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You are on page 1of 12

Department of Economics

Semester summer 2014

Address: Office : NAC819

Email: humaira@northsouth.edu

Phone Office:

Ext 1817

8852000

Consultation hours/room :

ST

9.45 am - 11.15 am

MW 9.45 am - 11.15 am

1.15p 2.30pm , 4.15p - 5pm

Text Book: Paul Newbold, Stattistics for Business and Economics, 7 th edition, Prentice hall

Supplementary readings: Gerald keller, Statistics for Management and economics, 9th

edition

Course Objectives:

The primary objective of this introductory statistics course is to help students to familiarize

them with basic statistical tools / concepts / techniques which are extensively applied and

used to grasp essential topics in Economics, and such topics are

primarily related to

Economic data analysis. This course serves as a prerequisite for ECO173( Applied statistics

II). Upon completion of this course an economics bachelors student is expected to master

the concepts; like probability distribution , theory of sampling , Estimation procedure and to

interpret the results as well.

Pre requisites: Nil

Lecture and Evaluation plan:

Lecture

Date/Day

Topics

Reference

Reading

01

Describing Data

Ch 3 , P. Newbold

02

Describing Data

Ch 3 , P. Newbold

03

Probability

Ch 4 , P. Newbold

04

Probability

Ch 4 ,P. Newbold

05

Probability

Ch 4 ,P. Newbold

06

probability distribution

Ch 5 ,P. Newbold /

G.Keller

Evaluation

Quiz-1

07

probability distribution (cont)

08

Review

09

10

10

and probability distribution

Ch6 Newbold / G.

Keller

11

11

and probability distribution

(cont)

Ch 6 Newbold / G.

Keller

12

12

Continuous probability

distribution: Normal

probability distribution

Ch6 Newbold / G.

Keller

13

13

distribution

Ch7 Newbold / G.

Keller

14

14

Sampling distribution of

sample mean

Ch7 Newbold / G.

Keller

15

15

Sampling distribution of

sample variance

Ch7 Newbold / G.

Keller

16

16

Review

Ch7 Newbold / G.

Keller

17

17

18

18

confidence Interval

estimation:

Confidence Interval for

mean(known variance)

Ch8 Newbold / G.

Keller

19

19

(cont)

Ch8 Newbold / G.

Keller

20

20

mean(Unknown variance)

Ch8 Newbold / G.

Keller

21

21

mean(Unknown variance)

(cont)

Ch8 Newbold / G.

Keller

22

22

difference between two

normal population means

with known population

variance

Ch8 Newbold / G.

Keller

23

23

difference between two

normal population means

with known population

variance (cont)

Ch8 Newbold / G.

Keller

24

24

To be

decided

by Office

Ch 5 ,P. Newbold /

G. Keller

Mid-I

Quiz-2

Mid-II

Quiz-3

Newbold / G.

Keller

Final Exam

Grading Policy: The course grade will be based on NSU GRADING system. The weights are as

follows:

Quiz / Assignments

:

30%

Mid-Term-1

:

20%

Mid-Term-2

:

25 %

Final Examination

:

25 %

Total:

:

100%

Course regulations:

1. Mobile phones must be switched off during the class hour.

2. Make-up exams will be arranged only in case of emergency , subject to submission of

genuine documents. There will be NO MAKE-UP for quiz tests under any

circumstances.

3. Distracting the instructor by talking to other classmates is not allowed.

4. Students are free to consult the instructor regarding the class material only during

the office hour mentioned.

5. Attendance is important to earn satisfactory grade in this course.

ECO172

Problem set I

Topic: Probability

Faculty: Humaira Husain

Q1. The Prob of A is 60% and prob of B is 45%. The prob of either is 80%. Find Prob of both A and B.

Q2. The Prob of A is 60% and prob of B is 45%. The prob of both is 30%. Find Prob of either A and B.

Q3. The Prob of A is 60% and prob of B is 45%. The prob of both is 30%. Find the conditional Prob of A

given B. Are A and B independent in Probability sense?

Q4. It was estimated that 30% of all seniors in a campus were seriously concerned about employment

prospects, 25% were seriously concerned about grades , 20% were seriously concerned about both. Find

the probability that a randomly chosen senior is seriously concerned about at least one of these two

things?

Q5.A music store owner finds that 30% of all customers ask for assistance ( event A), 20% of customers

make purchase before leaving (event B) and 15% of all customers both ask for assistance and make

purchase .

a. Are the two events mutually exclusive?

b. Are the two events collectively exhaustive?

c. Are the two events statistically independent?

Q6. Market research in a particular city indicated that during a week 18% all adults watch a television

program oriented to business and financial issues , 12 % read a publication oriented to these issues , and

10% do both.

a. Find the probability that an adult in this city who watches a television program oriented to business and

financial issues reads a publication oriented to these issues?

b. Find the probability that an adult in this city who reads a publication watches television oriented to

business and financial issues?

