QM 1 Course Manual 1013

Quantitative Methods 1
EBC1005 EBC1006 EBC1007

102BB 102BE 102BF
Course manual 2013/2014
More course-related information in Eleum,
our electronic learning environment!
http://eleum.unimaas.nl
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Contents
1 General Introduction to Quantitative Methods 1 3
1.1 Subjects and textbooks 4
1.1.1 Mathematics 4
1.1.2 Statistics 5
1.1.3 Computer skills 6
1.2 The teaching system 6
1.2.1 Lectures 6
1.2.2 Group meetings 7
1.3 Examination rules 7
1.3.1 Part 1: quizzes 8
1.3.2 Part 2: written test 8
1.3.3 Part 3: computer skills 8
1.3.4 Part 4: presence and participation requirements 8
1.3.5 Passing QM 1 9
1.3.6 Re-examination arrangements QM 1 9
1.3.7 Test strategy 10
1.4 Organization 11
1.5 The weekly cycle 11
1.5.1 Literature and lecture 11
1.5.2 Preparation 11
1.5.3 Project 11
1.5.4 Tutorial group meeting 11
1.5.5 Quizzes 11
1.5.6 The Thursday/Friday Recap lecture 11
1.6 Block schedule 12
2 Weekly Assignments 13
2.0 Week 0: what you should do before starting 13
2.1 Week 1 14
2.1.1 Statistics 14
2.1.2 Mathematics 14
2.2 Week 2 17
2.2.1 Statistics 17
2.3 Week 3 19
2.3.1 Statistics 19
2.4 Week 4 21
2.4.1 Statistics 21
2.5 Week 5 22
2.5.1 Statistics 22
2.6 Week 6 24
2.6.1 Statistics 24
2.7 Week 7 27
2.7.1 Statistics 27

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1 General I ntroduction to Quantitative Methods 1
All students of International Business, Economics and Fiscal Economics at this school receive a basic
training in quantitative methods covering subjects from mathematics, statistics and computer skills.
The majority of this training is given in the first year. This block, you will be participating in what we
call Quantitative Methods 1 (QM 1). It is followed by a second round of quantitative methods (QM 2)
in period 4. In the second year, some additional subjects will be covered. The topics for the latter two
courses and the block-period for the third course depend on your choice regarding study and
specialization.
The prerequisites for Quantitative Methods 1 are high-school algebra and preferably some
calculus (Wiskunde A or Wiskunde B in the Netherlands, preferably Mathematik Leistungskurs
in Germany). The QM 1 program will repeat many topics that are familiar to students of the Wiskunde
A program. However, do not be deceived by the similarity in topics: we expect you to demonstrate a
different mastery of quantitative knowledge than most high-school programs. We place more
emphasis on active knowledge, i.e. the capability to apply your knowledge to real-life situations, than
on the mere understanding of our methods. Given the diversity of the prior knowledge of our student
population, the personal effort required from each one of you may differ considerably depending on
your background. It is therefore extremely important for you to keep up with the course in order to
benefit from it as much as possible.
In mathematics, we will repeat and extend your knowledge about functions and equations.
Questions that play a role in this course are:
- How to translate a given problem into a mathematical model. Most of these problems
are questions for a maximum or minimum value or for the significance of the problem
mathematically, the existence of a solution.
- How to find maximum and minimum values for a function of one and two variables.
We will make use of derivatives and partial derivatives in order to formulate equations
and conditions for extreme values.
- How to solve a system of equations, especially linear equations.
In statistics, we will focus on the following topics:
- Methods of data collection, and types of data.
- Descriptive statistics: describing important characteristics of populations or samples by
numerical methods as the mean, median, mode (measures of central tendency) variance
and standard deviation (measures of spread) as well as by graphical methods, like
histograms, bar charts or Box-and-Whiskers displays.
- Probability theory, as an introduction to random variables.
- Discrete random variables and the most important discrete probability distribution: the
binomial distribution.
- Continuous random variables and two continuous probability distributions: the uniform
and the normal distribution.
- Sampling distributions, as a first step to the topic that will dominate the QM statistics
agenda from now on: inferential statistics, or inductive reasoning. Understanding why
large samples provide so much more information than small samples is an important
element of this first step.
- The construction of confidence intervals to estimate unknown population parameters
and
- Hypothesis testing in the simplest case of one population. This includes concepts as null
and alternative hypothesis, type I and type II errors as well as the p-value of a
hypothesis test.
In computer skills, we will endeavour to provide basic training in Microsoft Excel and its
statistical add-in PHStat, leading up to more intensive use of the package in QM 2 as well as a number
of other subjects in later blocks. While we do not expect any previous experience with Microsoft
Excel, we require prior knowledge of the Microsoft Windows operating system, as well as the
Microsoft Word word processing package and other Microsoft Office applications. If you feel that you
lack vital experience with these programs, we suggest that you familiarize yourself with both as soon

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as possible. Your local bookseller will be able to recommend a number of useful introductions if you
feel the need. Personally, we prefer the for dummies series of computer books
*
, but there are many
others that are just as suitable.
All information in this manual as well as a lot of additional information can be found in our
electronic learning environment Eleum: http://eleum.unimaas.nl. Among the features you can
find online will be copies of old exams and announcements regarding your group and the entire
course. It is our aim to update the site frequently, and we strongly advise you to check it regularly.
Ideally, you should check the site daily, but minimally you should drop by at least once a week.
1.1 Subjects and textbooks
In QM 1, the study load of mathematics and statistics are equal: about 45% each (of 20 hours per
week). Computer skills will require the remaining 10%. These percentages are only an indication; your
real workload may differ significantly depending on your specific background.
1.1.1 Mathematics
For QM 1, the textbook is Knut Sydster, Peter J. Hammond, & Arne
Strom (2012): Essential Mathematics for Economic Analysis, 4
th
ed.
Harlow: Financial Times/Prentice Hall. [UM library code: SB QA 00.01].
The text is available at a reduced price and in combination with a
MyMathLab Student Access Kit through StudyStore in a bundle with the
Statistics & Marketing texts.
Some additional background literature, for those that are interested:
- Chiang, Alpha C.: Fundamental Methods of Mathematical
Economics, 3
rd
ed. New York, 1984: McGrawHill. [SF QA 90AXX]
- Haeussler, Ernest F. & Paul, Richard S.: Introduction to Mathematic Analysis, 10
th
ed.
Upper Saddle River, 2002: Prentice Hall. [4
th
ed.: SB QA 00.01]
- Wisniewski, Mik: Introductory Mathematical Methods in Economics, 2
nd
ed. London,
1996: McGrawHill. [SB QA 90AXX]
In the mathematics part of QM 1 we will confine our attention to the mathematical subjects that
are necessary for economics as well as business administration students. Our starting point is the
concept of a function. We will survey specific types of functions that are widely used in economic
applications. Exponential and logarithmic functions for instance are ideal to describe growth and
proportional effects. Functions can be seen as a bridgehead between empirical regularities and
scientific explanations. They make up the core of every formal model and therefore play a central role
in the application of mathematics to economic problems. This explains our attention to functions and,
as a natural continuation, our attention to the analysis of functions, i.e. the study of patterns and
characteristics of functions. A function describes the relation between variables and an important way
to get a rough idea of the character of this relation is plotting the graph of the function. However, if
you want to have more precise information, then a more profound study is necessary. We are
especially interested in the aspect of change in a (functional) relation. Observed or expected change is
what triggers the actions of economic agents including all of us. Not only the sign and size of
changes matter, also the speed of change, or the length of time in which the change is completed. In
order to measure that speed, we introduce the derivative of a function. Economic concepts like
marginality and elasticity are based on (rates of) change and thus on the derivative of a function.
Besides, derivatives play a major role in the analysis of the functional form itself. They are most
useful in locating maxima and minima of functions also interesting characteristics for economic
agents. Derivatives are found with the help of differential rules, i.e. rules for differentiating common
classes of functions (such as exponential and logarithmic functions) and combinations (such as sums
and products).
So far what we understood by function was a relation between just two variables. The real world
is of course far too complex to be described and explained by such simple relationships. Most

*
Respectively known as voor dummies in Dutch, fr Dummies in german and pour les nuls in
French.

