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# North South University

Department of Economics
Semester summer 2014

## Course Title: ECO172

Email: humaira@northsouth.edu

Phone Office:

Ext 1817

8852000

## Class Time: MW at 11.20 pm

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

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

## Discrete random variables and

probability distribution

Ch 5 ,P. Newbold /
G.Keller

Evaluation

Quiz-1

07

## Discrete random variables and

probability distribution (cont)

08

Review

09

10

10

## Continuous random variables

and probability distribution

Ch6 Newbold / G.
Keller

11

11

## Continuous random variables

and probability distribution
(cont)

Ch 6 Newbold / G.
Keller

12

12

Continuous probability
distribution: Normal
probability distribution

Ch6 Newbold / G.
Keller

13

13

## Sampling and sampling

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

## Point estimation and

confidence Interval
estimation:
Confidence Interval for
mean(known variance)

Ch8 Newbold / G.
Keller

19

19

(cont)

Ch8 Newbold / G.
Keller

20

20

## Confidence Interval for

mean(Unknown variance)

Ch8 Newbold / G.
Keller

21

21

## Confidence Interval for

mean(Unknown variance)
(cont)

Ch8 Newbold / G.
Keller

22

22

## Confidence Interval for the

difference between two
normal population means
with known population
variance

Ch8 Newbold / G.
Keller

23

23

## Confidence Interval for the

difference between two
normal population means
with known population
variance (cont)

Ch8 Newbold / G.
Keller

24

24

## Last Lecture/ review

To be
decided
by Office

Ch 5 ,P. Newbold /
G. Keller

Mid-I

Quiz-2

Mid-II

Quiz-3

Newbold / G.
Keller

Final Exam

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
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
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

## a. What proportion of predictions have been for unusually high earnings?

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

## Topic: Bivariate Probability and Bayes Theorem

Faculty: Humaira Husain

## Q1. Consider the following table

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

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

## a. Calculate the cumulative probability function

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.

## Q7. For a Binomial distribution function with P =0.7 and n =

probability that the number of success is less than 6.

## Q8. An automobile dealer mounts a new promotional campaign . Purchasers of new

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?

## Question: 2 (Theory Questions)

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 .

## Question: 3 (Theory Question).

Develop the Sampling distribution of sample mean with help of a detailed example and
examine the characteristics of the sampling distribution.

## Q4.Antelope Coffee is considering the possibility of opening a Coffee shop . Previous

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 ?