Q7. A bank classifies borrowers as high risk or low risk. Only 15% of its loans are made to high risk

borrowers. Of all its loans 5% are in default and 40% of those in default are high risk borrowers . Find the

probability that a high risk borrower will default?

Q8. A consulting organization predicts whether corporations earnings will be unusually high , normal or

low. A stockbroker compares the past predictions with actual outcomes. The accompanying table shows

the proportions in the nine joint classifications.

Outcome

Unusually High

Normal

Unusually low

Unusually High

0.23

0.06

0.01

Prediction

Normal

0.12

0.22

0.06

Unusually Low

0.03

0.08

0.19

b. What proportion of outcomes have been for unusually high earnings?

c. What is the probability that a corporation for which unusually high earnings had been predicted will

have unusually low earnings?

ECO172

Problem set 2

Faculty: Humaira Husain

Purchase of Generic products

Frequency of visits

Often

Sometimes

Never

Frequent

0.12

0.48

0.19

Infrequent

0.07

0.06

0.08

a) Find prob that a customer who never buys generic products visits store frequently?

b) Are the events never buys generic products and visits the store frequently independent?

c) Find prob that a customer who infrequently visits store often buys generic products?

d) Are the events often buys generic products and visits the store infrequently independent?

Q2. Given P(A1) = 0.40 , P(B1| A1) = 0.60 and P(B1| A2) =0.70, find prob of P(A1| B1)?

Q3. A publisher sends advertising materials for an accounting text to 80% of all professors teaching the

appropriate accounting course. 30% of professors who received the material adopted the book, as did 10%

of professors who did not receive the material. Find probability that a professor adopts the book has

received the advertising material?

Q4. The following table shows for 1000 forecasts of earnings per share made by financial analysts , the

number of forecasts and outcomes in particular categories.

Outcome

Improvement

same

Worse

Improvement

210

106

75

Forecast

same

82

153

84

Worse

66

75

149

a. Find probability that, if the forecast is for a worse performance in earnings , this outcome will result?

b.If the forecast is for an improvement in earnings, find the probability that this outcome fails to result?

Problem set -3

Topic: Discrete Random variable and Probability distribution function

Faculty: Humaira Husain

Reference: Paul Newbold

Q1 A corporation produces packages of paper clips. The number of clips per

package varies , as indicated in the accompanying table

Number of clips

Proportion of packages

47

0.04

48

0.13

49

0.21

50

0.29

51

0.20

52

0.10

53

0.03

b. Find the probability that a randomly chosen package will contain between 49

and 51 clips

(inclusive)?

c. Two packages are chosen at random. Find the probability that at least one of

them contains at least 50 chips?

d. The cost of producing a package is 16 2 X . Where X is the number of clips in

the package. The revenue from selling the package, however many clips it contains

is 1.50 dollars. If profit is defined as the difference between revenue and cost, find

the mean and standard deviation of profit per package.

Q2. A production manager knows that 5 % of components produced by a particular

manufacturing process have some defect. Six of these components to be independent

of each other, are examined.

a. Find probability that none of these components has a defect?

b. Find the probability that one of these components has a defect?

c. Find the probability that at least two of these components have a defect?

Q3. A politician believes that 25% of all macroeconomists in senior positions will

strongly support a proposal he wishes to advance. Suppose that this belief is correct

and that five senior macroeconomists are approached at random.

a. find the probability that at least one of the five will strongly support the proposal?

b. Find the probability that a majority of the five will strongly support the proposal?

Q4. Determine the probability of exactly 4 successes for a random variable with a

Poisson distribution with parameter 2.5 .

Q5. A professor receives, on average, 4.2 telephone calls from students per day

before final exam. If the distribution of calls is Poisson , what is the probability of

receiving at least three of these calls on such a day?

Q6. A corporation has 250 personal computers . The probability that any 1 of them

will require repair in a given week is 0.01. Find the probability that fewer than4 of

the personal computers will require repair in a particular week. Use the Poisson

approximation to Binomial Distribution.

probability that the number of success is less than 6.

automobiles may, if dissatisfied fro any reason, return them within 2 days of

purchase and receive a full fund. The cost to the dealer of such a refund is $250. The

dealer estimates that 15% of all purchasers will indeed return automobiles and

obtain funds. Suppose that 50 automobiles are purchased during the campaign

period .

a. Find the mean and standard deviation of the number of these automobiles that

will be returned for funds.

b. Find the mean and standard deviation of the total refund costs that will accrue as

a result of these 50 purchases.

ECO172.1

Problem set -4

Topic: Continuous random variable and probability density function

Faculty: Humaira Husain , Summer 2014.

