SIKKIM MANIPAL UNIVERSITY-DE Summer 2013

Q1. Statistics plays a vital role in almost every facet of human life. Describe the functions of Statistics. Explain the applications of statistics Answer- : Statistics is the study of how to collect, organizes, analyze, and interpret numerical
information from data. Descriptive statistics involves methods of organizing, picturing and summarizing information from data. Inferential statistics involves methods of using information from a sample to draw conclusions about the population. Statistical methods are applied to specific problems in various fields such as Biology, Medicine, Agriculture, Commerce, Business, Economics, Industry, Insurance, Sociology and Psychology. In the field of medicine, statistical tools like t-tests are used to test the efficiency of the new drug or medicine. In the field of economics, statistical tools such as index numbers, estimation theory and time series analysis are used in solving economic problems related to wages, price, production and distribution of income. In the field of agriculture, an important concept of statistics such as analysis of variance (ANOVA) is used in experiments related to agriculture, to test the significance between two sample means. In Biology, Medicine and Agriculture, Statistical methods are applied in the following: Study of the growth of plants Movement of fish population in the ocean Migration pattern of birds Analysis of the effect of newly invented medicines Theories of heredity Estimation of yield of crop Study of the effect of fertilizers on yield Birth rate Death rate Population growth Growth of bacteria Insurance companies decide on the insurance premiums based on the age composition of the population and the mortality rates. Actuarial science is used for the calculation of insurance premiums and dividends. Statistics is a part of Economics, Commerce and Business. Statistical analysis of the variations in price, demand and production are helpful to both businessmen and economists. Cost of living index numbers help governments in economic planning and fixation of wages. A governments administrative system is fully dependent on production statistics, income statistics, labour statistics, economic indices of cost, and price. Economic planning of any nation is entirely based on the statistical facts. Cost of living index numbers are also used to estimate the value of money. In business activities, analysis of demand, price, production cost, and inventory costs help in decision making. Management of limited resources and labour needs statistical methods to maximise profit. Planned recruitments and distribution of staff, proper quality control methods, and a careful study of the demand for goods in the market and balanced investment, help the producer to extract maximum profit out of minimum capital investment. In manufacturing industries, statistical quality control techniques help in increasing and controlling the quality of products at a minimum cost. Hence, statistics is applied in every sphere of human activity.

Q2. a. Explain the various measures of Dispersion

Answer- Definition: A measure of Dispersion may be defined as a statistics signifying the extent of the scattering of items around a measure of central tendency.

SIKKIM MANIPAL UNIVERSITY-DE Summer 2013

The property of deviations of values from the average is called Dispersion or Variation. The degree of variation is found by the measures of variation. They are as follows: 1. Range (R) 2. Quartile Deviation (Q.D) 3. Mean Deviation (M.D) 4. Standard Deviation (S.D) They have units of measurement attached to them. Therefore, they are known as absolute measures of variation. However, we may want to compare two different distributions whose measurements are in terms of kilograms and in terms of centimetres. Then, we use the following relative measures that do not have any units attached to them. The relative measures are as follows: 1. Coefficient of Range 2. Coefficient of Quartile Deviation 3. Coefficient of Mean Deviation 4. Coefficient of Variation Solution B

Answer- Size of ((N+1)/2)th item. Here N=10 hence ((N+1)/2)th =5.5 item Now we have to take average of 5th and 6th item = (591+672)/2= 631.5 Hence median for given set of values is 631.5 Quartiles: Q1 = ((N+1)/4)th item = 2.75th item Q1 = 2nd value + 0.75 (3rd value 2nd value) Q1 = 391 + 0.75 (407-391) Q1 =403 Q2 = (2(N+1)/4)th item = 5.5th item Q2 = 5th value + 0.5 (6th value 5th value) Q2 = 591 + 0.5 (672-591) Q2 = 631.5

Q3. a. What is correlation? Distinguish between positive and negative correlation. b.

