Mec-003: Quantitative Methods: (Assignment)

MEC-003: QUANTITATIVE METHODS
(Assignment)
Course Code: MEC-003
Asst. Code: MEC-003/TMA/2017-18
Total Marks: 100
Section A
Answer all the questions from this section. 2×20=40
1. a) What is a first order linear differential equation? Write the steps to obtain the
solution to homogenous differential equation.
b) Given the rate of investment is I (t) = 2 t/ , where ’t’ is time. Suppose the initial
capital stock, K is 25.
Find the amount of capital accumulation during the time intervals [0, 1] and [1, 3].
2. a) What is the normal probability distribution function? State its properties.

b) Write down the distribution functions of the Binomial distribution and Poisson
distribution. When is a Poisson distribution an approximation of Binomial
distribution? Obtain the mean and variance of the Binomial and Poisson
distribution.
Section B
Answer all the questions from this section. 5×12=60
3. a) What are the relationship between confidence interval and hypothesis testing?
Distinguish between Type I and Type II error and explain what are meant by the
power of a test.
b) Describe the process of testing hypotheses about population proportion of a given
attribute.
4. A monopolist’s demand curve is given by p = 100 – 2q:

a) Find his marginal revenue function.
b) What is the relationship between the slopes of the average and marginal revenue
curves?
c) At what price is marginal revenue zero?
7
5. Find the extreme value (s) of / 2! ! ! 4! ! ! ! 2. and using the
Hessian matrix check whether the extreme value (s) is / are maximum or minimum.
6. Solve the following using simplex method of Linear programming Model in ! and ! .
Maximize of / 45! 55!
Sub to of 6! 4! 2 120
3! 10! 2 180
! 5 0, ! 5 0
7. a) Given the values of ! and 6
X 1 2 3 4 5
Y 3 7 5 1 14
Regress ! on 6
b) Given the values of ! and 6
X 25 25 30 30 16
y 2 3 5 1 8
Regress 6 on !.
8
ASSIGNMENT SOLUTION GUIDE
SESSION: (2017-2018)
MEC-03
QUANTITATIVE METHODS
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and
guidance of the student to get an idea of how he/she can answer the Questions given the Assignments. We do not
claim 100% accuracy of these sample answers as these are based on the knowledge and capability of Private
Teacher/Tutor. Sample answers may be seen as the Guide/Help for the reference to prepare the answers of the
Questions given in the assignment. As these solutions and answers are prepared by the private teacher/tutor so the
chances of error or mistake cannot be denied. Any Omission or Error is highly regretted though every care has been
taken while preparing these Sample Answers/ Solutions. Please consult your own Teacher/Tutor before you prepare
a Particular Answer and for up-to-date and exact information, data and solution. Student should must read and
refer the official study material provided by the university.
ANSWERS
Section - A
Q1. a) What is a first order linear differential equation? Write the steps to obtain the solution
to homogenous differential equation.
A first order linear differential equation has the following form:
The general solution is given by
where
pg. 1
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called the integrating factor. If an initial condition is given, use it to find the constant C.
Here are some practical steps to follow:
1.
If the differential equation is given as
rewrite it in the form
where
2.
Find the integrating factor
3.
Evaluate the integral

