d) Find the P-value and provide an interpretation of the P-value.
e) What conclusion can we draw? Use the P-value approach.
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