Course Content
Probability Distributions
Probability Distribution – Binomial, Poisson, Normal, and Exponential
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Facility Location and Layout
Site Selection and Analysis, Layout Design and Process
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Quality Management
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Unit VIII: Business Statistics and Operations Management

Key Differences Between Type I & Type II Errors

Error Type What Happens? Example
Type I Error (False Positive) Rejecting a true null hypothesis (finding an effect when there is none) A fire alarm rings, but there’s no fire.
Type II Error (False Negative) Failing to reject a false null hypothesis (missing an actual effect) A fire is burning, but the alarm does not ring.

 

Scenario Reality: Person is Healthy Reality: Person is Infected
Test Result: Positive Type I Error (False Positive) – A healthy person is wrongly diagnosed with COVID-19. ✅ Correct – Infected person is correctly diagnosed.
Test Result: Negative ✅ Correct – Healthy person is correctly diagnosed. Type II Error (False Negative) – An infected person is wrongly told they don’t have COVID-19.
 

How to Reduce These Errors?

  • To reduce Type I Error, lower α (significance level) (e.g., from 5% to 1%).

  • To reduce Type II Error, increase sample size or improve testing accuracy.