Monash University Semester One 2000 Faculty of Business and Economics EXAM CODES: ETC1000/ETW1000/ETC9000 TITLE OF PAPER: Business and Economic Statistics EXAM DURATION: 120 minutes writing time READING TIME: 10 minutes THIS PAPER IS FOR'STUDENTS STUPYING AT:( tick where applicable) Berwick SW Clayton Malaysia Distance Education 1 Open Learning, O Caulfield O Gippsland O Peninsula ClEnhancement Studies Other (specify) Candidates are reminded that they should have no material on their desks unless its use has been specifically permitted by the following instructions. AUTHORISED MATERIALS CALCULATORS WYES ONO OPEN BOOK OyEs so SPECIFICALLY PERMITTED ITEMS O YES who ifyes, items permitted are: Answer Four (4) questions, one from each of Sections A, B, C and D.SECTION A i Yroe (@) The charts below present information about registrations of new passenger vehicles in e ‘Australia for the 12-month periods ending October 1997 and October 1998, grouped by manufacturer / brand. 1200 10000 | Question 1 5x0 6x0 #900 2300 3 : : 2 ‘The bar chart has been designed to emphasise a particular aspect of the information contained in the data. What aspect do you think this is? Write two sentences which state some important features of the data as highlighted in this chart. What do you think is an appropriate heading for this chart? (S marks) ‘The pie charts have been designed to emphasise a different aspect of the information contained in the data. What aspect do you think this is? Write three sentences which state some important features of the data as presented in these charts. What do you think is an appropriate heading for this pair of charts? (6 marks) It is often said that bar charts are more appropriate than pie charts in presenting categorical information. What is the basis for this claim? (2marks) Question 1 cont.pups Uy Question 1 cont. ow ‘You are considering options for how to invest your money. You have three choices: 1. Invest all money in Fund A, 2. Invest all money in Fund B, 3. Invest half your money in Fund A and half in Fund B. Data on the percentage rate of return for Funds A and B over the past 10 years are given below: Fund A: 8.3, 6.2, 20.9, -2.7, 33.6, 42.9, 24.4, 5.2, 3.1, 30.5 Fund B: 12.1, -2.8, 6.4, 12.2, 27.8, 25.3, 18.2, 10.7, -1.3, 11.4 (Ifyou knew the mean retum for Funds A and B, you could easily work out the mean for Option 3. What would the relationship be? (marks) Box-and-Whisker plots of past returns for these 3 options are presented below. Box.and-Whisker Plots Returns on the Three Options: Past Performance = 2 2 (ii) Explain what the five different components of a Box-and-Whisker plot represent. (G marks) (iii) Based on the information in these plots, compare the three options you face. In particular, how do they compare in terms of the kinds of returns you can expect? What about riskiness I vasiability? Which would you choose overall and why? (7 marks)ps4 OR Question 2 @ ‘You have been employed to survey former customers of a large video store to try and find ‘out why they are no longer hiring videos from this store. The store defines a former ‘customer as one who has not hired for 6 months or more. You are given a database of 1000 former customers with the following information: name, phone number, address, sex, age, date of last hire, number of videos hired in the previous year. You decide to take a stratified random sample of 100 former customers by telephone. What is a stratified sample? Why is it generally superior to simple random sampling? (B marks) ‘What would you consider to be a sensible characteristic on which to stratify the population? Explain how you would take this stratified sample? (4 marks) Explain what nonresponse bias is in sampling. How might it occur in this sampling exercise? G marks) ‘The graph below shows data on nominal and real average weekly earnings (AWE) in Australia for the past 20 years. Average Weekly Famings: Total eamings ‘Nominal and Real, s/wook un3987"——dun-1980"—durvige He Neh st AWE Real AWE Question 2 cont.