Jack Williams is vice president of marketing for one of the largest natural gas companies in the nation. During the past 4 years, he has watched two major factors erode the profits and sales of the company. First, the average price of crude oil has been virtually flat, and many of his industrial customers are burning heavy oil rather than natural gas to fire their furnaces, regardless of added smokestack emissions. Second, both residential and commercial customers are still pursuing energy-conservation techniques (e.g., adding extra insulation, installing clockdrive thermostats, and sealing cracks around doors and windows to eliminate cold air infiltration). In previous years, residential customers bought an average of 129.2 mcf of natural gas from Jack’s company ( mcf), based on internal company billing records, but environmentalists have claimed that conservation is cutting fuel consumption up to 3% per year. Jack has commissioned you to conduct a spot check to see if any change in annual usage has transpired before his next meeting with the officers of the corporation. A sample of 300 customers selected randomly from the billing records reveals an average of 127.1 mcf during the past 12 months. Is there a significant decline in consumption?
a. Complete the appropriate hypothesis test at the 0.01 level of significance using the p-value approach so that you can properly advise Jack before his meeting.
b. Because you are Jack’s assistant, why is it best for you to use the p-value approach?