QMB Group Assignment 1

Subject Code: Subject Name:

ECOM90009 Quantitative Methods for Business 1

Assignment Number:

Workshop Day and Time: Friday 3.15-4.15pm The Spot-2018 Tutor Name: Jackson Yuen

Student Name number Student ID:

1. Xiaoshan Guo 2. Yufei Hua (675805) (652713)

3. Shuaib Kamalboor (312331) 4. Wen Gu (675719)

QMB Group Assignment 1

Question 1 a) This is stratified sampling. Stratified sampling is obtained by separating the population into mutually exclusive sets and then drawing simple random samples for each stratum. In this case, the two mutually exclusive sets are West-Germany and East-Germany, then drawing 300 gainfully-employed males (age 20-30) from each stratum to analyze the income difference.

b) Numerical Descriptive statistics for incomes of each of the two regions shown below: West-Germany Mean Standard Error Median Mode Standard Deviation Sample Variance Kurtosis Skewness Range Minimum Maximum Sum Count 39995.09 1647.44 34212 59301 28534.42 814213335.7 6.91 2.05 211923 130 212053 11998526 300 East-Germany Mean Standard Error Median Mode Standard Deviation Sample Variance Kurtosis Skewness Range Minimum Maximum Sum Count 34024.95 1145.33 30448.5 45455 19837.63 393531598.7 3.44 1.42 127555 2687 130242 10207484 300

Our group draws two histograms shown below to analyze and compare the different incomes distributions. (Based on the range of each stratum, the graph follows 22 intervals)

QMB Group Assignment 1

70 60 50 frenquecy 40 30 20 10 0 10000 18

West Germany Annual Household Incomes in 2010 (in Euro)

60 55 48 45

25 13 12 6 6 3 110000 2 120000 2 130000 3 140000 150000 160000 170000 180000 1 190000 200000 210000 210000 1 220000 220000
3

20000

30000

40000

50000

60000

70000

80000

90000 9

100000

income

East Germany Annual Household Incomes in 2010 (in Euro)

80 70 60 frenquecy 50 40 30 20 20 10 0 10000 20000 30000 40000 50000 60000 70000 13 3 80000 90000 49 35 25 76 67

1 100000 110000 120000 130000

140000

190000

150000

160000

170000

180000

income

To be more specific, these sets of data are cross-sectional and only represent various income levels of West-Germany and East-Germany at a certain time (2010), thus, the histograms show us a clear view of the frequency distributed in different income level.

200000

QMB Group Assignment 1

c) Obviously, large number of income in both groups is centralized between 10000 and 50000, but in East-Germany, more income located from 20000 to 40000 than West, otherwise the West has more income from 40000 to 50000. The mean and median of East income is slightly lower than the West. However, the standard deviation of West income is much higher than the East, because there exist several extreme incomes in West-Germany, such as the lowest is 130, the highest is 212053. This also causes larger range in West than the East. Both of the shapes are similar income distributions which are skewed to the right; most incomes distribute below 60,000. Furthermore, the peak in East is higher than the West. However, the West has heavier tail. Overall, graphs and statistics demonstrate that large income gap exists in West-Germany, and the income in East-Germany is relatively stable and has smaller gap.

d) Median. Based on the analysis of graphs and numerical data, median illustrates the relatively efficient measure of central location. Firstly, median usually provides a better measure of the center of the data which means it can show the middle level of income. Secondly, this case involves several extreme observations, such as lowest 130 and highest 212053, so we cannot use mean to make the judgment. Moreover, income is not always the same and occurs as different number so the mode is not a good way. Thus, the use of median which is not as sensitive as mean when there are extreme observations is the most efficient measure of central location in this case.

QMB Group Assignment 1

Question 2 a). (i) Use XLSTAT to analyze the standardized data in six groups and then construct the box plot shown below: Statistic Minimum Maximum 1st Quartile Median 3rd Quartile Mean Variance (n-1) Standard deviation (n-1) DVD 2001 -1.729 1.848 -0.817 -0.048 0.885 0.000 1.000 1.000 LAPTOP 2001 -1.864 1.752 -0.853 0.072 0.876 0.000 1.000 1.000 TV 2001 -2.020 1.650 -0.800 0.368 0.725 0.000 1.000 1.000 DVD 2011 -2.110 -0.510 -1.692 -1.275 -0.822 -1.272 0.225 0.475 LAPTOP 2011 -1.872 1.793 -1.393 -0.479 0.726 -0.254 1.333 1.154 TV 2011 -1.945 1.670 -0.994 -0.640 0.360 -0.300 0.944 0.972

Box plots
3

-1

-2

-3

DVD 2001

LAPTOP 2001

TV 2001

DVD 2011

LAPTOP 2011

TV 2011

(ii) Standardization of the price allows us to examine products with different price scales. Firstly, after standardizing, we can compare different type of products, such as DVDs, Laptops and TVs under the similar price scale. Secondly, it is much easier to know the position of each device in price level. Thirdly, if we draw the graph by using the original data, the box plot should have large gap between different devices so that it is hard to make the comparison. For instance, Laptop prices are generally higher than DVDs, therefore their higher prices would not reflect its actual change
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QMB Group Assignment 1

when compared with DVDs as DVDs prices are naturally smaller. Thus, it is easier to use standardized data to draw graphs and compare the different price distribution. However, it is obvious that standardized data has its drawback as well. For example, if there are outliers in the observation (or extreme data), they would be normalized and scaled down to match the other observations. Therefore, standardization may alleviate the impact of outliers in data analysis and let the researcher not easy to find them.

