What is a 'One-Tailed Test'

A one-tailed test is a statistical test in which the critical area of a distribution is one-sided so that it is either greater than or less than a certain value, but not both. If the sample that is being tested falls into the one-sided critical area, the alternative hypothesis will be accepted instead of the null hypothesis. The one-tailed test gets its name from testing the area under one of the tails (sides) of a normal distribution, although the test can be used in other non-normal distributions as well.

BREAKING DOWN 'One-Tailed Test'

An example of when one would want to use a one-tailed test is in the error rate of a factory. Let's say a label manufacturer wants to make sure that errors on labels are below 1%. It would be too costly to have someone check every label, so the factory selects random samples of the labels and test whether errors exceed 1% with whatever level of significance they choose. This represents the implementation of a one-tailed test.

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