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situations involve some form of dependence between more than two variables. We will therefore study
relations between three (and more) variables, one being viewed as the dependent one and all others
being viewed as independent ones. If such a relationship relates every combination of values of the
independent variables to at most one value of the dependent variable, then that dependent variable is a
function of the independent variables. For the analysis of functions of several variables we will extend
the concept of derivative to that of partial derivative. Partial derivatives can be used for finding
maxima and minima of functions and for the determination of (partial) marginalities and elasticities.
Relations between more than two variables may be very complicated. However, if the
relations are linear, then we may use other tools to analyze them. For example, during the last week of
the course we will present a technique, Gaussian Elimination, to solve systems of linear equations.
The principle is easy: solving by simplification and substitution.
Prerequisite mathematical knowledge (what you should know before starting the QM 1 course)
Chapters 1 and 2, as well as sections 3.1 and 4.1 4.6 of Sydster & Hammond.
Minimally, you should have mastered the contents of the first two chapters. Furthermore, you
are supposed to know the concepts contained in sections 4.1 4.6 of Sydster & Hammond. Although
these sections are contained in the 1
st
week of this course, we will only scratch the surface of these
subjects.
If you feel that your understanding of the above-mentioned concepts is lacking, and you missed
the math summer course that took place in the months June to August, we recommend that you
practice some of the materials we have created for that summer course. In MyMathLab, within the
section HomeWork, you will not only find seven different HomeWork lessons for all seven weeks of
QM1, but also 50 HomeWork lessons prepared for the summer course. All of these HomeWork
lessons carry names like SC Ch 13.1: Functions: Notation, so start their name with the abbreviation
SC of SummerCourse. Please go through these 50 lessons, and practice several items from each of
them. If you already master the items, you will discover that you can do them in no more than a couple
of minutes. If you do not master them, you will need some more time, but that will pay out: this
material is essential to be able to grasp the QM1 coverage (students of the summer course who
successfully completed all items of all 50 lessons, took on average 13.5 hours to do so, so it is less
time-consuming as you may think).
1.1.2 Statistics
Statistics can be divided into two sub-disciplines: descriptive statistics and inductive statistics.
Descriptive statistics aims to describe, summarize and display possibly large sets of data, such as a
census or population count, in a way that facilitates communication. Examples are tables and figures
like bar plots and line graphs, characteristic numbers such as averages or proportions, and the use of
some functional relation, like a time trend, to describe patterns in a large data set. These examples
involve two kinds of instruments: (i) graphical means of display that are relatively easy to grasp, and
(ii) numerical summaries of the data which reduce any number of observations to a small number of
items. Descriptive statistics typically treat the data as if it were a complete set of records on the
phenomenon or group we are interested in, which is called the population in statistical jargon; its
ambition is to display and summarize the data set as such.
However, it is rarely the case that we have complete records. This is where inductive statistics
takes over. Inductive statistics deals explicitly with partial, often relatively small samples, drawn from
larger populations which are impossible or too costly to observe in their entirety. From the samples
one endeavours to learn about the populations. Induction (as opposed to deduction) means just that: to
squeeze information concerning the general whole out of information on a particular part. Its aim, in a
word, is generalization. What we are really interested in is the general population and we only study
the sample as a way to learn more about the underlying population. Naturally, a good deal of
uncertainty is unavoidable in the process. That is why induction, unlike deduction, cannot generate
exact and rigorous knowledge. Even when our statistical inference looks very conclusive, we have to
remember that the conclusion is subject to the possibility of error.
Inductive statistics (also called inferential statistics) dominates descriptive statistics, though
maybe more in terms of its level of complexity and technicity than in terms of daily practice. The last
three weeks of this block as well as the entire QM 2 course are devoted to it. The first four weeks of
this block prepare the necessary ground. First of all, we pay some attention to the concepts and
methods of descriptive statistics. Secondly, and somewhat paradoxically, we study probability theory,

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the application of deductive reasoning to chance and randomness. This is a sub-discipline of
mathematics and, in a sense, the mirror image of inductive statistics. It deals with the hypothetical
situation where we know all about the population and want to predict the likely features of random
samples drawn from it. Some knowledge of the rules of probability theory is indispensable as a
stepping-stone to understand the rather more subtle rules of inductive statistics.
The subject matter of this block corresponds to a large extent to chapters 1-5, 7-13 of the Sharpe
et. al. textbook which is the prescribed literature for both QM 1 and QM 2:
- Sharpe, Norean R., De Veaux, Richard D., &
Velleman, Paul F. (2012): Business Statistics, 2
nd
ed.
New York: Pearson Education International.
Sharpe et. al. is available through StudyStore in a
bundle with a license of:
- MyStatLab Student Access Kit.
(The most economic way to buy this textbook, is in a
wrapping together with the Math and Marketing texts.)
As you understand from above specification, the delivery of mathematics and statistics in this
block will be of somewhat experimental nature: it will be your first e-learning block. An important
learning tool is the MyLab software, an electronic learning environment that allows you to prepare
your tutorial sessions by solving math and statistics problems and receiving digital feedback in case
you make errors, or opposite, are able to find the correct solution in one straight way.
1.1.3 Computer skills
The computer skills section of this block serves several purposes. The most important is to familiarize
you with Microsofts Excel spreadsheet package, which is widely used in later blocks, organizations
and businesses, and the so-called Excel add-in PHSTAT (or DDXL), a dedicated tool for solving
statistical problems. (The textbook suggests another tool, XLSTAT, but last year, we encountered
major problems with installing this add-in, and abandoned it. If you are more successful in installing,
feel free to use it, or any other add-in: they all do the same kind of statistical calculations. We will
focus our support on Excel itself, and PHSTAT.). In the first two weeks, two lectures aim to provide
an overview of the programs functions moving from knowledge required for beginners to advanced
knowledge required to tackle mathematical or statistical problems in Excel. We offer group sessions in
all weeks that allow you to get vital experience in applying these techniques. Furthermore, the
computer skills sessions are also used to test whether you have developed an adequate understanding
of the most important concepts. In weeks 2, 4 and 6, you will work on three so-called Excel
assignments. These have the status of required assignments: you have to send in a satisfactory
solution, in order to get a pass for computer skills.
Finally, students will need to take computer tests of their knowledge in mathematics and
statistics in weeks 1, 3, 5, and 7. These tests not only serve as an indication of your strengths and
weaknesses, they also allow you to obtain bonus points that will be added to your exam. Further
information regarding the MyStatLab system, including login and usage instructions, will be made
available during the first lecture of the block, and the Eleum site.
Part of computing is the use of calculators. In this course, only one, specific calculator is
allowed in exam and quizzes: the Casio FX-82MS or Casio FX-85MS. StudyStore does sell the
proper machine.
1.2 The teaching system
1.2.1 Lectures
During the blocks QM 1 and QM 2, lectures will be given every Monday. There will be a one-hour
lecture in mathematics and a one-hour lecture in statistics. The aim of these lectures is to give a survey
of the subject material of that week. Since one hour is short, that survey will focus on the most
difficult parts of each weeks topic instead of covering all topics. Lectures will be most effective if you
read the relevant chapters in the textbooks in advance: this way, you have the necessary background
knowledge to follow the explanations and examples provided in the lecture.

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At the end of the week, on Thursday or Friday (depending on your study), a second lecture will
be held. In the first weeks, part of that lecture is devoted to computer skills, whilst the main focus will
be on problems that came up during the group meetings. Furthermore, the weeks most tedious
assignments will be elaborated in more detail than is possible during the group meetings.
1.2.2 Group meetings
On Tuesdays or Wednesdays (depending on your study) we will hold tutorial group meetings. The
meetings last for two hours (divided equally between mathematics and statistics), during which the
weekly assignments are discussed. The assignments can be found in Chapter 2 of this manual.
As for most business and economics subjects, the tutorial group of 12 to 14 students is the
central working unit in QM 1. There are, however, some differences between the QM courses and
other courses. The main difference is that the teams work on explicitly given problems (the
assignments). Hence, there is no PBL-like preparatory discussion and brainstorming. The team
members have to solve the assignments individually before the meeting, where they are then discussed
by all. During the discussion, solutions will be compared and evaluated, and difficulties encountered
by individual members may be discussed and clarified. Another difference concerns the role played by
the tutor. This role is more active in QM than is typical for business or economics subjects. Together
with the team the tutor examines the solutions of the assignments and indicates which are correct and
which are incorrect or incomplete. If necessary, i.e. if the team is unable to find a solution, the tutor
will provide help.
In the mathematics part of the tutorial group meetings, we will discuss the so-called selected
exercises listed, per week, in Chapter 2 of this block book. It is absolutely imperative that you prepare
these exercises before every meeting of the tutorial group, even though short answers are provided
either at the end of the textbook (odd numbered exercises) or in this block book (even numbered
exercises). For those who like and/or need even more practice: the book contains a host of other
exercises, and the solutions/answers to the odd numbered exercises are all given at the end of the
book, whilst more elaborate versions of the answers will be provided through Eleum.
Both math and statistics sessions contain two separate sets of exercises: the Homework tasks,
and the Tutorial Group tasks. In statistics, these two types of tasks are mirrored, making use of the
pairing of even and uneven exercises in the textbook: for every uneven numbered exercise in the
textbook, included in the homework section, there is an even numbered exercise covering exactly the
same topic, included in the tutorial group section as discussion task. For math, there is not such strong
tie between individual homework and selected exercises, but still is true that mastery of homework
tasks is the first step to be able to do the group, selected exercises.
So therefore:
Homework tasks prepare the group tasks. Homework tasks are best done in MyMathLab and
MyStatLab. The tools provide you with immediate feedback, give help when needed, collect all types
of tools that can help solving the task, and, not unimportant, you can even achieve some additional
bonus when you do so (they can recover half of the bonus lost in the quizzes by consistently using
MyMathLab and MyStatLab in preparing the homework tasks).
Group tasks to finish the learning cycle in the tutorial group: the Discussion tasks for
statistics, the Selected exercises for math.
There will be two additional tutorial sessions in weeks 5 and 7 (Thursdays or Fridays,
depending on your study). A sample exam is available in the back of this blockbook, that may be
placed on the agenda of those second meetings. Answer keys to the sample exam will be posted in
Eleum, after the tutorial sessions have taken place.
1.3 Examination rules
Your assessment in QM 1 consists of four parts:
1. Three math & statistics quizzes that take place during the block and that allow you to
earn 8 bonus points.
2. A final written test for mathematics and statistics, consisting of 40 multiple-choice
questions and leading to your test score.
3. The computer-skills part, which leads to the mark pass or fail.
4. Presence and participation requirements.

