Question 1. Statistics plays a vital role in almost every facet of human life. Describe the functions of Statistics.

Explain the applications of statistics. (Meaning 2 marks, Functions 3 marks, Applications - 5 marks)
Statistics may be defined as an aggregate of facts affected to a marked extent by multiplicity of causes, numerically expressed, enumerated or estimated according to a reasonable standard of accuracy, collected in a systematic manner for a predetermined purpose and placed in relation to each other Statistics is used for various purposes. It is used to simplify mass data and to make comparisons easier. It is also used to bring out trends and tendencies in the data, and the hidden relations between variables. All these help in easy decision making. 1. Statistics simplifies mass data 2. Statistics brings out trends and tendencies in the data 3. Statistics brings out the hidden relations between variables 4. Decision making power becomes easier 5. Statistics makes comparison easier. Due to advanced communication networks, rapid changes in consumer behavior, varied expectations of a variety of consumers and new market openings, modern managers have a difficult time in making quick and appropriate decisions. Therefore, there is a need for them to depend more upon quantitative techniques like mathematical models, statistics, operations research and econometrics. Accounting Public accounting firms use statistical sampling procedures when conducting audits for their clients. Finance Financial advisors use a variety of statistical information to guide their investment recommendations. Marketing Electronic scanners at retail checkout counters are being used to collect data for a variety of marketing research applications. Production Todays emphasis is on quality. Quality is of utmost importance in production. A variety of statistical quality control charts are used, to monitor the average output of a production process Economics Economists are frequently asked to provide forecasts about the future of the economy. They use a variety of statistical information in making such forecasts. For example, in forecasting inflation index, economists use statistical information on indicators such as the producer index, the unemployment rate and manufacturing capacity utilisation.

Question 2 a. Explain the various measures of Dispersion. (Explanation 5 marks) b. Obtain the values of the median and the two Quartile 391 384 591 407 672 522 777 733

2488

1490

The data presented has to be carefully analyzed to make any inference from it. The inferences can be of various types, for example, as measures of central tendency, dispersion, correlation or regression. Measures of central tendency will cluster around the figure which is in the central location. In case of population, the measures are the parameters and in case of the sample are statistics that are estimates of population parameters. The three most common ways of measuring the center of distribution is mean, mode and median. In case of population, the measures of dispersion are used to quantify the spread of the distribution. Range, interquartile range, mean deviation and standard deviation are four measures to calculate the dispersion. A measure of statistical dispersion is a nonnegative real number that is zero if all the data are the same and increases as the data become more diverse. Most measures of dispersion have the same units as the quantity being measured. In other words, if the measurements are in meters or seconds, so is the measure of dispersion. Other measures of dispersion are dimensionless. In other words, they have no units even if the variable itself has units. These include:

Coefficient of variation Quartile coefficient of dispersion Relative mean difference

Median =(N+1)/2 = (10+1)/2= 5.50 =(591+672)/2 = 631.5 2 Quartiles are 25% = round(0.25*(N+1)) = round(.25*11)=3rd position= 407 75% = round(0.75*(N+1)) = round(.75*11)=8th position=777

Question 3 - What is correlation? Distinguish between positive and negative correlation. (Meaning 2 marks, Differences 3 marks) b. Calculate coefficient of correlation from the following data.
X 1 2 3 4 5 6 Y 9 8 10 12 11 13 (Formula 1 marks, Calculation/Solution- 3 marks, Interpretation 1 mark) 7 14 8 16 9 15

Correlation is a measure of the statistical relationship between two comparable time series. For investors, these series may be two commodities, two stocks, a stock and an index or even a stock and a commodity. The relationship, which can be causal, complementary, parallel or reciprocal, is stated as the correlation coefficient and always reflects the simultaneous change in value of the pairs of numerical values over time. A positive correlation exists where the high values of one variable are associated with the high values of the other variable(s). A 'negative correlation' means association of high values of one with the low values of the other(s). The correlation coefficient, which lies between the range of -1.00 to +1.00, as a positive or negative probability that the members of a market pair relate to each other. A negative reading suggests that one member of the pair consistently moves up while the other moves down. Conversely a positive reading suggests there is a tendency for the pair of markets move together in the same direction. A correlation coefficient very close to 0.00 means the no correlation, indicating that their statistical relationship is completely random.
X 1 2 3 4 5 6 7 8 9 45 9 Y 9 8 10 12 11 13 14 16 15 108 xy = x2 = xy 9 16 30 48 55 78 98 128 135 597 597 285 =
2

sigma N x = 45 y = 108 2 y = 1356 (9*597 - (45*108))

