# Your client says that he remembers a little bit about hypothesis testing, but he is a little fuzzy

Income distributions across American cities have remarkably different shapes. This article attempts to explain that observation. After a brief review of the income distribution literature, a theory of an area’s income distribution is proposed which can account for the dissimilar shapes. The theory focuses upon the industry mix of an area and ignores other factors. For reasons of data availability, the theory is tested using data from states. Approximately 88 percent of the variance is explained, which lends supports to the hypothesis that factors other than industry mix do not strongly affect the shape of the income distribution or are correlated with industry mix.

## Competency

Given a real-life application, develop a hypothesis test for a population parameter and its interpretation.

## Instructions

Scenario (information repeated for deliverable 01, 03, and 04)

A major client of your company is interested in the salary distributions of jobs in the state of Minnesota that range from \$30,000 to \$200,000 per year. As a Business Analyst, your boss asks you to research and analyze the salary distributions. You are given a spreadsheet.

that contains the following information:

• A listing of the jobs by title
• The salary (in dollars) for each job

In prior engagements, you have already explained to your client about the basic statistics and discussed the importance of constructing confidence intervals for the population mean. Your client says that he remembers a little bit about hypothesis testing, but he is a little fuzzy. He asks you to give him the full explanation of all steps in a hypothesis testing and wants your conclusion about a claim that the average salary for all jobs in the state of Minnesota is less than \$75,000.

Background information on the Data

The data set in the spreadsheet consists of 364 records that you will be analyzing from the Bureau of Labor Statistics. The data set contains a listing of several jobs titles with yearly salaries ranging from approximately \$30,000 to \$200,000 for the state of Minnesota.