Q1. Let the random variable X follow a normal distribution with mean = 80 and variance =

100.

a. Find the probability that X is greater than 60

b. Find the probability that X is greater than 72 and less than 82

c. Find the probability that X is less than 55

d. The probability is 0.1 that X is greater than what number?

Q2.Anticipated consumer demand for a product next month can be represented by a normal

random variable with mean 1200 units and standard deviation 100 units.

a. What is the Probability that sales will exceed 1000 units?

b. What is the Probability that sales will be between 1100 units and 1300 units?

c. The probability is 0.10 that sales will be more than how many units?

Q3. An investment portfolio contains stocks of a large number of corporations. Over the last

year the rates of return followed a normal distribution with mean 12.2 % and a standard

deviation 7.2%.

a. For what proportion of these corporations was the rate of return higher than 20%?

b. For what proportion of these corporations was the rate of return negative?

c. For what proportion of these corporations was the rate of return between 5% and 15%?

Q4. A random variable X is normally distributed with mean 100 and variance100, and a

random variable Y is normally distributed with mean 200 and variance 400. The random

variables have correlation coefficient equal to 0.5. Find the mean and variance of the

random variable W = 5X + 4Y.

Q5 A random variable X is normally distributed with mean 100 and variance100, and a

random variable Y is normally distributed with mean 200 and variance 400. The random

variables have correlation coefficient equal to -0.5. Find the mean and variance of the

random variable W = 5X - 4Y.

Q6. A consultant has three sources of income- from teaching short courses from selling

computer software and from advising on projects. His expected annual income frm these

three sources are $20000, $25000 and $15000 and the respective standard deviations are

$2000 , $5000 and $4000. Assuming independence find the mean and variance of the total

annual income.

Q7. Let X1 and X2 be a pair of random variables show that the covariance between the

random variables (X1 + X2 ) and (X1 - X2 ) is 0 if and only if X 1 and X2 have the same

variance.

ECO172.1

Problem set -5 (Normal Probability density function)

Topic: Continuous random variable and probability density function

Faculty: Humaira Husain , Summer 2014.

Q1. Grade point averages of students on a Large campus follow a normal distribution with

mean 2.6 and standard deviation 0.5.

a. Find the probability that a randomly chosen student has a grade point average higher

than3.0?

b. What is the probability that a randomly chosen student will have grade point average

between 2.25 and 2.75?

c. What is the minimum grade point average needed for a students grade point average to

be among the highest 10% on this campus?

d. Two students are chosen at random from this campus. What is the probability that at

least one of them has grade point average higher than 3.0?

Q2. It is estimated that amounts of money spent on gasoline by customers at a gas station

follow a normal distribution with standard deviation = 2.5 dollars. It is also found that

10% of all customers spent more than 25 dollars. What percentage of customers spent less

than 20 dollars?

Q3. A video rental chain estimates that annual expenditures of members on rentals follow

a normal distribution with mean =100 dollars. It is also found that 10% of all members

spent more than 130 dollars in a year. What percentage of members spend more than 140

dollars in a year?

Q4. Financial Managers Inc buys and sells a large number of stocks . Portfolio manager

has asked you for your assistance in the analysis of the Johnson fund. A portion of the

portfolio consists of 10 shares of stock A and 8 shares of stock B . The price of A has mean of

10 and variance of 16. While the price of B has mean of 12and variance of 9. Find the mean

and variance of the portfolio value.

ECO172.1

Problem set -6

Topic: Sampling Distribution , Chapter 7 from P. Newbolds text

Faculty: Humaira Husain , Summer 2014.

Question: 1.

The lifetimes of light bulbs produced by a particular manufacturer have a mean of 1200

hours and a standard deviation of 400 hours. Population distribution is normal . Suppose

you purchase 9 bulbs

a) Find mean and variance of the sample mean lifetime.

b) Find the standard error of the sample mean lifetime.

c) Find the probability that those 9 bulbs have lives less than 1050 hours?

a) State the central limit theorem and discuss its implications.

b) What are the characteristics of the sampling distribution of sample mean?

c) What are the characteristics of the sampling distribution of sample variance?

2

d) Prove that sample variance ( s ) is an unbiased estimator of population variance 2 .

Develop the Sampling distribution of sample mean with help of a detailed example and

examine the characteristics of the sampling distribution.

research shows that its shops will be successful if the per capita Annual Income is more

than $60000 dollars with standard deviation of Income is $5000. A random sample of 36

people was obtained and the mean income was 62300 . Does this sample provide evidence to

conclude that a shop should be opened?

Q5. Given a population with mean 100 and variance 2 900 . A random sample of

size 30 is obtained. The population distribution is unknown.

a) What are the mean and variance of the sampling distribution of sample means?

b) Find the probability that X > 109?

c) Find the probability that 96 X 110 ?

d) Find the probability that X 107 ?

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