4.
Write down the general solution
5.
If you are given an IVP, use the initial condition to find the constant C.
Example: Find the particular solution of:
pg. 2
Solution: Let us use the steps:
Step 1: There is no need for rewriting the differential equation. We have
Step 2: Integrating factor
Step 3: We have
Step 4: The general solution is given by
Step 5: In order to find the particular solution to the given IVP, we use the initial condition to find
C. Indeed, we have
Therefore the solution is
Note that you may not have to do the last step if you are asked to find the general solution (not an IVP).
The steps to obtain the solution to homogenous differential equation
The differential equation
is homogeneous if the function f(x,y) is homogeneous, that is-
Check that the functions
pg. 3
.
are homogeneous.
In order to solve this type of equation we make use of a substitution (as we did in case of Bernoulli
equations). Indeed, consider the substitution . If f(x,y) is homogeneous, then we have
Since y' = xz' + z, the equation (H) becomes
which is a separable equation. Once solved, go back to the old variable y via the equation y = x z.
Let us summarize the steps to follow:
(1)
Recognize that your equation is an homogeneous equation; that is, you need to check that f(tx,ty)=
f(x,y), meaning that f(tx,ty) is independent of the variable t;
(2)
Write out the substitution z=y/x;
(3)
Through easy differentiation, find the new equation satisfied by the new function z.
You may want to remember the form of the new equation:
(4)
Solve the new equation (which is always separable) to find z;
(5)
Go back to the old function y through the substitution y = x z;
(6)
If you have an IVP, use the initial condition to find the particular solution.
Since you have to solve a separable equation, you must be particularly careful about the constant
solutions.
Example: Find all the solutions of
pg. 4
Solution: Follow these steps:
(1)
It is easy to check that is homogeneous;

(2)
Consider ;
(3)
We have
which can be rewritten as
This is a separable equation. If you don't get a separable equation at this point, then your equation
is not homogeneous, or something went wrong along the way.
(4)
All solutions are given implicitly by
(5)
Back to the function y, we get
Note that the implicit equation can be rewritten as
pg. 5
Q1b) Given the rate of investment is I (t) = 2 t-3 , where ’t’ is time. Suppose the initial capital
stock, . is 25.
Find the amount of capital accumulation during the time intervals [0, 1] and [1, 3].
pg. 6
pg. 7
Q2. A) What is the normal probability distribution function? State its properties.
The Normal Probability Distribution is very common in the field of statistics.
Whenever you measure things like people's height, weight, salary, opinions or votes, the graph of the results is very
often a normal curve.
The Normal Distribution
A random variable X whose distribution has the shape of a normal curve is called a normal random variable.
This random variable X is said to be normally distributed with mean μ and standard deviation σ if its probability
distribution is given by
These are symmetric in nature and peak at the mean, with the probability distribution decreasing away
before and after this mean smoothly, as shown in the figure below.
The figure also shows a family of curves with different peaks centered about the same mean, which differ
in their spread and height.
μ = Mean of the Population

σ = Standard Deviation
pg. 8
Normal distribution occurs very frequently in statistics, economics, natural and social sciences and can be used to
approximate many distributions occurring in nature and in the manmade world.
For example, the height of all people of a particular race, the length of all dogs of a particular breed, IQ, memory and
reading skills of people in a general population and income distribution in an economy all approximately follow the
normal probability distribution shaped like a bell curve.
The theory of normal distribution also finds use in advanced sciences like astronomy, photonics and quantum
mechanics.
The normal distribution can be characterized by the mean and standard deviation. The mean determines where the
peak occurs, which is at 0 in our figure for all the curves. The standard deviation is a measure of the spread of the
normal probability distribution, which can be seen as differing widths of the bell curves in figure
The Formula
The mean is generally represented by μ and the standard deviation by σ. For a perfect normal distribution, the mean,
median and mode are all equal. The normal distribution function can be written in terms of the mean and standard
deviation as follows:
From the above formula for normal distribution, it can be inferred that about 68% of all values lie within
one standard deviation from the mean; 95.4% of all values lie within two standard deviations from the
mean and 99.7% of all values lie within three standard deviations from the mean.
pg. 9
From the basic bell curve, there can be many special cases derived that become meaningful under different
situations.
For example the left or right or both sides of a normal distribution can be skewed or there could be the
presence of long tails.
A basic study of the normal distribution therefore is necessary before a meaningful study can be made into
these special cases. This concept can be extended to 3-D normal distributions as well, which are used for
more advanced applications.
2b) Write down the distribution functions of the Binomial distribution and Poisson distribution.
When is a Poisson distribution an approximation of Binomial distribution? Obtain the mean
and variance of the Binomial and Poisson distribution.
Binomial distributions are useful to model events that arise in a binomial experiment. Examples include
how many coin flips show heads, how many scratch-off lottery tickets are winners, how many of a doctor's
patients die during surgery, and how many free throws I make in one hundred attempts. Key ingredients
of such an experiment include:
• A fixed number of repeated, identical, independent trials. n is usually the parameter chosen to label
the number of trials.
• Every trial results in either a success, with probability p, or a failure, with probability 1-p. These
must be the only two outcomes for a trial.
• The random variable of interest is the total number of trials that ended in a success.
The probability
mass function for the binomial distribution is given by:
p(x)=(nx)px(1−p)n−x for x=0,1,2,…,n
Poisson distributions are useful to model events that seem to take place over and over again in a completely
haphazard way. For example, how many magnitude 8+ earthquakes will take place in a particular year? Or,
how many babies will be born in a large hospital on a particular day? Or, how many hits will a website get
in a particular minute? Key assumptions for the Poisson model include:
• The random variable counts the number of events that take place in a given interval (usually of time
or space)
• All events take place independently of all other events
• The rate at which events take place is constant usually denoted λ
The probability mass function is given by:

