Complete Question
Pennsylvania Refining Company is studying the relationship between the pump price of gasoline and the number of gallons sold. For a sample of 14 stations last Tuesday, the correlation was 0.65.At the 0.01 significance level Can the company conclude that the correlation is positive
Answer:
Yes the company conclude that the correlation is positive
Step-by-step explanation:
From the question we are told that
The sample size is n = 14
The correlation is r = 0.65
The null hypothesis is [tex]H_o : r < 0[/tex]
The alternative hypothesis is [tex]H_1 : r > 0[/tex]
Generally the standard deviation is mathematically evaluated as
[tex]Sr = \sqrt{1- r}[/tex]
[tex]Sr = \sqrt{1- 0.65}[/tex]
[tex]Sr = 0.616[/tex]
The degree of freedom for the one-tail test is
[tex]df = n- 2[/tex]
[tex]df = 14- 2[/tex]
[tex]df = 12[/tex]
The standard error is evaluated as
[tex]SE = \frac{0.616}{ \sqrt{12} }[/tex]
[tex]SE =0.1779[/tex]
The test statistics is evaluated as
[tex]t = \frac{r }{SE}[/tex]
[tex]t = \frac{0.65 }{0.1779}[/tex]
[tex]t = 3.654[/tex]
The p-value of of t is obtained from the z table, the value is
[tex]p-value = P(t < 3.654) = 0.00012909[/tex]
Given that [tex]p-value < \alpha[/tex] then we reject the null hypothesis
Hence the company can conclude that the correlation is positive
