1. The normal distribution is the most important distribution in statistics.

It is also used in
many business processes. Provide examples of two business processes that can be described
by the normal distribution. Demonstrate the use of the normal distribution by providing two
practical examples showing how the normal distribution was used to solve a real world
problem. Show your work in detail along with the results and decisions made.
2. There are several techniques used to solve decision - making problems. Describe the
techniques used to solve problems under uncertainty. Which techniques results in an
optimistic decision? Which techniques results in a pessimistic decision? Provide a detailed
real world example of each.

3.
A. Regression analysis is an extremely valuable quantitative tool. Briefly discuss the
following using a real world example:
B. How the coefficient of determination and the correlation coefficient are related and
how they are used in regression analysis.
C. How scatter diagrams can be used to identify the type of regression to use.
D. The methods used to determine if the regression model is a good model for the
presented dependent and independent variable(s).
Suppose we want to gather information about the number of people residing in a city and the
amount of pollution in the city. This analysis can be done by collecting data and finding the
relation between the two variables using regression analysis.
Regression analysis will calculate the coefficient of correlation and determination between
the two variables population and pollution and find out the relationship between them for a
city over a certain period of time.
Real World Example: We can illustrate regression analysis using data from 1976-1989 for
both the annual value of sales of semiconductors (in $M) and a likely leading indicator of
these sales, namely Producers' durable equipment investment (in $B). First, a graph of the
relationship between these two variables suggests that they might be related in a linear
fashion:

We can run a regression of sales on durable equipment investment, which has an equation
that looks like this:
Sales = a + b (Investment)
Using this data, we get the following results:
Sales = -5513.7 + 52.3 (Investment)
t=4.4 t=10.7

4. No forecasting method is perfect under all conditions. Briefly describe the steps used to
develop a forecasting system. What is the difference between a casual model and a timeseries model? What is a qualitative forecasting model, and when is it appropriate. Provide a
real world example of each type of model.
There are five basic steps in any forecasting model and they are:
Step 1: Problem Definition where the problem is defined, the way the forecasts will be used
are identified, who will require the forecasts is determined. Select the variables and identify
the time horizons
Step 2: Gathering Information- both statistical and accumulated expertise of the people who
collect data and use forecasts
Step 3: Preliminary analysis is done by graphing the data collected and identifying any
logical patterns in it.
Step 4: Choosing and fitting appropriate models
Step 5: using and evaluating a forecast model
A Comparison of Time Series and Causal Models of Forecasting
A time series is just collection of past values of the variable being predicted. Also known as
nave methods. Goal is to isolate patterns in past data.
Types of Time Series Forecasting:
Trend
Seasonality
Cycles
Randomness

Causal forecasting methods are based on the relationship between the variable to be
forecasted and an independent variable.
Types:
Regression a mathematical equation relates a dependent variable to one or more
independent variables that are believed to influence the dependent variable
Econometric models - system of interdependent regression equations that describe
some sector of economic activity
Input-Output Models - describes the flows from one sector of the economy to
another, and so predicts the inputs required to produce outputs in another sector
Qualitative Models
Qualitative models have generally been successful with short-term predictions, where the
scope of the forecast is limited. Qualitative forecasts can be thought of as expert-driven, in
that they depend on market mavens or the market as a whole to weigh in with an informed
consensus. Qualitative models can be useful in predicting the short-term success of
companies, products and services, but meets limitations due to its reliance on opinion over
measurable data.
Examples Real World
Market Research: Polling a large number of people on a specific product or service to predict
how many people will buy or use it once launched.

Delphi Method: Asking field experts for general opinions and then compiling them into a
forecast.