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False Alert, Missed Alarm

**Null hypothesis (Ho) **- It is a hypothesis that says there is no statistical significance between the two variables in the hypothesis.

It is a statement of “No Difference”. It is a statement we are testing in order to determine whether or not that statement is true. The observed difference is purely by chance and there is no special cause for the difference

**Alternative Hypothesis (Ha)** - Hypothesis which states that there is statistical significance between the two variables in the hypothesis.

It is a statement of “Difference”. It states that there is real effect and the observations are affected by the effect and some pure chance variations

**Type I Error (False Alert)** - is rejection of Null Hypothesis when it is true. In simpler words, Type I error occurs when we conclude that there is a statistical difference when there is actually no difference. This is also known as a false positive or producer's risk

**Type II Error (Missed Alarm)** - is failing to reject a Null Hypothesis when it is false or rejection of Alternate Hypothesis when it is true. In simpler words, Type II error occurs when we conclude that there is no difference when there is actually a statistical difference. This is also known as false negative or consumer's risk

An application oriented question on the topic along with responses can be seen below. The best answer was provided by Arunesh Ramalingam on 19th September 2017.

Q 12. While pursuing Business Excellence, given a choice, which error will you prefer over the other - A false alarm or a missed alert?

Explain your answer with suitable examples.

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