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Inferential Statistics - Assignment

Question 1:
The quality assurance checks on the previous batches of drugs found that — it is 4 times more
likely that a drug is able to pr oduce a satisfactory result than not.

Given a small sample of 10 drugs, you are required to find the theoretical probability that at
most, 3 drugs are not able to d o a satisfactory job.

a.) Propose the type of probability distribution that would accurately portr ay the above
scenario, and list out the three conditions that this d istribution follows.

b.) Calculate the required probability.

Solution:
a) Based on the above scenario the Binomial distribution will be correct method to arrive
on the probability
Similar cases for binomial distribution:
i) Tossing a coin 20 times to see what is the probability of occurrence of 3 tails
ii) Probability of Drawing 4 red balls from a bag, putting each ball back after
drawing it in 10 trials
iii) Probability of a student to answer 3 questions correctly (by random guess - out
of fixed number of options) in a set of 10 questions

b) Based on the problem statement,


n = 10 -- number of samples
r = 3 -- number of un-successful drug trials (atmost)
p = 0.2 -- probability of being un-successful (…. it is 4 times more likely that a drug is
able to produce a satisfactory result than not)

Based on the Binomial distribution formula,

P (X=r) = nCr (p)r (1-p)(n-r)


Calculating repeatedly for X = 0, 1, 2, 3
P(X=0) = 10C0(0.2)0(1-0.2)(10-0)
P(X=0) = 1 * 1 * 0.11 = 0.11 ~ 11%

P(X=1) = 10C1(0.2)1(1-0.2)(10-1)
P = 10 * 0.2 * 0.134 = 0.268 ~ 26.8%

P(X=2) = 10C2(0.2)2(1-0.2)(10-2)
P = 45 * 0.04 * 0.168 = 0.3024 ~ 30.24%

P(X=3) = 10C3(0.2)3(1-0.2)(10-3)
P = 120 * 0.008 * 0.210 = 0.202 ~ 20.2%

P(X = atmost 3) = P(X=0) + P(X=1) + P(X=2) + P(X=3)


= 11% + 26.8% + 30.24% + 20.2% =

Question 2:

For the effectiveness test, a sample of 100 drugs was taken. The mean time of effect was 207
seconds, with the standard deviation coming to 65 seconds. Using this information, you are
required to estimate the range in which th e population mean might lie — with a 95%
confidence level.

a.) Discuss the main methodology using which you will approach this problem. State all the
properties of the required method. Limit your answer to 150 words.
b.) Find the required range.
Solution:

a) The solution is based on the Central Limit Theorem.

The Central Limit Theorem states that, no matter how the srcinal population is distributed,

the 1.
sampling distribution
Sampling will follow
Distribution’s Mean =these three properties
Population Mean –
2. Sampling Distribution’s Standard Deviation (Standard Error) = /√, where σ is the
population’s standard deviation and n is the sample size
3. For n > 30, the sampling distribution becomes a normal distribution

Using CLT, we can estimate the population mean from the sample mean and standard
deviation, but the population mean’s value has to be reported with some error margin.

Now, the y% confidence interval (i.e., confidence interval corresponding to y% confidence


level) for μ will be given by the range –

Here, X = Sample Mean


Z* is the Z-score associated with the confidence level
S = Standard error, sample standard deviation
n = sample size

b)
Since n(100) > 30, the sampling distribution is a normal distribution

n = 100
SE = 65 secs
µ(x) = 207 secs
̅
Confidence Level = 95%
Z* score = 1.96

Population Mean = [X  {(Z*S)/√}], [ X + {(∗)/√}]


Question 4:

Now, once the batch has passed all the quality tests and is ready to be launched in the
market, the marketing team needs to plan an effective online ad campaign to attract new
customers. Two taglines were proposed for the campaign, and the team is currently divided
on which option to use.

Explain why and how A/B testing can be used to decide which option is more effective. Give a
stepwise procedure for the test that needs to be conducted.

Solution:

The A/B test is an industry application of two sample proportion test, which is a way to
test two different versions of the same element and see which one performs better.

Procedure for the A/B test for the new painkiller medicine:

Step-1: Define a significance level for this test. Say 5%.

Step-2: Apply the first tagline in the campaign and perform the advertisements.

Step-3: Have a customer survey to get the f eedback from the market. The number of
customers providing positive feedback to be denoted as 1 in the survey data. If the
customers were indifferent or gave a negative feed back note them as 0.

Step-4: Continue the campaign for a certain period and gather the information from the
survey.

Step-5: Apply the second tagline in the campaign and perform the advertisements

Step-6: Again, have a customer survey to get the feedback from the market. Note the
survey information as per the rule provided in Step-2.

Step-7: Collect the data from both surveys and then apply the A/B test.

Step-8: Calculate the p-value of both the data sets. If the p-value of the data set is more
than the significance level (=5%) the NULL hypothesis cannot be rejected. Incase the p-
value comes out less than 5% the alternate hypothesis is accepted.

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