p(x)=e−λt(λt)xx! for x=0,1,2,…
pg. 10
Poisson distribution an approximation of Binomial distribution
binomial situations in which n is very large and p is very small. For example: The null hypothesis holds that a certain
genetic characteristic will express itself in p=.001 of the population. In a sample of n=3000 subjects, k=7 are observed
to display the characteristic, whereas only np=3 are expected. On the null hypothesis, how likely is it that a rate this
great or greater could occur by mere chance? Your computer would not be able to perform the factorial and
exponential operations required for direct calculation (Exact Binomial Probability Calculator), and np<5 would
preclude use the normal approximation (Binomial z-Ratio Calculator).
In cases of this sort, the appropriate binomial probabilities can be approximated by way of the Poisson probability
function
(e—np)(npk)
TP =
(k out of n)
k!
where:
e = the base of the natural logarithms;
n = the number of opportunities for event x to occur;
k = the number of times that event x occurs or is stipulated to occur; and
p = the probability that event x will occur on any particular occasion;
Application of the Poisson function using these particular values of n, k, and p, will give the probability of
getting exactly 7 instances in 3000 subjects. Applying it to all values of k equal to or greater than 7 will yield
the probability of getting 7 or more instances in 3000 subjects, while applying it to all values of k equal to
or smaller than 7 will give the probability of getting 7 or fewer instances in 3000 subjects. Note, however,
that these results are only approximations of the true binomial probabilities, valid only in the degree that
the binomial variance is a close approximation of the binomial mean.
To perform calculations of this type, enter the appropriate values for n, k, and p (the value of q=1 —p will
be calculated and entered automatically). Then click the 'Calculate' button. To enter a new set of values for
n, k, and p, click the 'Reset' button. The value entered for p can be either a decimal fraction such as .001 or
a common fraction such as 1/1000. Whenever possible, it is better to enter the common fraction rather
than a rounded decimal fraction: e.g., 1/1050 rather than .00095.
The mean and variance of the Binomial and Poisson distribution
There are two possible outcomes (defective or not), the 100 trials of selecting the bulbs from the assembly
line can be assumed to be performed in an identical and independent manner, and the probability of
getting a defective bulb can be assumed to be constant from trial to trial. So, X is indeed a binomial random
variable. Well, calculating the probability is easy enough then... we just need to use the cumulative binomial
table with n = 100 and p = 0.05.... Oops! The table won't help us here, will it? Even many standard
calculators would have trouble calculating the probability using the p.m.f.:
pg. 11
P(X≤3)=(1000)(0.05)0(0.95)100+⋯+(1003)(0.05)3(0.95)97
Using a statistical software package (Minitab), I was able to use the binomial p.m.f. to determine that:
P(X ≤ 3) = 0.0059205 + 0.0311607 + 0.0811818 + 0.1395757 = 0.25784....
But, if you recall the way that we derived the Poisson distribution,... we started with the binomial
distribution and took the limit as n approached infinity. So, it seems reasonable then that the Poisson p.m.f.
would serve as a reasonable approximation to the binomial p.m.f. when your n is large (and therefore, p is
small). Let's calculate P(X ≤ 3) using the Poisson distribution and see how close we get. Well, the probability
of success was defined to be:
p=λn
Therefore, the mean λ is:
λ=np
So, we need to use our Poisson table to find P(X ≤ 3) when λ = 100(0.05) = 5.
The cumulative Poisson probability table tells us that finding P(X ≤ 3) = 0.265. That is, if there is a 5%
defective rate, then there is a 26.5% chance that the a randomly selected batch of 100 bulbs will contain
pg. 12
at most 3 defective bulbs. More importantly, since we have been talking here about using the Poisson
distribution to approximate the binomial distribution, we should probably compare our results. When we
used the binomial distribution, we deemed P(X ≤ 3) = 0.258, and when we used the Poisson distribution,
we deemed P(X ≤ 3) = 0.265. Not too bad of an approximation, eh?
It is important to keep in mind that the Poisson approximation to the binomial distribution works well only
when n is large and p is small. In general, the approximation works well if n ≥ 20 and p ≤ 0.05, or if n ≥ 100
and p ≤ 0.10.
Section - B
Q3.a) What are the relationship between confidence interval and hypothesis testing?
Distinguish between Type I and Type II error and explain what are meant by the power of a
test.
There is an extremely close relationship between confidence intervals and hypothesis testing. When a
95% confidence interval is constructed, all values in the interval are considered plausible values for the
parameter being estimated. Values outside the interval are rejected as relatively implausible. If the value
of the parameter specified by the null hypothesis is contained in the 95% interval then the null hypothesis
cannot be rejected at the 0.05 level. If the value specified by the null hypothesis is not in the interval then
the null hypothesis can be rejected at the 0.05 level. If a 99% confidence interval is constructed, then
values outside the interval are rejected at the 0.01 level.
Imagine a researcher wishing to test the null hypothesis that the mean time to respond to an auditory
signal is the same as the mean time to respond to a visual signal. The null hypothesis therefore is:
μvisual - μauditory = 0.
Ten subjects were tested in the visual condition and their scores (in milliseconds) were: 355, 421, 299,
460, 600, 580, 474, 511, 550, and 586.
Type I error
A type I error (or error of the first kind) is the incorrect rejection of a true null hypothesis. Usually a type I error leads
one to conclude that a supposed effect or relationship exists when in fact it doesn't. Examples of type I errors include
a test that shows a patient to have a disease when in fact the patient does not have the disease, a fire alarm going
on indicating a fire when in fact there is no fire, or an experiment indicating that a medical treatment should cure a
disease when in fact it does not.
A type I error occurs when the null hypothesis (H0) is true, but is rejected. It is asserting something that is absent, a
