1

ECON20003 – QUANTITATIVE METHODS 2

First Semester, 2020
Assignment 2
Due date and time: Friday 15 May, 4:00PM

Please read the following instructions carefully before starting to work on the
assignment.
 There is a total of 100 marks for this assignment. It is worth 5% of the final
grade for QM2.
 This assignment must be submitted online via the LMS by 4:00 PM on Friday
15 May. Any assignment not submitted by this due date and time will be
given a mark of zero.
 Students may work alone and submit their own assignment answers, if they
wish to do so, or they can work on the assignment in pairs. In the latter case,
each assignment pair must submit only one set of assignment answers and
both students of the pair will receive the same mark for their assignment. It
is not allowed to form assignment groups of more than two students.
 Please note that the assignment submission process has two stages:
1. Registering your assignment group, and
2. Submitting the assignment online via the LMS.
If you are completing Assignment 2 in pairs, both students need to register
into the same group. To do so, in the course navigation menu, click the
“People” link and then the Groups tab. The group names (set by default) are
A2 1, A2 2, A2 3 etc. The pair MUST join one of these created groups for
submitting the assignment and not create your own group. The deadline for
registering your group is 5PM on Friday 8 May. If a pair fails to register their
group before the deadline for group registration, both students will need to
make an individual submission. Students making an individual submission
do NOT need to register.
 Answer the assignment questions using Microsoft Word. Make sure to
include a cover page in the document with the student ID, the name and the
tutorial group of each group member.
Some assignment tasks require you to do manual calculations, some others
to use R/RStudio. In the former case, you can type the manual calculations
straight in Word, or you can write them on a sheet of paper with black or
blue pen, scan/photo them with your smartphone (e.g. with the iPhone Note
app) and insert them into your Word document. In the latter case, paste your

ECON20003 Semester 1, 2020 Assignment 2

 2

relevant R/RStudio, printouts (graphs, output tables etc.) in the main body
of the document and the scripts in the Appendix.
Convert the whole file to PDF before submitting it online via the LMS. Do not
forget to preview your assignment after uploading on the LMS to ensure that
you have indeed uploaded the correct and complete assignment, and that
its formatting is in order as in their original document. Submissions that are
late because of formatting issues or because a version is incomplete, will
not be accepted.

Assignment Tasks and Questions

Exercise 1 (40 marks = 15 + 15 +10)

One important factor in inventory control is the variance of the daily demand for the
product. A management scientist has developed the optimal order quantity and reorder
point, assuming that the variance is equal to 250. Recently, the company has
experienced some inventory problems, which induced the operations manager to
doubt the assumption made about the variance. To examine the problem, the manager
took a random sample of 25 daily demands, which are saved in the a2e1 Excel file.

(a) Estimate the population variance of the daily demand for the product with 95%
confidence. What does it suggest? Do the calculations manually using your
calculator and the required statistical table.1 Report the details of your manual
calculations and then repeat the estimation with R.

(b) Do these data provide sufficient evidence at the 5% significance level to infer that
the management scientist’s assumption that the variance is equal to 250 is wrong?
Specify the null and alternative hypotheses, calculate the observed test statistic
first manually and then with R, make a statistical decision first based on the
appropriate critical value and then on the p-value reported by R, and draw your
conclusion.

(c) What are the required conditions for the statistical procedures you used in parts
(a) and (b)? Does it appear that they are satisfied? Explain your answer and
support it with as much evidence as you can.

1
LK: As a preparation for the exam, I recommend you take this opportunity to learn how to use the
STAT function of your Casio fx92 calculator.

ECON20003 Semester 1, 2020 Assignment 2

 3

Exercise 2 (30 marks = 2 + 12 + 8 + 4 + 4)

A car manufacturer believes that marketing of eight-cylinder (V8) cars appeals mainly
to men. A survey is conducted to ask, ‘Do you prefer V8 cars?’ The relative frequencies
of men and women who answered ‘yes’ and ‘no’, respectively, are summarised in the
following table:

   Gender of the respondent 
Prefer V8 cars?  Men  Women 
Yes  0.68  0.56 
No  0.32  0.44 

Like in Exercise 1, do again the calculations first manually and then with R.

(a) There are two variables in this question, the gender of the respondents and their
preference for V8 cars. What type of variables are they and what are their levels
of measurement? Explain your answers.

(b) Assume that 50 men and 50 women participated in the survey. At the 5% level of
significance, is there a difference between males and females in terms of the
proportion of people who prefer V8 cars? Specify the null and alternative
hypotheses, calculate the observed test statistic first manually and then with R,
make a statistical decision first based on the appropriate critical value and then on
the p-value reported by R, and draw your conclusion. Are the conditions required
by the test you performed likely satisfied? Explain your answer.

(c) Repeat part (b), assuming this time that 200 men and 200 women participated in
the survey.

(d) Compare the details of your manual calculations in parts (b) and (c). Which details
are the same, which are different? Discuss the effects of the sample size on your
statistical decision.

(e) Based on your confidence interval in part (c), does it seem reasonable to claim
that the population proportion of men who prefer V8 cars is 10% higher than the
corresponding population proportion of women? What about the claim that the
population proportion of men who prefer V8 cars is 25% higher than the
corresponding population proportion of women? Explain your answers.

ECON20003 Semester 1, 2020 Assignment 2

 4

Exercise 3 (30 marks = 20 + 10)

In marketing children’s products, it is extremely important to produce television

commercials that hold the attention of the children who view them. A psychologist hired
by a marketing research firm wants to determine whether differences in attention span
exist among children watching advertisements for different types of products. One
hundred and fifty children under 10 years of age were recruited for an experiment.
One-third watched a 60-second commercial for a new computer game, one-third
watched a 60-second commercial for a breakfast cereal, and another third watched a
60-second commercial for children’s clothes. Their attention spans were measured.
The results (in seconds) were recorded and saved in the a2e3 Excel file. Do all
required calculations with R.

(a) Which techniques should be considered to determine whether children’s attention

span varies by the product being advertised? What are the required conditions of
these techniques? Are they satisfied this time? Explain your answer and support
it with as much evidence as possible.

(b) Based on your answer in part (a), which technique appears to be the most
appropriate this time? Perform it with R. Can you conclude at the 5% significance
level that children’s average attention span varies by the product being
advertised? Do not forget to specify the null and alternative hypotheses, to identify
the test statistic, to make and explain your statistical decision, and to draw an
appropriate conclusion.

ECON20003 Semester 1, 2020 Assignment 2