b). (i) Based on the statistic table below and the box plots: Min Q1 Median Q3 Max DVD 2001 -1.73 -0.82 -0.05 0.89 1.85 LAPTOP 2001 -1.86 -0.85 0.07 0.88 1.75 TV 2001 -2.02 -0.80 0.37 0.73 1.65

From the table, it could be inferred that the three types of devices have similar price ranges and price distributions. However, the range of middle 50% of prices distribution in TVs is smaller than DVDs and Laptops. More obviously, we could notice that the median of TVs is higher than the other two in 2001. It means that the shape of TV s price distribution is skewed to the left (median>mean), so more TVs have relatively higher prices. Specifically, it could be interpreted that in 2001, TVs may have the lowest price level offered in one of its brands. Furthermore, the highest median is for TV as well, which could be the result of having many brands with different price levels for each type of TV, for example, these prices could include a 24 inch screen TV and also a 40 inch TV screen, and in addition the introduction of High Definition TV compared to Standard Definition, thus, the higher median price. The maximum prices between all three are on similar levels, but may also indicate a higher demand for DVDs at that time in 2001 which might have given the higher figure for maximum DVD price level.

QMB Group Assignment 1

(ii) DVDs Minimum Q1 Median Q3 Maximum 2001 -1.73 -0.82 -0.05 0.89 1.85 2011 -2.11 -1.69 -1.28 -0.82 -0.51 LAPTOP 2001 2011 -1.86 -1.87 -0.85 -1.39 0.07 -0.48 0.88 0.73 1.75 1.79 TV 2001 -2.02 -0.8 0.37 0.73 1.65 2011 -1.94 -0.99 -0.64 0.36 1.67

The box plot and the table demonstrate that price level of DVD drops dramatically (e.g. the maximum, mean and median) but the minimum is similar over time. It could be explained by the introduction of Blu-Ray discs that provide the viewer with higher resolution and clearer imaging quality therefore pushing the price level downwards as demand for DVDs has dropped. For Laptops, it maintains the similar price range over time but the range below the mean is larger than that in 2001. It may be interpreted that there are cheaper laptops in 2011 than in 2001 as the cost reduction, e.g. producing in China, India. Also, the alternative devices like the Tablet, like the iPad may result in reducing price level. In terms of TV, the price range is also similar; however, the price for middle level of TV drops over time which can be seen from median to Q3. For example, some of the market segments use computers as alternative and subscription-based services like Netflix which will suffice and not require them to purchase a TV.

(iii) The statement regarding of DVDs, to some extent, is plausible. As the technology development, the DVD is relatively out-fashioned so there is no improvement in DVDs so it means that they are almost the same products this is why their general prices drop dramatically after years and only maintain a minimum cost level. In terms of TVs, the advanced technology such as the introduction of HD TV with different resolutions (480p, 720p, and 1080p) provides the consumer with more choices and various models, therefore the price of middle level of TVs prices would be lower in 2011 compared to 2001. Also due to the highly competitive market, the TV producer would provide better and various products to meet the needs of different customers.
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QMB Group Assignment 1

Question 3 a). (i) Independent trials refer to events for which the occurrence of one has no influence on the occurrence of the others. For this case, it means the passenger who bought the ticket whether showing up or not; X is random variable the number of passengers who buy the ticket and show up. N is the number of trials, specifically the number of passengers who bought tickets (or the number of tickets sold); P is the success probability of passengers who buy the ticket and show up, P=0.92

(ii) It is not plausible, because when some situations happen, for example, many families, couples, friends or teams buy tickets together and they may make the same choice of showing up or not. This will have influence on each other, so they are not completely independent.

(iii) This graph is constructed by applying excel function: P=BINOMDIST(X, 50, 0.92, FALSE) Binomial Distribution: N=50,p=0.92
0.25 0.2

Probability

0.15 0.1 0.05 0 0 10 20 30 40 50 60

Variable X

QMB Group Assignment 1

(iv) With the discrete character of a binomial distribution, it is somewhat surprising that a continuous random variable can be used to approximate a binomial distribution. For many binomial distributions, we can use a normal distribution to approximate our binomial probabilities. But the normal approximation is reasonably valid provided that the sample size is large enough which means that the size needs to meet both of the requirements as below:
np 5 and n 1 p 5

This is a rule of thumb, which is guided by statistical practice. The normal approximation can always be used, but if these conditions are not met then the approximation may not be that good of an approximation. Thus, in this case,
n (1 p) 50 0.08 4 5 , so the normal approximation cannot be used in this

case.

b). Suppose an airline wants the on average to have full airplanes for departures. (i) As known N=50, P=0.92. Thus, E(vacant)=N*(1-P)=50*0.08=4.

(ii) As known E(X)=50, P=0.92. Thus, N=E(X)/P=54 now they should sell 54 tickets to make the airplane as full as possible; And E(vacant)=N*(1-P)=54*0.08=4.325, so it means that there are 5 people not showing up. Thus, the vacant seats in this case should be 50-(54-5)=1.

(iii) As known X>50, so P(more passengers shown than available seats) = 1-P(X<=50) =1-Bionomist(50,54,0,92,True)= 0.364. (via Excel function)

54 (iv) P(all buy and shown)= C54 0.9254 0.080 0.01108