Answer- In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management. Correlation is computed into what is known as the correlation coefficient, which ranges between -1 and +1. When two or more variables move in sympathy with the other, then they are said to be correlated. If both variables move in the same direction, then they are said to be positively correlated. If the variables move in the opposite direction, then they are said to be negatively correlated. If they move haphazardly, then there is no correlation between them. Correlation analysis deals with the following:

SIKKIM MANIPAL UNIVERSITY-DE Summer 2013

Measuring the relationship between variables. Testing the relationship for its significance. Giving confidence interval for population correlation measure. Positive and negative correlations: Both the variables (X and Y) will vary in the same direction. If variable X increases, variable Y also will increase; and if variable X decreases, variable Y also will decrease; then the correlation in such cases is known as positive correlation. If the given variables vary in opposite direction, then they are said to be negatively correlated. If one variable increases, the other variable will decrease. In other words, the variables are negatively correlated if there is an inverse relationship between the variables. For example, price and supply of the commodity. On the other hand, correlation is said to be negative or inverse if the variables deviate in the opposite direction, i.e., if the increase (decrease) in the values of one variable results, on the average, in a corresponding decrease (increase) in the values of the other variable. For example, temperature and sale of woolen garments. b. X dX=X-5 dX^2 Y dY=Y-12 dY^2 dX*dY 1 -4 16 9 -3 9 12 2 -3 9 8 -4 16 12 3 -2 4 10 -2 4 4 4 -1 1 12 0 0 0 5 0 0 11 -1 1 0 6 1 1 13 1 1 1 7 2 4 14 2 4 4 8 3 9 16 4 16 12 9 4 16 15 3 9 12 45 0 60 108 0 60 57 X=45 dX=0 dX^2=60 Y=108 dY=0 dY^2=60 dXdY=57

Correlation coefficient (r) = (NdXdY - dX dY)/ ((NdX2 (dX)2)*(NdY2) (dY)2)1/2 Here N = 9, Hence Correlation coefficient (r) =0.95

Q4. Index number acts as a barometer for measuring the value of money. What are the characteristics of an index number? State its utility Answer- An index number is a number which is used to measure the level of a certain phenomenon as
compared to the level of the same phenomenon at some standard period. In other words, an index number is a number which is used as a device for comparison between the price, quantity or value of a group of articles in different situations for example, at a certain place or a period of time and that of another place or period of time. When a comparison is with respect to prices, it is called an index number of price, when it is with respect to physical quantities; it is named as index number of quantities. Other index numbers are defined in the similar manner. The index numbers are meant for comparison of variations arising out of the difference in situations, for example, change of time or change of place. Chief Characteristics of Index Numbers 1. Expressed in numbers Index numbers represent the relative changes such as increase in production; reduction in prices etc. in the numbers. 2. Expressed in percentage Index numbers are expressed in terms of percentages so as to show the extent or relative change where the value of base is assumed to be 100 but the sign of percentage (%) is not used. 3. Relative measure Index numbers measure changes which are not capable of direct measurement. 4. Specified averages Index number represents a special case of average, in general known as weighted average. It is a special type of average, because in a simple average, the data is homogenous having the same unit of measurement, whereas the average variables have different units of measurement.

SIKKIM MANIPAL UNIVERSITY-DE Summer 2013

5. Basis of comparison Index numbers by their very nature are comparative. They compare changes over time or between places or similar categories.

Q5. Business forecasting acquires an important place in every field of the economy. Explain