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1.3.1 Part 1: quizzes
In the computer skills sessions of weeks 3, 5, and 7, electronic quizzes in MyMathLab and MyStatLab
will be taken that allow you to earn 8 bonus points. The first two quizzes, one for math and one for
statistics, will be taken in week 3 and are rewarded with one bonus points each. In week 5, the second
quiz for statistics and for math are rewarded with 1.5 bonus points each. In week 7, the last quiz for
statistics and math are again rewarded with 1.5 bonus points each. In total, a maximum of 8 bonus
points may be scored. Some further bonus can be achieved for both mathematics and statistics by
systematically preparing for the tutorial sessions using the MyMathLab and MyStatLab tools: that will
bring you (in case of full preparation) half of the bonus score lost in all quizzes. Total bonus will be
added to your exam score to obtain your final mark. So quizzes, MyMathLab and MyStatLab are a
bonus in the purest sense of the word: you do not lose if you do not participate, or if you perform
badly. However, any points you score may be added to your exam score and will therefore improve
your final grade! That is why we strongly recommend that you participate: experience shows that for a
large share of our students, the bonus points make the difference between passing and failing this
course.
Important: bonus points are valid within the current academic year only. That includes the resit.
But if you fail both QM1 first sit and resit this year, your bonus points are void. However, you will be
able to try and earn bonus points again next year.
1.3.2 Part 2: written test
The written QM tests consist of 20 multiple-choice questions on mathematics (numbered 1 to 20) and
20 multiple-choice questions on statistics (numbered 21 to 40). Your test score will be based on the
number of questions you answer correctly out of the 40 multiple-choice questions. There is one
constraint: you must score at least 9 correct answers for each of the two subjects.
It is sensible to practice old exams in order to gain experience with multiple-choice tests and in
order to determine any weaknesses in your knowledge. You can download old exams from Eleum.
Moreover, we have arranged that the final exam of last year, printed in the last pages of this manual,
can be covered in the extra tutorial sessions of weeks 5, 7.
1.3.3 Part 3: computer skills
Computer skills in QM 1 is tested by preparing the student project, on which you will be working for
several weeks. This student project consists of a statistical analysis of a large data set: your first
empirical research. In order to make up a data set for every student that is worthwhile investigating,
we split the project in two parts: in weeks 1-6, you collect your own data, and in weeks 6-7, you will
perform a statistical analysis of these data. Collecting data is done in several ways, but the most
important part is filling several questionnaires. All questionnaires refer to one topic: you own way of
studying. Once you have filled these questionnaires, we will provide you with data: your own data,
and data summarizing the characteristics of all students. (Everything will be completely anonymous,
of course!) After receiving your data, you can start doing your empirical research. The report of this
research, to be sent in at the end of the examinations week, describes the outcomes of your research.
Computer skills is marked pass or fail. To achieve a pass, you need:
1. to send in all questionnaires, in order to build up a personal data set;
2. to do the two entry tests in week 1, and the two Excel assignments in weeks 2 & 4;
3. make a satisfactory Student Project.
All questionnaires will be taken through the Eleum. Additional information, such as
requirements for the student project report, will be made available via Eleum. With regard to the
questionnaires: since you need to do a proper statistical analysis of your own data, you will benefit
from sending in true, that is real, scores. Fancy data, or even somewhat inaccurate data, will generally
contain all kinds of inconsistencies that make any statistical analysis really awkward. Questionnaire
data will, beyond serving the student projects, be used in anonymous format to improve QM1
education, and in educational research.
1.3.4 Part 4: presence and participation requirements
As in most other blocks, you are required to attend and actively participate in at least 75% of the
tutorial group meetings. In QM 1, we have 9 meetings, so you can miss at most 2 (physically, or
mentally, or both).

9
Active participation is a subjective criterion, and the tutor is responsible for the evaluation of
this part of your grade. However, the most important ingredient of active participation is not your
behaviour during the group meeting, but your preparation before the group meeting, which is easy to
assess in a relatively objective way. In a typical meeting, most of the time one of the students is at the
board explaining to other students how to solve a particular assignment. You wont be able to do so
without having prepared the meeting and without having solved the required assignments at home.
Maybe your solution is not the best one, or even incorrect. That does not make you unprepared: as
long as you can explain how you got there, you and other students can probably learn more from
unsuccessful attempts than from correct solutions. However, if you do not have any solution or do
have a solution but are not capable of explaining how you got there, the tutor will regard you as
unprepared and will mark your participation as insufficient.
The fulfilment of both the presence and the participation requirement is necessary to be
exempted from the block assignment.
1.3.5 Passing QM 1
You must fulfil three conditions to pass the QM 1 block:
1. The mark pass for computer skills.
2. A final score (test score + bonus points) of at least 27 points.
3. A minimum score of 9 correct answers (each) in both the math and the statistics
subsections of the final exam.
4. A pass for presence and participation requirements (or in case you fail the requirement,
a pass for the block assignment that makes it up).
Your final score (test score + any activated bonus points) is then translated to a grade on a scale from 1
to 10 as follows:
Correct answers
Final grade
Min score > 9 Min score s 8
0 10 1 1
11, 12 1 1
13, 14 2 1
15, 16 2 2
17, 18 3 2
19, 20 3 3
21, 22 4 3
23, 24 4 4
25, 26 5 4
27 5 5
28, 29 6 5
30 6 5
31, 32 7 5
33 7 5
34, 35 8 5
36 8 5
37, 38 9
39 9
40 10
A grade of 5 or higher is sufficient.
1.3.6 Re-examination arrangements QM 1
As stipulated in the examination rules, there is a second chance (a.k.a. resit) for each QM exam. Resits
always take place at the end of the block period following the first test. For instance, the resit for QM
1 comes at the end of block 2. According to examination rules, you cannot participate the resit if you
got a passing mark already in the first sit.
Your final score after the resit will be calculated as your highest test score (first test or resit)
including the bonus points you earned during the block. Remember that your final score will only be
translated into a grade if you fulfilled the computer skills requirement as well. (However, there is no

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required chronological order in which you have to complete the requirements. Your final grade
remains on hold until everything else has been completed.)
The resit for computer skills in QM 1 consists of making an individual version of the student
project report and hand it in as a resit.
1.3.7 Test strategy
The mathematics and statistics tests consist of multiple-choice questions (with four alternative answer
choices). No books or notes of any kind may be used. Tables, a list of important formulas, scrap paper,
and answer forms will be provided together with the test itself. You will need a pencil and you may
use a pocket calculator of the type Casio FX-82MS or Casio FX-85MS (no other calculators will
be allowed). The use of a pocket computer or a mobile phone during the exam is strictly forbidden
and will be considered as fraudulent. (For further information, cf. the examination rules.) Note that the
exam wardens may bring detection equipment to bear to be on the safe side, it is best not to bring
appliances that are prohibited.
In multiple-choice testing, you are meant to form a judgment on every single question, and to
mark the best answer in each case. Your test score is simply the number of correctly marked answers.
That is why it is never a good idea to leave a question unanswered. Tactically speaking, it is best
always to select one (and only one) answer, even if you have to make a guess. Furthermore, there is
always exactly one correct answer. Should you indicate more than one answer for the same question,
then all your answers to that question will be ignored. Therefore it would be wise to use a pencil to
mark your answers; this way, you will be able to change your answer if you change your mind.
It is useful to reflect upon the multiple-choice situation. A number of answers (usually four) is
proposed for each question. Of these answers, one and one only is correct. The others are called
distracters: they are incorrect but correspond to possible and maybe even attractive mistakes. It is
very pleasant when your reasoning and/or calculation leads you immediately to one of the proposed
answers. But be careful: test writers have some experience in accounting for all sorts of popular
mistakes. The wrong answers are not totally innocent. You may have found the correct answer, but
you may also have been attracted by a more or less subtle distracter. This happens often when a
student attempts to reason backwards from the answers to the question, which is why you are advised
not to do so. Reasoning forward and thinking twice is no luxury!
When the answers are numerical it may well happen that your solution corresponds to none of
the proposed answers. What next? Re-do your reasoning and your calculation. Most probably you
have made an error that was not anticipated by the test designer. It is indeed not feasible to foresee all
possible reasoning mistakes, and even less practicable to simulate all possible calculation errors. Look
at the up side: this helps you to eliminate all sorts of non-essential mistakes, including calculation
errors, before you select an answer. Ready-made answers are not only a convenience (for students and
graders alike); they are also a sort of sieve for many errors. Use it as such by subjecting your own
solution to this verification. If you dont find your solution among the proposed answers, dont go
straight for a guess. Rather, try to find and correct the mistake.
Another quandary you may find yourself in, especially with non-numerical questions, is when
more than one answer look correct to you. Again, dont go straight for a guess. Exclude carefully as
many alternatives as possible, this will improve your odds. Look for the differences between the
remaining answers, there the knot must be. Reason forward: how would you have expressed it
yourself? Again, you are more likely to be tempted by a subtle distracter if you are trying to reason
backward from the answers. So avoid that!
In the end, if you really cannot identify a single answer as the only correct one, choose and mark
one answer that, to the best of your insight, is at least as good as all the others.
A few final tips
In the textbooks exercises and problems are arranged by chapter and even by section. In the tests this
is obviously not the case. That is why tests are more difficult than weekly assignments, even if the
questions are quite comparable. The aim of your study must be to master the subject matter as a whole,
so that you can find your way in it and so that you see the connections between its various parts.
Otherwise your knowledge will be of no help to solve the business or economic problems you will
encounter later in your career.
We provide real tests from previous years in Eleum, and one in the back of this blockbook.
These tests are representative of the way you will be tested in and of the level of difficulty you may
expect. They are good material for practice provided you really simulate the circumstances of a test:

11
answer all questions in one go, time yourself and do not use any books or notes until you have
finished the exam. Study associations provide exam training for all that are interested during the last
weeks of each block.
1.4 Organization
Three lecturers are working in block QM 1, one each for mathematics, statistics, & recap, with one of
the lecturers serving as the contact person for general problems (the coordinator). Each of the lecturers
can be contacted with problems and comments regarding his subject.
Statistics & Coordinator Dirk Tempelaar d.tempelaar@maastrichtuniversity.nl
Mathematics Stan van Hoesel s.vanhoesel@maastrichtuniversity.nl
Recap Lutz Krebs lutz.krebs@maastrichtuniversity.nl
1.5 The weekly cycle
In the following we provide a suggestion on how to structure your weekly learning activities in order
to help you benefit as much as possible from this course. However, since learning styles and
background knowledge differ greatly between individuals, this schedule should only be considered as
an indication.
1.5.1 Literature and lecture
We strongly recommend that you turn to the weekly literature before the Monday lecture. The lecture
is not a summary of the literature; instead it focuses only on the some key concepts. If you have not
had a first look at the literature before the lecture, you may not be able to follow the deliberations and
they will certainly not be as useful. Also, it is often beneficial to go back to the literature to reread the
problematic sections after the lecture in order to deepen your understanding of them.
1.5.2 Preparation
Once you feel confident with the weekly topics, it is time to put your knowledge to practice by
preparing the selected exercises for mathematics and the homework tasks for statistics. Remember that
you are not per se required to find the perfect solution. If you get stuck with any particular problem, be
sure to verbalize your difficulties and bring them to the group meeting for discussion.
1.5.3 Project
The project consists of two parts: gathering data, by answering several questionnaires early in the
block, and analysing these data, and their relationship to data of other students, in weeks 6-7. The type
of data analysis expected from you, and the Excel commands you need for them, are described in the
Excel appendices of the several chapters. The computing skills session in week 6 is reserved for it.
1.5.4 Tutorial group meeting
Here, you will have the opportunity to discuss any difficulties you may have had with your fellow
group members and your tutor. This is the best time to ask any questions! While you will be evaluated
for your participation (and your presence), this should not keep you from speaking up about any
problems. On the contrary: you and your fellow students can learn more from a discussion of
challenging issues than from a simple presentation of correct answers. As indicated, group meetings
need to be prepared, as a kind of individual prediscussion of the relevant tasks. For Math and Stats, it
is solving the Homework tasks, preferably in the MyLab learning environments.
1.5.5 Quizzes
Three times during the block, quizzes will be offered as a self-assessment measure and as a way to
score bonus points. The quizzes are not obligatory and you may skip the meetings during which they
are administered. Quizzes allow you to check whether you have fully understood the subjects of the
previous weeks, and the bonus points you score will be added to your exam score to raise your grade.
1.5.6 The Thursday/Friday Recap lecture
Finally, the weekly cycle is concluded with a final lecture, during which the most challenging items of
the week will be discussed again. Topics on the agenda are to a great extent determined by students:
you can send in proposals for difficulties to be tackled in the Recap lecture.

12
1.6 Block schedule
Week Mathematics Statistics Computer Skills

1
Sections 4.1 4.10
Definition of a function, graph of a
function, linear and quadratic functions,
general polynomials and rational
functions, power functions, exponential
and logarithmic functions
Chapter 1
Statistics and Variation
Chapter 2
Data
Chapter 3
Surveys and Sampling
CS group session:
Math & Stats entry tests
Recap Lecture
Project
Questionnaire 1 to be handed in the
weekend (+entry tests)

2
Sections 5.1 5.5
Manipulating graphs and the inverse
function, graph of an equation, graph of
a function, piecewise defined functions,
distance, equation of a circle, ellipses,
hyperbola
Chapter 4
Displaying and Describing
Categorical Data

CS Group session
First Excel assignment
Recap Lecture
Project
weekend (+ Excel assignment)

3
Sections 6.1 6.9
Introduction to differential calculus,
rules for differentiation, a.o. the chain
rule and higher derivatives

Chapter 5
Displaying and Describing
Quantitative Data

CS Group session
First Quiz for Mathematics and
Statistics, taken in MML/MSL
Recap Lecture
Project
Questionnaire 3 to be handed in

4
Sections 6.10 6.11
Derivatives of exponential and
logarithmic functions
Sections 7.1 7.4
Implicit differentiation, derivative of
inverse, approximation
Section 7.7
Elasticity
Chapter 7
Randomness and Probability
Chapter 8
Random Variables and Probability
Models l

CS Group session
Second Excel assignment
Recap Lecture
Project
weekend (+ Excel assignment)

5
Sections 8.1 8.3
First-derivative test for
maximum/minimum and economic
examples
Section 8.4 until The mean-value
theorem
Extreme-value theorem
Sections 8.5 8.7
Further economic examples, second-
derivative test, inflection points
Chapter 9
The Normal Distribution
Chapter 10
Sampling Distributions
CS Group session
Second Quiz for Mathematics and
Recap Lecture
Project
Questionnaire 5 to be handed in.

6
Sections 11.1 11.3
Dependent and independent variables,
Cobb-Douglas functions, domain of a
function of two variables, partial
derivatives of a function of two
variables, higher order partial
derivatives, graph of a function of two
variables, level curves, isoquants of a
production function, geometric
interpretation of partial derivatives
Sections 11.7 11.8
Marginal products, complementarity of
input factors, Partial elasticitys
Chapter 11
Confidence Intervals for
Proportions
Chapter 12
Confidence Intervals for Means
CS Group session
Student Project
Recap Lecture
Project
weekend

7

Section 13.1 13.5
Unconstrained optimization, stationary
points, first and second order conditions
for an optimum, convexity/concavity of
a function of two variables, local
optima, saddle points, economic
applications: discriminating monopolist,
linear regression, extreme value theorem
Chapter 13
Testing Hypotheses

CS Group session
Third Quiz for Mathematics and
Recap Lecture
Hand in your project at latest
October, Sunday 20 through
Eleum

