About Syllabus Blog Tools PYQ Quizes

T-Test in Business Statistics

Suppose you're trying to judge whether a new teaching method really improves student scores compared to the traditional one. But you only have a small group of students to test it on. Can you still make a reliable statistical conclusion? This is where the t-test steps in one of the most essential tools for small sample analysis and a favorite topic in UGC-NET examinations.

Unit 5: Business Statistics and Research Methods

Purpose of the T-Test

The t-test is designed to compare sample means and judge whether the difference is significant or simply due to chance. Unlike the z-test, which requires large samples and known variance, the t-test thrives on small samples and situations where the population variance is unknown.

When to Use a T-Test

  • Sample size is small (n < 30).
  • Population variance (σ²) is unknown.
  • Data is approximately normally distributed.
  • Used to compare sample mean(s) with a hypothesized value or with another sample.

Types of T-Tests

a. One-Sample T-Test

Objective: To test whether the mean of a single sample differs significantly from a known or hypothesized population mean.

Formula:

t = ( − μ ) / (s / √n)

  • = Sample mean
  • μ = Hypothesized population mean
  • s = Sample standard deviation
  • n = Sample size

Example: A class of 15 students has an average score of 72 with a standard deviation of 10. Test whether this differs from the expected average score of 75 at 5% significance.

Step 1: t = (72 − 75) / (10 / √15) = −3 / (2.58) = −1.16

Step 2: Degrees of freedom = n−1 = 14. From the t-table at 5% (two-tailed), critical value ≈ ±2.145.

Since −1.16 lies within −2.145 and +2.145, we fail to reject H₀. The mean score is not significantly different from 75.

b. Independent Two-Sample T-Test

Objective: To test whether the means of two independent groups differ significantly.

Formula:

t = ( x̄₁x̄₂ ) / √[ (s₁²/n₁) + (s₂²/n₂) ]

  • x̄₁, x̄₂ = Sample means
  • s₁², s₂² = Sample variances
  • n₁, n₂ = Sample sizes

Example: Sample A (n=10) has mean 85 and SD 5. Sample B (n=12) has mean 80 and SD 6. Test whether the difference is significant.

Step 1: t = (85−80) / √[(25/10)+(36/12)] = 5 / √(2.5+3) = 5 / √5.5 ≈ 2.13

Step 2: Approximate df ≈ n₁ + n₂ − 2 = 20. At 5% (two-tailed), critical value ≈ 2.086.

Since 2.13 > 2.086, we reject H₀. The two groups differ significantly in their means.

c. Paired T-Test

Objective: To test whether the mean difference between paired observations is significant (before and after studies, matched pairs, etc.).

Formula:

t = ( ) / ( sd / √n )

  • = Mean of differences
  • sd = Standard deviation of differences
  • n = Number of pairs

Example: The weights of 8 people were recorded before and after a diet program. The mean difference was 4 kg with SD of differences = 2.5. Test significance at 5%.

Step 1: t = 4 / (2.5/√8) = 4 / 0.88 = 4.55

Step 2: df = n−1 = 7. From t-table at 5%, critical value ≈ 2.365.

Since 4.55 > 2.365, we reject H₀. The diet program significantly reduces weight.

Assumptions of T-Test

  • The data should be continuous (interval/ratio scale).
  • Observations are independent within and across groups.
  • Data approximately follows a normal distribution.
  • For independent t-test, variances of the two groups are roughly equal (homogeneity of variance).

Interpretation of Results

When the calculated t-value exceeds the critical value from the t-distribution table (based on degrees of freedom and chosen significance level), we reject the null hypothesis. The strength of evidence is often summarized by the p-value. If p ≤ α (commonly 0.05), we conclude the difference is statistically significant.

The t-test is a small-sample hero. It compares means when variance is unknown, making it practical and powerful. 

Students should remember the three variations: one-sample, independent two-sample, and paired t-test, along with their assumptions. The key is about understanding when and why to apply them. So the next time you face a problem, ask yourself 

Small sample? unknown variance? If yes, the t-test is waiting at your side.

Every statistician, researcher, or student should carry the t-test as part of their essential toolkit. Learn it well, and it will always pay dividends in exams and real-world research.



Recent Posts

View All Posts