false hit. A type I error may be likened to a so-called false positive (a result that indicates that a given condition is
present when it actually is not present).
The type I error rate or significance level is the probability of rejecting the null hypothesis given that it is true.It is
denoted by the Greek letter α (alpha) and is also called the alpha level. Often, the significance level is set to 0.05
(5%), implying that it is acceptable to have a 5% probability of incorrectly rejecting the null hypothesis.
pg. 13
Type II error
A type II error (or error of the second kind) is the failure to reject a false null hypothesis. Examples of type II errors
would be a blood test failing to detect the disease it was designed to detect, in a patient who really has the disease;
a fire breaking out and the fire alarm does not ring; or a clinical trial of a medical treatment failing to show that the
treatment works when really it does.
A type II error occurs when the null hypothesis is false, but erroneously fails to be rejected. It is failing to assert what
is present, a miss. A type II error may be compared with a so-called false negative (where an actual 'hit' was
disregarded by the test and seen as a 'miss') in a test checking for a single condition with a definitive result of true or
false. A Type II error is committed when we fail to believe a true alternative hypothesis. In terms of folk tales, an
investigator may fail to see the wolf ("failing to raise an alarm"). Again, H0: no wolf.
The power of a test.
The power of a binary hypothesis test is the probability that the test correctly rejects the null hypothesis (H0) when
a specific alternative hypothesis (H1) is true. The Statistical power ranges from 0 to 1, as statistical power increases,
the probability of making an error decreases (specifically a type 2 error), type 2 error is =β, statistical power is =1-β.
Therefore, as an example, if experiment 1 has a statistical power of 0.7, and experiment 2 has a statistical power of
0.95, then there is a stronger probability that experiment 1 had a type 2 error than experiment 2, and experiment 2
is more reliable than experiment 1 due to the reduction in probability of a type 2 error. It can be equivalently thought
of as the probability of accepting the alternative hypothesis (H1) when it is true—that is, the ability of a test to detect
a specific effect, if that specific effect actually exists. That is,
The probability of not committing a Type II error is called the power of a hypothesis test.
Effect Size
To compute the power of the test, one offers an alternative view about the "true" value of the population
parameter, assuming that the null hypothesis is false. The effect size is the difference between the true
value and the value specified in the null hypothesis.
Effect size = True value - Hypothesized value
For example, suppose the null hypothesis states that a population mean is equal to 100. A researcher might
ask: What is the probability of rejecting the null hypothesis if the true population mean is equal to 90? In
this example, the effect size would be 90 - 100, which equals -10.
pg. 14
Q3. B) Describe the process of testing hypotheses about population proportion of a given
attribute.
In statistics, during a statistical survey or a research, a hypothesis has to be set and defined. It is termed as a statistical
hypothesis It is actually an assumption for the population parameter. Though, it is definite that this hypothesis is
always proved to be true. The hypothesis testing refers to the predefined formal procedures that are used by
statisticians whether to accept or reject the hypotheses. Hypothesis testing is defined as the process of choosing
hypotheses for a particular probability distribution, on the basis of observed data.
Hypothesis testing is a core and important topic in statistics. In the research hypothesis testing, a hypothesis is an
optional but important detail of the phenomenon. The null hypothesis is defined as a hypothesis that is aimed to
challenge a researcher. Generally, the null hypothesis represent the current explanation or the vision of a feature
which the researcher is going to test. Hypothesis testing includes the tests that are used to determine the outcomes
that would lead to the rejection of a null hypothesis in order to get a specified level of significance. This helps to
know if the results have enough information, provided that conventional wisdom is being utilized for the
establishment of null hypothesis.
Hypothesis testing is one of the most important concepts in statistics. A statistical hypothesis is an assumption about
a population parameter. This assumption may or may not be true. The methodology employed by the analyst
depends on the nature of the data used and the goals of the analysis. The goal is to either accept or reject the null
hypothesis.
Hypothesis Testing Terms
Given below are some of the terms used in hypothesis testing :
1. Test Statistic
The decision, whether to accept and reject the null hypothesis is made based on this value. The test
statistic is a defined formula based on the distribution t, z, F etc. If the calculated test statistic value is less
than the critical value, we accept the hypothesis, otherwise, we reject the hypothesis.
Hypothesis Testing Formula
z test statistic is used for testing the mean of the large sample. The test statistic is given by
z
= x¯−μσn√
where, x¯
is the sample mean, μ is the population mean, σ
is the population standard deviation and n is the sample size.
pg. 15
2. Level of Significance
The confidence at which a null hypothesis is accepted or rejected is called level of significance. The level
of significance is denoted by α
3. Critical Value
Critical value is the value that divides the regions into two-Acceptance region and rejection region. If the
computed test statistic falls in the rejection region, we reject the hypothesis. Otherwise, we accept the
hypothesis. The critical value depends upon the level of significance and alternative hypothesis.
4. One Sided or Two Sided Hypothesis
The alternative hypothesis is one sided if the parameter is larger or smaller than the null hypothesis
value. It is two sided when the parameter is different from the null hypothesis value. The null hypothesis
is usually tested against an alternative hypothesis(H1). The alternative hypothesis can take one of three
forms:
1. H1: B1 > 1, is one-sided alternative hypothesis.