13
2 Weekly Assignments
2.0 Week 0: what you should do before starting
It is wise to prepare your personal computer/laptop for studying QM before week 1 starts, since you
will find such personal computing environment to be crucial in the next seven weeks.
- Excel
You will need to use it a lot in several courses of the first year. Convince yourself that it is
available on your private pc, preferably Excel 2010, and preferably the English version! Excel
commands in the English, Dutch and German versions of Excel are really different, so you will
find it troublesome to work with different language versions at different places. Realize that in the
Library, and in the SBE, all software is English based. (One can achieve student licenses for the
Office 2010 product, to which Excel belongs, at https://www.surfspot.nl/.)
- Excel add-ins Analysis Toolpak and Analysis Toolpak-VBA
These additional statistical features of Excel are part of Excel itself, but need to be activated. You
do so by opening Excel; in the File-menu, select Options; click Add-Inns, and in the Manage box,
select Excel Add-Inn, and click Go; in the Add-Ins available box, check Analysis Toolpak and
Analysis Toolpak-VBA, and click OK. As a result, you will find a new group called Data Analysis
in the Data ribbon.
- Additional statistical add-ins: PHSTAT, DDXL, XLSTAT,
Since Excel is a very all round program, you will experience that it has limitations in some more
applications. Dedicated statistical add-ins offer help in these cases. There are many around, and
most have very similar capabilities. One that comes with the textbook is XLSTAT (but, as
indicated, we found it not easy to install). Two other add-ins are available through Eleum, together
with installation instructions: PHSTAT and DDXL (last one is not compatible with Apple
computers). But you may have your own favourite. Please install one on your own computer to be
ready to do any statistical analysis.
- MyMathLabGlobal & MyStatLab
The publisher of the math, statistics and marketing textbooks, Pearson, has created one registration
site for all three MyLabs: www.pearsoned.co.uk/maastrichtsbe. Preferably, please register through
that site, and ignore the next two bullet points, which refer to the situation of separate registration
to all three MyLabs. Please prepare your MyLab accounts in time, so that you are ready to start in
week 1 (or before using the summer course materials to refresh your math mastery).
- MyStatLab
Your textbook should come with a so-called MyMathLabGlobal Student Access Kit. To prepare
your account, you need your access code, which is in the card in your book, and the course code:
tempelaar01647, with internet access at http://www.mystatlab.com/. Choose Buy now or
use your Access Code to register and establish a Login Name and Password.
- MyMathLabGlobal
Your textbook should come with a so-called MyMathLabGlobal Student Access Kit. To prepare
your account, you need your access code, which is in the card in your book, and the course code:
XL00-B1HG-501Z-6T24, with internet access at http://global.mymathlabglobal.com/.
Before starting with the course Quantitative Methods 1, we have run the SBE Math Summer Course in
which about 200 of you have participated. The summer course refreshes material from high school
programs, mainly the junior phase of high school (first three years). It is our experience that many
students lack essential knowledge and skills in basic algebraic operations as solving quadratic
equations, calculating the ratio of numbers, manipulating with logs and exponentials. In the same
MyMathLab tool as we will use the next seven weeks, the participants of the summer course practiced
these basic algebraic skills. If you missed the summer course but better had not missed it: the materials
are still available in MML, as 50 HomeWork lessons all labelled SC*****. So better give them a try to
be fully prepared.
14
2.1 Week 1

Mathematics Statistics Computer Skills

Sections 4.1 4.10
Definition of a function, graph of a
function, linear and quadratic functions,
general polynomials and rational
functions, power functions, exponential
and logarithmic functions
Chapter 1
Statistics and Variation
Chapter 2
Data
Chapter 3
Surveys and Sampling

CS group session:
Math & Stats entry test
Recap Lecture
Project
weekend (+entry tests)

2.1.1 Statistics
Literature: Sharpe et. al. Ch. 1, 2, & 3

Homework tasks (solve outside group, preferably in MyStatLab, and check your answers):
Chapter 2: exercises 1, 3, 5, 10, 20, 27, 29, 31, & 33;
Chapter 3: exercises 1, 2, 3, 6, 7, 8, 9, 11, 13, 14, 15, 16, 17, 19, 23, 35, 39, & 49.

Discussion tasks (for discussion in tutorial group meeting, no preparation needed):
Chapter 2: exercises 2, 4, 6, 13, 24, 28, 32, & 34;
Chapter 3: exercises 4, 5, 10, 12, 20, 24, 33, 41, & 46.

2.1.2 Mathematics

Homework tasks in MyMathLab on the subjects:
Chapter 4:
- Sections 4.1 - 4.10 (quick rehearsal): definition of a function, graph of a function, linear and
quadratic functions, general polynomials and rational functions, power functions, exponential
and logarithmic functions.

Selected exercises for tutorial group session:
Section 4.2: Problem 14
Section 4.8: Problems 1 and 4
Section 4.10: Problems 3(a)(b)(c), 4 and 7
Review problems 10 and 18
Extra exercise

15
Extra exercises
(A) Application
McDonalds faces a weekly demand for hamburgers depending on the price. One franchisee
collected the following two observations concerning this dependency: if the price is p = 3.00 euros,
then the demand turns out to be q = 50 hamburgers and at a price of p = 1.50 euros demand is q =
125.
Assume that price and demand have a linear relation, and that each week, the franchisee can
always produce and sell exactly the demanded quantity. Besides, the franchisee has to take account of
fixed costs to the amount of 100 euros per week and so-called variable costs to the amount of 0.60
euros per hat. Suppose, that the company has 50 operating weeks per year.
(a) Determine the revenue R(q) and the profit W(q) in euros per week as functions of q.
(b) At which q does the weekly profit attain its maximum? What is this profit? What is the yearly
profit?

Assume that the manufacturer wants to extend his factory as soon as possible. At this moment,
January 1, 2006, the necessary investment for the desired extension would amount to 4000 euros, and
the manufacturer can only reserve half of one year profit at that moment. However, the costs of the
extension will rise at 2% per year. On the other hand the reserved amount is saved on an account with
a yearly interest of 9%.
(c) In which year can the restaurant be extended?
(d) Assume that the government puts an environmental tax on the paper-wraps around
hamburgers to the amount of 0.04 euros per hamburger. How does this change the situation?

(B)
x
e x f y = = ) ( . For which value of x is f(x) = 10? For which value of x is f(x) = y?
Sketch in one picture the graphs of
x
e x f = ) ( , g(x) = ln x and h(x) = x.
In general: whether f(x) = y can be solved w.r.t. x depends on f and y.
When can this solution x be considered as a function of y?

(C) Determine the slope of the lines through P and Q in the following cases:
P Q
(2,3) (2.1, 3.2)
(2,3) ) 3 , 2 ( y x A + A +
(x,y) (a,b)
) , (
1 1
y x ) , (
2 2
y x

Only linear functions have an equal slope at each point in the domain.
Let x x x C + =
2
10
1
) ( be the cost function of a firm producing quantity x of some product. Sketch
the graph of C and estimate the slope of the tangent line at the point of the graph with x = 3. The same
for x = 6.
Determine the additional cost at a production quantity x = 4 compared to x = 3. The same for x
= 3.5, x = 3.2, x = 3.1 (compared to x = 3). Try to get a feeling for what happens if we take x ever
closer to 3, in the graph as wel as in the formula and the numerical results.

16
Remark concerning Plotting Graphs
Most graphs, that will be considered, can easily be sketched by hand. However, if you are
familiar with a graphic calculator, then you could use it, of course. Besides, you may use computer
programs for plotting graphs. If you are used to work with Microsoft's EXCEL for example, then you
may try to plot the graphs with it, although this way is rather cumbersome. Another program, that
simulates a graphic calculator on a computer, is TI-Interactive!, edited by Texas Instruments and easy
to use. A free 30 days trial version can be found on the site
http://education.ti.com/product/software/tii/down/download.html
A better option is probably a really free program, called GraphCalc, which can be found at the
site www.graphcalc.com : go to the download page and choose version 3.1b for regular users.
Although it is very easy to use, it has an extensive help function. If you want to plot for example the
function
1
1
2
) (

=
x
x f
you simply click on the sheet labelled Graph 1 and choose under the menu 2D Graph the
option Equations .... Once you have done that you can e.g. tick the box y3 and type 1/x^2-1 in the
corresponding display. After (optionally) adjusting the Range&Precision you can click on OK and
graphcalc will plot the graph for you. The result looks as follows.

17
2.2 Week 2

Sections 5.1 5.5
Manipulating graphs and the inverse
function, graph of an equation, graph of
a function, piecewise defined functions,
distance, equation of a circle, ellipses,
hyperbola
Chapter 4
Displaying and Describing Categorical
Data

Group session
First Excel Assignment
Recap Lecture
Project
weekend (+ Excel assignment if not yet)

2.2.1 Statistics
Literature: Sharpe et. al. Ch. 4

Chapter 4: exercises 1, 3, 5, 7, 9, 15, 19, 23, 29, 31, 36, 47, 51, & 53;

Chapter 4: exercises 16, 18, 27, 28, 30, 32, 41, 50, & 54.

2.2.2 Mathematics

Chapter 5:
- Sections 5.1-5.3: manipulating graphs and the inverse function.
- Section 5.4: graph of an equation, graph of a function, piecewise defined functions.
- Section 5.5: distance, equation of a circle, ellipses, hyperbola.

Section 5.5: Problems 2, 4 and 5(a)
Review problems Chapter 5: 10
Extra exercises

18
Extra exercises
(A) Application
In inventory management the central problem is to find the optimal order strategy. As an
example, we consider an inventory model for a VW car dealer selling only Golf.
In order to get a model, that can be analysed mathematically in a rather simple way, we assume
the following:
- Cars are sold at a constant rate over the year. For example: if demand is 100 per year and a
year has 250 working-days, then each 2.5 working-days a car is sold.
- Ordering takes place in equal quantities q equally distributed over the year.
- Ordered cars arrive at the moment that the inventory is depleted.
- The total demand during one year is constant equal to D.
- The cost for keeping in stock one car for a whole year is equal to a fixed percentage R of the
value of the car.
- The value of a car is W.
- The cost per order for the car dealer is B.
Try to find the optimal order strategy. You may start with a numerical example: take e.g. D = 50, R =
4%, W = 25000 and B = 250. Choose an obvious variable, e.g. the order quantity q and express the
total cost-function as a function of q. Make use of the graph of the total cost-function in order to get
an idea where the optimal value could be found. Think about how to use derivatives to determine the
optimal order quantity.
(B) Consider the function . 9 6 ) (
2 3
x x x x f + =
Sketch in one picture the graphs of f, f and f, where f is the derivative of f. What can you
from the graph of f for the behaviour of f and from the graphs of f and f for the behaviour of f?

