In 2015, the U.S. Census Bureau reported that 62.2% of American families owned their homes—the lowest rate in 20 years. Census data reveal that the ownership rate in one small city is much lower. The city council is debating a plan to offer tax breaks to first-time home buyers to encourage people to become homeowners. They decide to adopt the plan on a 2-year trial basis and use the data they collect to make a decision about continuing the tax breaks. Since this plan costs the city tax revenues, they will continue to use it only if there is strong evidence that the rate of home ownership is increasing.
a) In words, what will their hypotheses be?
b) What would a Type I error be?
c) What would a Type II error be?
d) For each type of error, tell who would be harmed.
e) What would the power of the test represent in this context?