Type 1 Error in Hypothesis Testing

Type 1 error occurs when 'we declare an innocent as guilty'.

By default, null hypothesis supports a homogeneous distribution and a no effect property. To reject a null hypothesis, requires a fair amount of certainty.

If a null hypothesis is actually true, but our result shows otherwise i.e. we reject the null hypothesis, that leads to committing a Type 1 error.

The impact of this error depends on the cost associated with committing one. For example, suppose I am shopping from a store which has only good apples, I believe that a particular apple is bad and hence I replace it from my bag. Here I have committed a Type-1 error but it's not going to cost me since the replacement apple too, is good. Here, the type 1 error is not harmful at all.

On the other hand, this error would have been too costly, if the lot has many bad apples and we remove a good apple from our bag thinking it to be bad.

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