19
2.3 Week 3

Sections 6.1 6.9
Introduction to differential calculus,
rules for differentiation, a.o. the chain
rule and higher derivatives

Chapter 5
Displaying and Describing Quantitative
Data

Group session
First Quiz for Mathematics and
Recap Lecture
Project
weekend

2.3.1 Statistics

Chapter 5: exercises 1, 3, 5, 7, 9, 11, 15, 18, 19, 22, 27, 33, 35, 41, 49, 51, 68, & 71;

Chapter 5: exercises 10, 13, 17, 26, 34, 36, 42, 48, 50, 53, 54, 58, 73, 75, & 76.

2.3.2 Mathematics

Chapter 6:
- Sections 6.1-6.6: introduction to differential calculus. Remark concerning Section 6.3: in order
to understand the meaning of :, and read Section 3.4 pages 61 to 63 until Solving
Equations.
- Sections 6.7-6.9: rules for differentiation, a.o. the chain rule, and higher derivatives.

Section 6.7: Problems 3(b)(c)(g)(h), and 9(a)(b)
Section 6.9: Problems 3(a)(c)(d) and 6
Extra exercise

20
Extra exercise
Application: Logistic growth
The growth of customer satisfaction or the sales of a new product on a market is often
graphically similar to an S-shaped curve. Such a curve can very well be described by a so-called
logistic function, this is a function V of time t of the following form:

rt
Ae
K
t V

+
=
1
) (
where K, A and r are positive constants. If t becomes bigger and bigger (approaches infinity), then
V(t) will approach K, the so-called saturation level. Shortly:
. ) ( lim K t V
t
=

Suppose for example that we consider a dealer of Airbus. V(t) is the number of A380 jumbos,
sold per week, t months after the introduction on time t = 0. Suppose further, that the weekly sales at t
= 0 are equal to 2 machines and after 2 months 6 machines. Let the saturation level be 12 machines
per week.
(a) Determine for this example te values of K, A and r.
(b) At which time weekly sales will be exactly 9 machines?
(c) Show, using the derivative, that sales are an increasing function of t.
(d) Can you find the moment where the sales have the fastest growth?
(e) Sketch the graph of the function.
(f) Answer the questions (c) and (d) for the general function as given in formula (*).

Answers to selected, even-numbered exercises
Section 6.2:
Problem 2: (a) , 2 6 ) ( ' + = x x f (b) . 1 2 = x y
Problem 4:
) (
1
) ( ) ( ) (
1 1
) ( ) (
h x x
h
h x x
h
h
h x x
h x
h x x
x
h
x h x
h
x f h x f
+
=
+
=
+
+
+
=
+
=
+

Section 6.6:
Problem 4: (a) r t 8 , (b) (c)
2 / 7
2
5

A .
Section 6.7:
Problem 8: f increasing in ], 1 , ( in , and in
). , 3 2 ( +
Section 6.8:
Problem 2: (a) , ) 1 ( 15 /
4 3
3
1
2
+ = t t dt dY (b) . ) ( /
1
+ =
a
c bt Aab dt dK
Section 6.9:
Problem 6: . ) 1 2 ( 3
2 / 5
t

,
) 1 4 (
) 1 )( 1 ( 3
) ( '
2 2
+ +
+
=
x x
x x
x f ) 3 2 , 1 [ +

21
2.4 Week 4

Sections 6.10 6.11
Derivatives of exponential and
logarithmic functions
Sections 7.1 7.4
Implicit differentiation, derivative of
inverse, approximation
Section 7.7
Elasticity
Chapter 7
Randomness and Probability
Chapter 8
Random Variables and Probability
Models l

Group session
Second Excel Assignment
Recap Lecture
Project
weekend (+ Excel assignment if not yet)

2.4.1 Statistics
Literature: Sharpe et. al. Ch. 7, 8

Chapter 7: exercises 1, 3, 5, 7, 9, 11, 19, 23, 25, 33, 39, 57, & 59;
Chapter 8: exercises 1, 2, 3, 5, 9, 13, 14, 15, 16, 17, 21, 33, 37, 41, 46, 49, & 55;

Chapter 7: exercises 2, 4, 6, 8, 10, 12, 16, 17, 20, 36, 38, 50, & 60;
Chapter 8: exercises 4, 8, 10, 19, 20, 34, 38, 42, 45, & 56.

2.4.2 Mathematics

Chapter 6:
- Sections 6.10 and 6.11: derivatives of exponential and logarithmic functions.
Chapter 7:
- Section 7.1: implicit differentiation of functions of one variable, first and second derivatives.
- Section 7.3: differentiating the inverse function.
- Section 7.4: linear approximation.
- Section 7.7: elasticity.

Review Problems for Chapter 6: 15(b)(c)
Section 7.1: Problems 3(a) and 6(b)(c)
Section 7.7: Problems 4(b)(c) and 6

22
2.5 Week 5

Sections 8.1 8.3
First-derivative test for
maximum/minimum and economic
examples
Section 8.4 until The mean-value
theorem
Extreme-value theorem
Sections 8.5 8.7
Further economic examples, second-
derivative test, inflection points
Chapter 9
The Normal Distribution
Chapter 10
Sampling Distributions

Group session
Second Quiz for Mathematics and
Recap Lecture
Project
weekend

This week, we will have 2 tutorial sessions: one Tuesday/Wednesday, one Thursday/Friday! In the
back of this blockbook, an old exam is included; it may be attractive to devote some time (this week
and in week 7) to discuss it, to get acquainted with the way of testing.

2.5.1 Statistics

Chapter 9: exercises 2, 3, 7, 9, 11, 13, 15, 17, 19, 21, 25, 27, 31, 33, 37, 43, 45, & 52;
Chapter 10: exercises 1, 3, 5, 7, 9, 12, 13, 25, 29, 37, 43, & 49;

Chapter 10: exercises 2, 4, 6, 8, 11, 14, 16, 19, 23, 41, 42, & 44.

2.5.2 Mathematics

Chapter 8:
- Sections 8.1-8.3: first-derivative test for maximum/minimum and economic examples.
- Section 8.4 until The mean-value theorem: extreme-value theorem.
- Sections 8.5-8.7: further economic examples, second-derivative test, inflection points.

Section 8.6: Problems 2, 4 and 6
Review Problems: 2 and 7
Extra exercises

23
Guidelines for reading
1. In lines 8-9 of Example 1 (Section 8.5, page 274) the claim is that t has a maximum value.
This is a consequence of Theorem 8.4.1 on page 268.
2. Page 276, line 5: this is again a consequence of Theorem 8.4.1.

Extra exercises
(A) Problem 10 in Section 8.2.
(B) Application
A farmer uses land (K) and labour (L) to produce wheat (Q), according to the production
function . ) , (
3
2
3
1
L K L K Q Q = =
Note that this is a function of two variables. Such functions will be studied next week but for
the moment we hope that you understand what is meant. For instance, if the farmer uses 8 units of
land (K = 8) and 27 units of labour (L = 27) then he produces
18 27 8 ) 27 , 8 (
3
2
3
1
= = = Q Q units of wheat.
The farmer wishes to maximize the produced amount of wheat by investing in an appropriate
mix of land and labour. The cost of land is 2 per unit and the cost of labour is 1 per unit. The farmer
wants to invest a total amount of 4. How much land and how much labour should the farmer use, and
how much wheat will he produce? We will solve this problem in a number of ways, using the
techniques of Chapter 8.
(a) Although there are two variables to be decided upon, the whole problem can be formulated as
a maximization problem with only one variable, namely L or K. Show this: determine the
function to be maximized, including its domain.
(b) Solve the problem of part (a) by only using information provided by the first derivative.
(c) Solve the problem of part (a) by also using the second derivative.
(d) Solve the problem of part (a) by using Theorem 8.2.2.

24
2.6 Week 6

Sections 11.1 11.3
Dependent and independent variables,
Cobb-Douglas functions, domain of a
function of two variables, partial
derivatives of a function of two
variables, higher order partial
derivatives, graph of a function of two
variables, level curves, isoquants of a
production function, geometric
interpretation of partial derivatives
Sections 11.7 11.8
Marginal products, complementarity of
input factors, partial elasticities.
Chapter 11
Confidence Intervals for Proportions
Chapter 12
Confidence Intervals for Means
Group session
Student Project
Recap Lecture
Project
weekend

2.6.1 Statistics

Chapter 12: exercises 1, 3, 5, 7, 9, 11, 17, 21, 29, & 35;

Chapter 11: exercises 2, 4, 8, 10, 18, 19, 20, & 54;
Chapter 12: exercises 2, 4, 6, 8, 10, 12, 20, 22, 26, & 40.