the objectives and theories of Business forecasting. Answer- Business Forecasting is an estimate or prediction of future developments in business such as sales, expenditures, and profits. Given the wide swings in economic activity and the drastic effects these fluctuations can have on profit margins, it is not surprising that business forecasting has emerged as one of the most important aspects of corporate planning. Forecasting has become an invaluable tool for businesspeople to anticipate economic trends and prepare themselves either to benefit from or to counteract them. If, for instance, businesspeople envision an economic downturn, they can cut back on their inventories, production quotas, and hiring. If, on the contrary, an economic boom seems probable, those same businesspeople can take necessary measures to attain the maximum benefit from it. Good business forecasts can help business owners and managers adapt to a changing economy. Business forecasting refers to the analysis of past and present economic
conditions with the object of drawing inferences about probable future business conditions. The process of making definite estimates of future course of events is referred to as forecasting and the figure or statements obtained from the process is known as forecast; future course of events is rarely known. In order to be assured of the coming course of events, an organised system of forecasting helps. Objectives of forecasting in business Forecasting is a part of human nature. Businessmen also need to look to the future. Success in business depends on correct predictions. In fact when a man enters business, he automatically takes with it the responsibility for attempting to forecast the future. To a very large extent, success or failure would depend upon the ability to successfully forecast the future course of events. Without some element of continuity between past, present and future, there would be little possibility of successful prediction. But history is not likely to repeat itself and we would hardly expect economic conditions next year or over the next 10 years to follow a clear cut prediction. Yet, past patterns prevail sufficiently to justify using the past as a basis for predicting the future. There are a few theories that are followed while making business forecasts. Some of them are: 1. Sequence or time-lag theory 2. Action and reaction theory 3. Economic rhythm theory 4. Specific historical analogy 5. Cross-cut analysis theory 1. Sequence or time-lag theory This is the most important theory of business forecasting. It is based on the assumption that most of the business data have the lag and lead relationships, that is, changes in business are successive and not simultaneous. There is time-lag between different movements. 2. Action and reaction theory This theory is based on the following two assumptions. Every action has a reaction Magnitude of the original action influences the reaction When the price of rice goes above a certain level in a certain period, there is a likelihood that after some time it will go down below the normal level. Thus, according to this theory a certain level of business activity is normal or abnormal; conditions cannot remain so for ever. 3. Economic Rhythm Theory The basic assumption of this theory is that history repeats itself and hence assumes that all economic and business events behave in a rhythmic order. According to this theory, the speed and time of all business cycles are more or less the same and by using statistical and mathematical methods, a trend is obtained

SIKKIM MANIPAL UNIVERSITY-DE Summer 2013

which will represent a long term tendency of growth or decline. It is done on the basis of the assumption that the trend line denotes the normal growth or decline of business events 4. Specific historical analogy History repeats itself is the main foundation of this theory. If conditions are the same, whatever happened in the past under a set of circumstances is likely to happen in future also. A time series relating to the data in question is thoroughly scrutinised such a period is selected in which conditions were similar to those prevailing at the time of making the forecast. However, this theory depends largely on past data. 5. Cross-cut analysis theory This theory proceeds on the analysis of interplay of current economic forces. In this method, the combined effects of various factors are not studied. The effect of each factor is studied independently. Under this theory, forecasting is made on the basis of analysis and interpretation of present conditions because the past events have no relevance with present conditions.

Q6. The weekly wages of 1000 workers are normally distributed around a mean of Rs. 70 and a standard deviation of Rs. 5. Estimate the number of workers whose weekly wages will be: a. Between 70 and 72 b. Between 69 and 72 c. More than 75 d. Less than 63
Answer1000 worker Mean=70Rs/week S.D()=5

x=70 =5 =(x- x)/ z= a) To estimate the number of worker whose wage from 70 to 72 i.e
z2

=1000

z1

1 2

dz where z=

, z1=

and z2=

= 2/5

= 1000

dz

=1000 X 0.1554 worker have wages from 70 to 72.

b) Between 69 to 72

z1 =

= -0.2

so Area of Normal distribution curve left to z1 A(z1) = 0.0793 and for z2= = = 0.4 5

SIKKIM MANIPAL UNIVERSITY-DE Summer 2013 A(z2) = 0.1554 Total Area A(z1)+A(z2) represents probability of workers in this wages range. So estimate of worker s is = 1000(A(z1)+A(z2)) =1000X(0.0793+0.1554) = 1000X0.2347 =234.7 or 235 workers c) More than 75 i.e z= = 5/5 = 1.0 So A(z) =0.3413 So p(more than 75Rs) = 0.5000-0.3413 = 0.1587 So worker whose wages is more than 75 Rs = 1000X0.15837 = 158.7 workers

d) No of worker whose wages less then 63 z= = = = -1.4

Region of Normal Distribution corresponding Z = -1.4 is A(z) = 0.4192 So P(less than 63 Rs) = - P(z=-1.4) = 0.5-0.4192 = 0.0808 So Number of worker whose less than 63Rs/week is = 1000X0.0808

=80.8=81(nearest whole number)