(Psy Question 2 cont. @ Gi) © Explain what is meant by the terms “Nominal AWE” and “Real AWE”. How is Real AWE calculated? (4 marks) ‘Comment on the behaviour of real AWE over the past 20 years. Are workers becoming better off over the years? (2 marks) ‘The consumer price index (CP1) is produced quarterly by the Australian Bureau of Statistics. What is the CPI? What is it designed to measure? What kind of items are included in the CPI? (4 marks) ‘The CPI is based on calculations of weighted averages of prices. What are the weights for the index based on? How often are they changed? (@ marks) ‘Using some CPI data as an example, show how values of the CPI can be used to construct a measure of inflation. (2 marks)jUpysy SECTION B Question 3 e ‘An Australian company is considering investing in a new magazine. To assess the viability of this, they collect data on the total number of readers of similar magazines in Australia over the past few years. Number of readers (in thousands) 53 74 95 99 109 132 154 167 189 203 A statistician used the above data to estimate a linear trend mode! for magazine readers. ‘The equation was where ris in years, 1=0 in 1990 and #,= estimated number of readers in the tth year. How do you interpret the numbers 53.8 and 16.4 in this equation? (4 marks) As the number of readers a stock or a flow variable? (2 marks) Use the linear trend model to forecast the total number of magazine readers in 2000 and 2001 (4 marks) ‘The statistician wonders if an exponential trend model of the form ¥ =ae™ is more appropriate. Explain how this model could be estimated using least squares regression. cy mi The estimated parameters in the exponential trend model were found to be a= 63.1 and R=0,139. Interpret these two parameters. (4 marks) After completing this analysis, the statistician discovers a data source providing monthly readership data for each month in the past 5 years. The data is highly seasonal and requires seasonal adjustment. Explain how the “ratio to moving average” method could be used to obtain estimates of the seasonal indices. Specify the order of any moving averages used. (6 marks)sy, OR Question 4 The data in the following graph show the number of new motorcycle registrations in Victoria each quarter since the first quarter of 191. The exponential trend mode} ¥, =3800(1.02)' is fitted to the data, where 1 is in quarters, *=0 in the first quarter of 1991 and ¥,= number of new motorcycle registrations in the ‘th quarter. 3000 Mar Mar Mare Mar- Mar Mar Mar Mare Mar Mar- 91 92 93 94 95 96 97 98 99 00 How do you interpret the numbers 3800 and 1.02 in this equation? (4 marks) Explain how this trend model could be estimated using least squares regression. (6 marks) Seasonal indices for this model were found and take the following values. S!= 1.04 8=0.92 S=0.95 S*=1.09 Carefully interpret each of these seasonal indices. (marks) Explain how these seasonal indices were calculated. Assume the exponential trend equation was used as the trend-cycle component. (4 marks) ‘The last four values in the series are ‘ 1999:Q1 7349 1999:Q2 7130 1999:Q3 8132 1999-94 8926 Give seasonally adjusted figures for 1999. (4 marks) Provide forecasts of new motorcycle registrations for each quarter of 2000. (S marks)[L339 SECTION C Question 5 Almond Delight is a breakfast cereal. The manufacturers are running a promotion with the promise of a prize as shown in the following table. Prize $value] Number of vouchers T0 boxes of Almond [$35 20,000 Delight ‘Artip fortwo to | $8000 100 Disneyland Anew BMW car__|$100000__|5 A box of Almond Delight costs $3.50. The company has distributed 20,105 prize vouchers among 1 million boxes of Almond Delight as shown above. No box receives more than one voucher; most boxes receive none. If a voucher was found in a box, the purchaser could redeem the prize by sending it to the manufacturer. Let X be the value of vouchers found in a randomly selected packet of Almond Delight. (@) Show that the probability of winning no prize (X=0) is 0.9799. (2 marks) (&) Write down the probability function of X'in table form. (4 marks) Calculate the expected value of X. G3 marks) Calculate the standard deviation of X. (5 marks) ‘Suppose a person buys 50 packets of Almond Delight and let ¥ denote the number of vouchers they obtain. What is the distribution of F? What is the probability they will win no prizes from the 50 packets? (5 marks) Would you buy Almond Delight if you found another brand that you liked equally well at $2.80? Why or why not? Allow 50c for the cost of envelopes and postage. (6 marks)[Lp OR Question 6 "The Cycling Planet company sells bicycles. During the summer months it sells an average of 2.7 bicycles per day. (@) Explain why the distribution of bicycles sold in a day during summer is Poisson. Specify all parameters of the distribution. G marks) (>) What is the probability that no bicycles are sold on a given day? (2 marks) (©) The Cycling Planet has one sales representative, whose income depends on the number of bicycles she sells in a day. She receives a base wage of $80 per day plus a commission of $20 for each bicycle sold in that day. ‘What is the expected daily income of the sales representative? G marks) ‘What is the standard deviation of the daily income of the sales representative? (3 marks) ‘What is the probability the sales representative will make more than $120 in one day? (G marks) Customers who purchase a