2. H1: B1 < 1, also a one-sided alternative hypothesis.
3. H1: B1 ≠
3. 1, is two-sided alternative hypothesis. That is, the true value is either greater or less than 1.
5. P - Value
The probability that the statistic takes a value as extreme or more than extreme assuming that the null
hypothesis is true is called P- value. The P-value is the probability of observing a sample statistic as
extreme as the test statistic, assuming the null hypothesis is true. The P value is the probability of seeing
the observed difference, or greater, just by chance if the null hypothesis is true. The larger the P value,
the smaller will be the evidence against the null hypothesis.
Q4. A) monopolist’s demand curve is given by p = 100 – 2q:

a) Find his marginal revenue function.
b) What is the relationship between the slopes of the average and marginal revenue curves?
c) At what price is marginal revenue zero?
pg. 16
pg. 17
Q5. Find the extreme value (s) of and using the
Hessian matrix check whether the extreme value (s) is / are maximum or minimum.
pg. 18
pg. 19
Q6. Solve the following using simplex method of Linear programming Model in X1 and X2 .
Maximize of z=45x1 +55x2
Sub to of
pg. 20
pg. 21
pg. 22
pg. 23
Q7. a) Given the values of a and y
X 1 2 3 4 5
Y 3 7 5 1 14
Regress x on y
b) Given the values of x and y

