We need to chose a value which is probability of rejecting H0 hypothesis if it’s true. Usually a=0.05 If test is two-tailed: Split a evenly between two tails Regions above/b Critical value separates distribution into rejection region and the region where we don’t reject H0. If z-score falls into one of the rejection regions we reject H0

Downside: If critical value is 1.645 then we would reject Z=1.646 and not reject Z=1.644. These two values have almost the same evidence for H0, but completely different conclusions To solve this p-value should be used

For normal distribution

  1. Choose a value
  2. Get critical value from the table
  3. Calculate Z
  4. Check if Z higher/lower then critical value