bicycle tend to also purchase a bicycle helmet about 70% of the time. Customers who do not purchase a bicycle tend to purchase a bicycle helmet about 40% of the time. Given that 50% of all customers purchase a bicycle, what proportion of customers purchase a bicycle helmet? ( marks) ‘What proportion of customers who purchase helmets, also purchase a bicycle? (4marks)(Uae SECTION D Question 7 @ (@) A ssaraple statistic is used to estimate a parameter of a population. For example, the sample mean is an obvious estimator of the unknown population mean. It is desirable if an estimator has three properties: unbiased, efficient and consistent. Explain briefly what is meant by each of these properties. (6 marks) If-Xis a random variable with a variance of a”, it can be shown that X from a simple random sample of n values has a variance of a” /n. It is easy to see from this formula that the variance of ¥ will fall as m increases. Give an intuitive explanation for why the variance of 1 will fall as n increases. G marks) Try to derive mathematically the formula for the variance of X. (marks) The sponsors of television shows targeted at the children’s market want to know the amount of time children spend watching television, as this affects their sponsorship decisions. A study has been conducted where 100 children were monitored for a week, and the number of hours they spend watching television was recorded. The mean for this sample of children was 27.2 hours per week, with a standard deviation of 8 hours per week. Statisticians constructed a 95% confidence interval for the overall mean number of hours children spend watching television, and found it was 25.6 to 28.8. Show the working which would produce this interval. (S marks) Give two interpretations / explanations of the confidence interval, one which would explain precisely to a statistician what the interval means, and the other a more simple and intuitive explanation aimed at a general audience. (G marks) The sample of 100 children was collected from a list of subscribers to Pay Television. ‘What impact do you think this might have on the analysis? (2 marks) One of the sponsors asks you the following: “Can you give me a conservative estimate for the population average — one where you're 90% sure that the average is above that value?” Calculate this value. G marks)OR bucstions (a) The following article appeared in The Times, April 13, 2000. Men Smarter than Women? “Why does it seem that most men would rather eat ground glass than ask for directions?” The answer suggested by this article is that men are better than women at finding their way when they become lost. It is suggested that because men have better spatial orientation and are proud of it, their egos prevent them from asking directions if they are lost. Women, however, are known for getting lost and risk no pride in asking for directions, A study done by the University of Uim in Germany scanned the brains of 12 men and 12 women to determine if different parts of the brain were used in spatial orientation tasks. The participants navigated their way out of a three-dimensional virtual-reality maze displayed on a computer screen. Men were able to escape the maze in an average of 142 seconds while women on average took 198 seconds. Not only were the times different, but the areas of the brain that were utllzed were also different. Only men seemed to use the left hippocampus and the women used the right frontal cortex, located in the outer part of the brain. The researchers concluded that men may use different cognitive strategies than women, based on the different areas of the brain. Men use geometry to navigate while women use landmarks. ‘The article explains that early man was the hunter or warrior and having good spatial orientation gave him the advantage in navigation. Early woman probably did not require this ability. (@ Comment on the sample size used in this study and its effect on the standard error of the mean. (marks) (ii) The report should probably have produced confidence intervals for the mean escape time for men and for women. Explain why these would be more useful than just the sample means. (4 marks) ‘Suppose we were able to obtain extra information about the above experiment, and were told that the standard deviation for the sample of 12 men was 60 seconds, whilst for the 12 ‘women it was 90 seconds, Using these numbers we would find that a 95% confidence interval for the mean time taken by women is given by (138.8, 253.2), and for men it is (103.9, 180.1). Show the working that would have produced the interval for the data on women. What light do these intervals shed on the issues raised in the article. (5 marks) Based on your understanding