X 25 25 30 30 16
y 2 3 5 1 8
Regress y on x
pg. 24
pg. 25
pg. 26

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MEC-003: QUANTITATIVE METHODS

Answer all the questions from this section. 2×20=40

2. a) What is the normal probability distribution function? State its properties.

Answer all the questions from this section. 5×12=60

4. A monopolist’s demand curve is given by p = 100 – 2q:

Sub to of 6! 4! 2 120

3! 10! 2 180

7. a) Given the values of ! and 6

b) Given the values of ! and 6

A first order linear differential equation has the following form:

The general solution is given by

Here are some practical steps to follow:

rewrite it in the form

Evaluate the integral

Example: Find the particular solution of:

Step 1: There is no need for rewriting the differential equation. We have

Step 2: Integrating factor

Step 4: The general solution is given by

Therefore the solution is

The steps to obtain the solution to homogenous differential equation

The differential equation

is homogeneous if the function f(x,y) is homogeneous, that is-

Check that the functions

equations). Indeed, consider the substitution . If f(x,y) is homogeneous, then we have

Since y' = xz' + z, the equation (H) becomes

Let us summarize the steps to follow:

Example: Find all the solutions of

It is easy to check that is homogeneous;

which can be rewritten as

Note that the implicit equation can be rewritten as

The Normal Distribution

μ = Mean of the Population

The probability mass function is given by:

The mean and variance of the Binomial and Poisson distribution

P(X ≤ 3) = 0.0059205 + 0.0311607 + 0.0811818 + 0.1395757 = 0.25784....

Therefore, the mean λ is:

The power of a test.

Effect size = True value - Hypothesized value

Hypothesis Testing Terms

Given below are some of the terms used in hypothesis testing :

Hypothesis Testing Formula

4. One Sided or Two Sided Hypothesis

1. H1: B1 > 1, is one-sided alternative hypothesis.

Q4. A) monopolist’s demand curve is given by p = 100 – 2q:

b) Given the values of x and y

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Sub to of 6! 4! 2 120

3! 10! 2 180