2.6.2 Mathematics
Chapter 11:
- Section 11.1: dependent and independent variables, Cobb-Douglas functions, domain of a
function of two variables.
- Section 11.2: partial derivatives of a function of two variables, higher order partial derivatives.
- Section 11.3: graph of a function of two variables, level curves, isoquants of a production
function, geometric interpretation of partial derivatives.
- Section 11.7: marginal products, complementarity of input factors.
- Section 11.8: partial elasticitys.

Section 11.2: Problems 4(a)(c)(d)(f) and 6
Review problems Chapter 11: 3, 7(a)(c) and 13(b)(d)
Extra exercise

25
- Section 11.1. If you want to get some intuition of what a partial derivative actually represents,
read Example 4 on page 371 carefully.
- Section 11.2 The part on the formal definition of partial derivatives on pages 375 and 376 is
optional, except the boxed remarks numbered (6).
- For basically all functions f you will encounter the next few years it holds that
.
2 2
x y
f
y x
f
c c
c
=
c c
c

This is usually a convenient double check for any errors in your calculations of second order
derivatives.
- If you want to get a feeling for 2D and 3D plots of functions or equations of one or two
variables you are of course allowed to use your graphical calculator if you have one, or a
computer program like GraphCalc. See the remark in week 1 about the use of this program for
graphs of functions of 1 variable. For 2 variable functions plotting a graph is equally easy. Just
go to the window 3D Graph and enter a function of x and y, in the Equations ... submenu of 3D
Graph. For example, if you want to plot , ) , (
2 2
y x y x f + = then after entering the function and
adjusting some options you may find the following picture:

- Sections 11.7 and 11.8. In these sections you'll encounter partial derivatives of functions of
more than two variables. The only thing you have to remember for these cases is that
everything you learned for two variables translates directly to higher dimensions as well. So,
for example the partial derivative
y
f
c
c
of a function y z x z y x z y x f + + =
2 3 2
) , , ( to y can simply
be computed by considering x and z as constants and taking the derivative to y as usual. The
result is . 1 3 ) , , (
2 2
+ =
c
c
z y x z y x
y
f

26
Extra exercise
Consider a company that produces gadgets (G) using the production factors blood (B), sweat (S)
and tears (T) according to the production function
G(B,S,T)=BS + BT + ST.
1. What happens if the input (B,S,T) of production factors doubles? What if it increases with a
factor t > 0 from (B,S,T) to (tB,tS,tT)?
2. Compute the marginal products
S B
G G ' , ' and . '
T
G
3. Compute the corresponding elasticitys G El G El
S B
, and . G El
T

4. Compute ). 1 , 1 , 1 ( G El
S
How can you interpret the value of this partial elasticity?
5. Compute G(1,1,1)and G(1,1.03,1). How can you connect these values to the elasticity you
found in (4)?
6. Show that the sum of the elasticitys you computed in (3) equals 2 (which happens to be the
exponent of the increase of production you found in (1). This result is due to Leonhard Euler
(1707 - 1783)).

27
2.7 Week 7

Section 13.1 13.5
Unconstrained optimization, stationary
points, first and second order
conditions for an optimum,
convexity/concavity of a function of
two variables, local optima, saddle
points, economic applications:
discriminating monopolist, linear
regression, extreme value theorem

Chapter 13
Testing Hypotheses

Group session
Third Quiz for Mathematics and
Recap Lecture
Project Hand in your project at latest
October, Sunday 20 through Eleum,
Safe Assignment

This week, we will have 2 tutorial sessions: one Tuesday/Wednesday, one Thursday/Friday! In the
back of this blockbook, an old exam is included; it may be attractive to devote some time to discuss it,
to get acquainted with the way of testing.

2.7.1 Statistics

Chapter 13: exercises 1, 3, 5, 7, 9, 11, 13, 15, 17, 19, 21, 23, 25, 27, 41, 43, 47, 48, 55 & 71.

Chapter 13: exercises 2, 4, 6, 8, 10, 12, 14, 16, 18, 20, 22, 24, 26, 28, 42, 44, 46, 56, 70 & 72.

2.7.2 Mathematics

Chapter 13:
- Sections 13.1 and 13.2: unconstrained optimization, stationary points, first and second order
conditions for an optimum, convexity/concavity of a function of two variables.
- Section 13.3: local optima, saddle points.
- Section 13.4: economic applications: discriminating monopolist, linear regression.
- Section 13.5: Extreme-value theorem, optimization of a differentiable function over a compact
domain.

Section 13.2: Problems 2, 3, 5 and 8
Section 13.4: Problems 2(a)(b) and 5
Section 13.5: Problems 2 en 6
Review problems Chapter 13: 4(a)(b), 7, 9 and 10
Extra exercise

28
1. The proof on page 465 in section 13.3 concerning the second-order derivative test is optional.
(It is a good test for your intuition though to see if you can understand the arguments used in
the proof.)
2. Skip Example 4 in section 13.4. Though linear regression is a very useful example of the
optimization techniques you just learned, it has not yet been treated in the statistics part of this
course.
3. Notice that, like with the theory from Sections 13.1 and 13.2, and in contrast with the second-order
techniques from Section 13.3, the extreme value theorem enables you to find global extrema instead of
local ones.

Quantitative Methods I, EBC1005/1006/1007, 2012/2013, first sit Mathematics part, version A

1. What is the inverse of the function ()
for ?
a)
() ( )( )
b)
()

c)
()

d)
()

2. What is the domain of the function ()
?
a)
b) but
c)
d) or

3. The average price of a book is 25 euros at a certain bookstore, and it increases exponentially with 6%
during every year. When is the average price going to reach 35 euros?
a) in less than 4 years
b) between 4 and 5 years
c) between 5 and 6 years
d) more than 6 years

4. What is the derivative of ()
?
a)

b)

c) (

d)

5. The function ()
is
a) decreasing and convex on the interval [0,4]
b) increasing and convex on the interval [0,4]
c) decreasing and concave on the interval [0,4]
d) increasing and concave on the interval [0,4]

6. What is the elasticity
() of the function () () at
?
a) 1.5
b) 2
c) 0
d) -2.5

7. The level curves of the function ( )
are
a) parabolas
b) straight lines with slope -2
c) circles with center (-1,0)
d) circles with center (1,0)


8. What is the slope of the tangent line to the curve () at the point (
) ?
a) -3
b) 4
c) 0
d)

9. The function ( ) (
) has
a) 3 stationary points
b) 2 stationary points
c) 1 stationary point
d) no stationary points

10. Which ( ) minimizes ( ) given ?
a) and
b) and
c) and
d) none of the above

11. The second order partial derivative
( ) of the function ( )
is
a)

b)

c)

d)

12. What are the inflection points of the function ()

a)
b) and
c)
d) and

13. The function ()
() , where , has
a) 2 local maximum points
b) 1 local minimum point and no local maximum point
c) 1 local maximum point and no local minimum point
d) 1 local maximum point and 1 local minimum point

14. Consider the function ()
. For which case below is it true that has a

maximum at ?
a) and
b) and
c) and
d) and


15. Consider a differentiable function () for positive values of . Let
() denote the elasticity of . Now

let () (). What do you know about the elasticity
() of ?
a)
()
()
b)
()
()
c)
()
()
d)
()
()

16. Consider the equation ( )( ) . Suppose that the point (2,6) is on the curve
corresponding to this equation. What is the speed of increase of at this point?
a)
b)
c) -2
d) -1

17. The function ()
()
is defined for every
a) and
b) and
c)
d)

18. Consider the function ( ) . Which is true?
a) The point (3,2) is on the level curve ( ) and has a stationary point on this level curve.
b) The point (3,2) is not on the level curve ( ) and has a stationary point on this level
curve.
c) The point (3,2) is on the level curve ( ) and has no stationary point on this level curve.
d) The point (3,2) is not on the level curve ( ) and has no stationary point on this level
curve.

19. Consider the function ( )
. Which case below describes all points ( ) for which the

equality
( )
( ) holds?
a) or
b) or
c)
d) .

20. A manager has to distribute 20 tasks to 2 machines. If he sends jobs to the first machine and jobs to the
second machine, then his utility is . Each job has to be sent to exactly one of the machines.
What is the optimal choice of the manager if he wants to maximize the utility?
a) and
b) and
c) and
d) none of the above.
Quantitative Methods I, EBC1005/1006/1007, 2012/2013, first sit Statistics part, version A

21. Which of the following is the best description of a systematic random sample?
A) A sample chosen in such a way that every possible sample of a given size has an equal chance to be the
sample.
B) After a population is separated into distinct groups, one or more of these groups are randomly selected
in their entirety to be the sample.
C) Select a sample in such a way that the proportion of some variables thought to impact the response is
approximately the same in the sample as in the population.
D) A value is randomly selected from an ordered list and then every n
th
value in the list after that first
value is selected for the sample.

