The Significance of Significance Levels
By g_oak, Updated
How Statistics can relate to our real lives.
Hey! Do you ever wonder how statistics applies to our real lives?
How could significance levels relate to us?!
Yeah, I do! I often think about how significance levels are...significant haha...in our lives
Oh I get it! Then we'd test the two hypotheses, for example the null would be that gum drops are liked the same as other candy and the alternative would be that gum drops are liked less than other candy
Let's think: owners of candy shops and other businesses need to know what their consumers like to buy. So in order to do that, they can set up hypothesis tests, with a 5% significance level of course.
Yes, good! Now let's move on to how we would finish the test and how the candy shop owner would come to a conclusion
So, after we test our hypotheses, what kind of p-values, which is the probability of finding the observed results or results more extreme assuming the null hypothesis is true, are we looking for?
Well, if we want to fail to reject the null hypothesis, we need a p-value that's bigger than our significance level of 0.05. If we want to reject the null, effectively saying that gum drops are less popular than the other candy, then the p-value needs to be smaller than the significance level.
When the candy shop owner finds a p-value smaller than the significance level, he or she can conclude that gum drops are not liked by the consumers, and will not waste money buying them for the store.
Wow perfect! So now when consumers go into the candy shop, they'll find more of what they love and will recommend the store to their friends!
So next time, when we're trying to choose a movie for movie night, what should we do to find one?
We'll perform a hypothesis test, find the p-value, compare it to the significance level and see whether it is liked less by audiences than other movies of the same genre!
No, actually, I'll just choose the movie, but good job knowing the importance of a significance level!
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