of a representative, random sample, do you think the researchers in this study can generalize their results to all women and men? What do you think of the headline the newspaper bas written? (GB marks) Question 8 cont.Marg Question 8 cont. (©) Ina survey of drug use among 995 Sydney teenagers, the following results were reported. @ Source Percentage Daily smokers 21.7 Occasional smokers 14 Ex-smokers 312 ‘Never smoked 39.7 ‘What is a point estimate of the proportion of teenagers who are either daily or occasional smokers? (2 marks) Construct a 90% confidence interval for the proportion of teenagers who are either daily or occasional smokers. (S-marks) Give two interpretations/explanations of this interval, one which would explain precisely to a statistician what the interval means, and the other a more simple and intuitive explanation aimed at a general audience. (marks)vy e Formula sheet ETC1000 Semester 1, 2000 Sourcing and describing data Mean Weighted mean ‘Variance Coefficient of variation Index numbers Time series analysis Least squares regression: (t-AY-¥) _ Dey 7 Sea The linear trend equation T= A+ Bt can be fitted to data using least squares regression. ‘The exponential trend equation 7; = af! = ae = afl +r)* orlnZ; = A+ Bt where A = In(a) and B = R= In(1 +7) may also be fitted by the method of least squares. ‘The point of time for the origin (¢ = 0) must be specified in each case. Probability Pr(A or B) = Pr(A) + Pr(B) ~ Pr(A and B) Pr(A and B) PHB) Bayes’ Theorem: Given k mutually exclusive and exhaustive events By,...,Be with probabilities Pr(B,), then if an event A occurs, the probability of By is given by Pr(A | Bi) Pr(Bi) Thar PHA] BY PHB)’ Pr(A| B)= Pr(Bi | A) sksRandom variables per eee eerre Ez Variance: o? = Var X) = S(Xi— py)? PHM). ot Covariance: oxy = Cov(X,¥) = (Xi — E(X))(¥i - E(¥)) Pr(X;, 1). ii oxy = Oif X and ¥ are independent. Linear combinations: If P = aX + bY, then E(P) = aE(X) +0E(¥) and Var(P) = a?Var(X) + b’Var(Y) + 2abCov(X, Y). Binomial distribution: Let X be the number of successes in n trials and let p be the probability of a success. Then Pr(X =a) = sera a, 2=O1....0 and = E(X)=np, —_-Var(X) = np(1—p). Poisson distribution: Let X be the number of successes during an interval and let be the expected number of successes. Then Haye SOE, 2=0)1,2... z and E(X)=2, — Van(X) =A Pr(X = 2) = Normal distribution: If X £ N(u,07), then =-X-Me 2-2-2 £ yo,» Confidence interval estimation Population mean Population proportion/ LY rep AREAS UNDER THE STANDARDIZED NORMAL DISTRIBUTION Pr(0S2S24) I 2 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09 0.0040 0.0438 0.0832 0.1217 0.1591 0.1950 0.2291 0.2611 0.2910 0.3186 0.3438 0.3665 0.3869 0.4049 0.4207 0.4345 0.4463 0.4564 0.4649 0.4719 0.4778 0.4826 0.4864 0.4896 0.4920 0.4940 0.4955 0.4966 0.4975 0.4982 0.4987 0.0080 0.0478 0.0871 0.1255 0.1628 0.1985 0.2324 0.2642 0.2939 0.3212 0.3461 0.3686 0.3888 0.4066 0.4222 0.4357 0.4474 0.4573 0.4656 0.4726 0.4783 0.4830 0.4868 0.4898 0.4922 0.4941 0.4956 0.4967 0.4976 0.4982 0.4987 0.0120 0.0517 0.0910 0.1293 0.1664 0.2019 0.2357 0.2673 0.2967 0.3238 0.3485 0.3708 0.3907 0.4082 0.4236 0.4370 0.4484 0.4582 0.4664 0.4732 0.4788 0.4834 0.4871 0.4901 0.4925 0.4943 0.4957 0.4968 0.4977 0.4983 0.4988 0.0160 0.0557 0.0948 0.1331 0.1700 0.2054 0.2389 0.2704 0.2995 0.3264 0.3508 03729 10,3925 0.4099 0.4251 0.4382 0.4495 0.4591 0.4671 0.4738 0.4793 0.4838 0.4875 0.4904 0.4927 0.4945 0.4959 0.4969 0.4977 0.4984 0.4988 0.0199 0.0596 0.0987 0.1368 0.1736 0.2088 0.2422 0.2734 0.3023 0.3289 0.3531 0.3749 0.3944 04115 0.4265 0.4394 0.4505 0.4599 0.4678 0.4744 0.4798 0.4842 0.4878 0.4906 0.4929 0.4946 0.4960 0.4970 0.4978 0.4984 0.4989 0.0239 0.0636 0.1026 0.1406 0.1772 0.2123 0.2454 0.2764 0.3051 0.3315 0.3554 0.3770 0.3962 0.4131 0.4279 0.4406 0.4515 0.4608 0.4686 0.4750 0.4803 0.4846 0.4881 0.4909 0.4931 0.4948 0.4961 0.4971 0.4979 0.4985, 0.4989, 0.0279 0.0675 0.1064 0.1443, 0.1808 0.2157 0.2486 0.2794 0.3078 0.3340 0.3577 0.3790 0.3980 0.4147 0.4292 0.4418 0.4525 0.4616 0.4693 0.4756 0.4808 0.4850 0.4884 0.4911 0.4932 0.4949 0.4962 0.4972 0.4979 0.4985 0.4989 0.0319 0.0714 0.1103 0.1480 0.1844 0.2190 0.2517 0.2823 0.3106 0.3365, 0.3599 0.3810 0.3997 0.4162 0.4306 0.4429 0.4535 0.4625 0.4699 0.4761 0.4812 0.4854 0.4887 0.4913 0.4934 0.4951 0.4963 0.4973 0.4980 0.4986 0.4990, 0055] 0.0753 O.1141 0.1517 0.1879 0.2224 0.2549 0.2852, 0.3133 0.3389 0.3621 0.3830 0.4015 0.4177 0.4319 0.4441 0.4545 0.4633 0.4706 0.4767 0.4817 0.4857, 0.4890 0.4916 0.4936 0.4952, 0.4964 0.4974 0.4981 0.4986, 0.4990[2 >?>% STUDENT ¢ DISTRIBUTION: CRITICAL VALUES For a paticalr number of degrees of freedom V each cen represents the vale of comesponding o specified pper tai ares 3.