22. A local park district is planning to build a recreation center. The park
district conducted a poll to find out the types of physical activities the local
population would be interested in. The poll was based on telephone
responses from 1013 randomly selected adults. The table shows the
percentages of people who expressed interest in various activities. Which
of the following displays is/are appropriate for these data? (More than one
display may be appropriate.)

A) I B) II C) I, II D) I, II, III

23. Three statistics classes (50 students each) took the same test. Shown below are histograms of the scores
for the classes. Use the histograms to answer which class had the highest mean score.
A) Class 1
B) Class 2
C) Class 3
D) Classes 1 & 3


24. Most US college-bound students take either the SAT (Scholastic Assessment Test) or the ACT (which
originally stood for American College Testing). Scores on both the ACT and the SAT are approximately
normally distributed. ACT scores have a mean of about 21 with a standard deviation of about 5. SAT
scores have a mean of about 508 with a standard deviation of about 110. Nicole takes the ACT and gets a
score of 24. Luis takes the SAT. What score would Luis have to have on the SAT to have the same
standardized score (z-score) as Nicole's standardized score on the ACT?
A) 548 B) 560 C) 574 D) 583

25. Each of the histograms below is of 15 integers from 1 through 5. The horizontal and vertical scales are
the same for each graph. Which graph has the smallest standard deviation?

A) a. B) b. C) c. D) d.

26. Which of the following statements is true for two events, each with probability greater than 0?
A) If the events are mutually exclusive, they must be independent.
B) If the events are independent, they must be mutually exclusive.
C) If the events are not mutually exclusive, they must be independent.
D) If the events are mutually exclusive, they cannot be independent.

27. Given P(A) = 0.60, P(B) = 0.30, and P(A|B) = 0.50. Find P(A B).
A) .40 B) .72 C) .75 D) .90

28. A group of volunteers for a clinical trial consists of 74 women and 77 men. 19 of the women and 21 of
the men have high blood pressure. Are high blood pressure and gender independent? Choose the best
explanation.
A) Yes; P(High blood pressure and Male) = P(High blood pressure) P(Male).
B) Yes; P(High blood pressure| Female) = 0.257; P(High blood pressure| Male) = 0.257; These are equal.
C) No; P(High blood pressure and Male) = 0.139; P(High blood pressure and Female) = 0.126; These are not
equal.
D) No; P(High blood pressure) = 0.265; P(High blood pressure| Female) = 0.257; These are not equal .

29. You play a game that involves rolling a die. You either win
or lose 1 depending on what number comes up on the die. If
the number is even, you lose 1, and if it is odd, you
win 1. However, the die is weighted and has the following probability distribution for the various faces.
Given that you win rather than lose, what is the probability that you rolled a "5"?
A) .10 B) .22 C) .33 D) .45


30. A fair die is to be rolled 8 times. What is the probability of getting at least one 4?
A)
B) (
) (
C) (
) (
) (
) (
D) (
) (

31. Based on the Normal model for yearly snowfall in cm in a certain town N(57, 8), how many cms of
snow would represent the 80th percentile approximately?
A) 64.5 cm B) 63.7 cm C) 63.3 cm D) 61.7 cm

32. For a Normal model, we know = 1250, and 35% of the distribution is below 1200. What is ?
A) 110 B) 120 C) 130 D) 140

33. A volunteer for a mayoral candidate's campaign periodically conducts polls to estimate the proportion
of people in the city who are planning to vote for this candidate in the upcoming election. Two weeks
before the election, the volunteer plans to double the sample size in the polls. The main purpose of this is
to:
A) reduce nonresponse bias. B) reduce bias due to the interviewer effect.
C) decrease the variability in the population.
D) decrease the standard deviation of the sampling distribution of the sample proportion.

34. A sample is chosen randomly from a population that was strongly skewed to the right. Describe the
sampling distribution model for the sample mean if the sample size is small.
A) Skewed right, center at , standard deviation /n
B) Skewed right, center at , standard deviation (/n)
C) Symmetric, center at , standard deviation /n
D) Symmetric, center at , standard deviation (/n).

35. The real estate industry claims that it is the best and most effective system to market residential real
estate. A survey of randomly selected home sellers in Southern Limburg found that a 95% confidence
interval for the proportion of homes that are sold by a real estate agent is 69% to 75%. Interpret the
interval in this context.
A) 95% of all random samples of home sellers in Southern Limburg will show that between 69% and 75%
of homes are sold by a real estate agent.
B) We are 95% confident that between 69% and 75% of homes in this survey are sold by a real estate
agent.
C) We are 95% confident, based on this sample, that between 69% and 75% of all homes in Southern
Limburg are sold by a real estate agent.
D) If you sell a home, you have a 72% 3% chance of using a real estate agent.

36. The real estate industry claims that it is the best and most effective system to market residential real
estate. A survey of randomly selected home sellers in Southern Limburg found that a 95% confidence
interval for the proportion of homes that are sold by a real estate agent is 69% to 75%. Explain what "95%
confidence" means in this context.

A) About 95% of all random samples of home sellers in Southern Limburg will produce a confidence
interval that contains the true proportion of homes sold by a real estate agent.
B) About 95% of all random samples of home sellers in Southern Limburg will find that between 66%
and 78% of homes are sold by a real estate agent.
C) There is a 95% chance that the true proportion of home sellers in Southern Limburg who sell their
home with a real estate agent is between 66% and 78%.
D) 95% of home sellers in Southern Limburg will sell their home with a real estate agent between 66% and
78% of the time.

37. How tall is your average statistics classmate? To determine this, you measure the height of a random
sample of 15 of your 100 fellow students, finding a mean height of 168 cm and a standard deviation of 7.5
cm. Have the conditions and assumptions for inference been met?
A) No, the sample is more than 10% of the population. B) No, the population is not likely to be Normal.
C) No, the sample wasn't random. D) Yes, all conditions and assumptions have been met.

38. Suppose you have obtained a confidence interval for , but wish to obtain a greater degree of
precision. Which of the following would result in a narrower confidence interval?
I. Increasing the sample size while keeping the confidence level fixed.
II. Decreasing the sample size while keeping the confidence level fixed.
III. Increasing the confidence level while keeping the sample size fixed.
IV. Decreasing the confidence level while keeping the sample size fixed.
A) II, IV B) I, IV C) I, III D) II, III

39. A manufacturer of balloons claims that p, the proportion of its balloons that burst when inflated to a
diameter of up to 12 inches, is no more than 0.05. Some customers have complained that the balloons are
bursting more frequently. If the customers want to conduct an experiment to test the manufacturer's
claim, which of the following hypotheses would be appropriate?
A) H0: p 0.05 against the alternative HA: p = 0.05.
B) H0: p = 0.05 against the alternative HA: p > 0.05.
C) H0: p = 0.05 against the alternative HA: p 0.05.
D) H0: p = 0.05 against the alternative HA: p < 0.05.

40. A t-test for the mean population score on an aptitude test is performed. The hypotheses are:
H0: = 100 against the alternative HA: 100. The computer test statistic, t, is positive, and the P-value
for the test is found to be 0.07. What is a correct interpretation of this P-value?
A) If the null hypothesis were true, the probability of observing the test statistic would be 0.07.
B) If the null hypothesis were true, the observed sample values would occur 7% of the time.
C) If the null hypothesis were true, the probability of observing a value of the test statistic as extreme or
more extreme than actually observed would be 0.07.
D) If the null hypothesis were true, the probability of observing a value of the test statistic as large as or
larger than that observed would be 0.07.
Formulas for mathematics:
Important derivatives
Rules for derivatives
Relative speed of increase:
) (
) ( '
x f
x f
Elasticity: ) ( '
) (
) ( x f
x f
x
x f EL
x
=
Let f(x,y) have a stationary point ) , (
0 0
y x
) 0 (
ln
1
) ( ' log ) (
) 0 ( ln ) ( ' ) (
) 0 ( ) ( ' ) (
1
> = =
> = =
= =

a
a x
x f x x f
a a a x f a x f
a ax x f x x f
a
x x
a a
) ( ' )) ( ( ' )) ( ( n Compositio
) (
) ( ' ) ( ) ( ' ) (
) (
)
Quotient
) ( ' ) ( ) ( ) ' ) ( ) Product
) ( ' ) ' ) ( ) Sum
Derivative Function Operation
then exist, and Let
2
x g x g f x g f
x g
x g x f x f x g
x g
f(x
x g x f x g (x f x g f(x
x g (x f x g f(x
g'(x) f'(x)
+

0 ) ( point - Saddle
0 ) ( 0 ) , ( 0 ) , ( Maximum
0 ) ( 0 ) , ( 0 ) , ( Minimum
2
2
0 0 0 0
2
0 0 0 0
<
> < <
> > >
xy yy xx
xy yy xx yy xx
xy yy xx yy xx
f f f
f f f y x f y x f
f f f y x f y x f
a
ac b b
x for c bx ax x f
2
4
0 ) (
2
2

= = + + =

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Quantitative Methods 1

EBC1005 EBC1006 EBC1007

. For which case below is it true that has a

() denote the elasticity of . Now

. Which case below describes all points ( ) for which the

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