2

x2 1 4 9 16 25 36 49 64 81 285

y2 81 64 100 144 121 169 196 256 225 1356

0.95

***9(285) - (45 )] [9(1356) - 108 ]]]

Question 4 Index number acts as a barometer for measuring the value of money. What are the characteristics of an index number? State its utility. (Meaning 2 marks, Utility 2 marks, Characteristics 6 marks) An index number is an economic data figure reflecting price or quantity compared with a standard or base value. The base usually equals 100 and the index number is usually expressed as 100 times the ratio to the base value. For example, if a commodity costs twice as much in 1970 as it did in 1960, its index number would be 200 relative to 1960. Index numbers are used especially to compare business activity, the cost of living, and employment. Following are the main uses of index number: 1. A Barometer Index numbers serve as a barometer for measuring the value of money. With the help of index number we can easily make a comparison in the value of money in different years. 2. Importance for the Govt. The change in the value of money has a direct effect on the public. So Govt. adopts the fiscal and monetary policy according the results of index numbers. 3. Throws Light on Economic Condition Index numbers are very helpful in comparing the economic conditions of a particular group at two different periods. 4. Consumption Standard If we want to know the true consumption standard of a class in a locality we can compute the consumption index number. 5. Fixation of Wages The money wages can be revised according the proportionate change in the cost of living. The cost of living index number guides the Govt. and the executives for the fixation and revision of wages. 6. Importance For The Producer :Price index number indicates the producer that he should expand the production or he should reduce the production. If price level is rising it means profit rate is high. 7. Analysis of Industry if we want to judge the prospects of manufacturing concern the investment index number can be constructed, to know the net yield of the industrial sector. 8. Comparison of developed and under developed Countries
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International price index number can be used for comparing the general level of prices in the developed and under developed countries. 9. Efficiency Of labour To check the efficiency and per capita output of the labour can be shown by index number. Promotion and salary can be also considered keeping in view the index number. 10. Measures to remove Inequality of Income Index number of whole sale prices also indicate about the regional disparity. So different measures can be taken for the proper distribution of wealth and stabilizing of prices.

Question 5 -

Business forecasting acquires an important place in every field of the economy. Explain the objectives and theories of Business forecasting. (Meaning 2 marks, Objectives 3 marks, Theories 5 marks)

Business Forecasting is an estimate or prediction of future developments in business such as sales, expenditures, and profits. Given the wide swings in economic activity and the drastic effects these fluctuations can have on profit margins, it is not surprising that business forecasting has emerged as one of the most important aspects of corporate planning. Forecasting has become an invaluable tool for businesspeople to anticipate economic trends and prepare themselves either to benefit from or to counteract them. If, for instance, businesspeople envision an economic downturn, they can cut back on their inventories, production quotas, and hiring. If, on the contrary, an economic boom seems probable, those same businesspeople can take necessary measures to attain the maximum benefit from it. Good business forecasts can help business owners and managers adapt to a changing economy. Objectives of business forecasting: In the narrow sense, the objective of forecasting is to produce better forecasts. But in the broader sense, the objective is to improve organizational performancemore revenue, more profit, increased customer satisfaction. Better forecasts, by themselves, are of no inherent value if those forecasts are ignored by management or otherwise not used to improve organizational There are few theories which are usually followed to make business forecasting. These are. 1. Theory of Economic Rhythm 2. Action and Reaction Approach 3. Sequence Method or Time Lag Method 4. Specific Historical Analogy 5. Cross-cut Analysis 6. Model Building Approach. Theory of Economic Rhythm: This theory propounds that the economic phenomena behave in a rhythmic manner and cycles of nearly the same intensity and duration tend to recur. According to this theory, the available historical data have to be analyzed into their components, i.e. trend, seasonal, cyclical and irregular variations. The secular trend obtained from the historical data is projected a number of years into the future on a graph or with the help of mathematical trend equations. If the phenomenal is cyclical in behavior, the trend should be adjusted for cyclical movements. Action and Reaction Approach: This theory is based on the Newtons Third Law of Motion, i.e., for every action there is an equal and opposite reaction. When we apply this law to business, it implies that it there if depression in a particular field business, there is bound to be boom in it sooner or later. It reminds us of the business, cycle which has four phases, i.e. prosperity, decline, depression and prosperity. This theory regards a certain level of business activity as normal and the forecaster has to estimate the normal level carefully. According to this theory, if the price of commodity goes beyond the normal level, it must
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come down also below the normal level because of the increased production and supply of that commodity. Sequence Method or Time Lag Method: This theory is based on the behavior of different businesses which show similar movements occurring successive!;, but not simultaneously. As such, this method takes into account time lag based on the theory of lead-lag relationship which holds good in most cases. The series that usually change earlier serve as forecast for other related series. However, the accuracy of forecasts under this method depends upon the accuracy with which time lag is estimated. Specific Historical Analogy: This theory is based on the assumption that history repeats itself. It simply implies that whatever happened in the past under a set of circumstances is likely to happen in future under the same set of conditions. Thus, a forecaster has to analyze the past data to select such period whose conditions are similar to the period of forecasting. Further, while predicting for the future, some adjustments may be made for the special circumstances which prevail at the time of making the forecasts. Cross Cut Analysis: In this method of business forecasting, the combined effect of various factors is not studied, but the effect of each factor that has a bearing oil the forecast, is studied independently. This theory is similar to the Analysis of Time Series under the statistical methods. Model Building Approach: This approach makes use of mathematical equations for drawing economic models. These models depict the inter-relationships amongst the various factors affecting the economy or business. The expected values for dependent variables are then ascertained by putting the values of known variables in the model. This approach is highly mechanical and this can be rarely employed in business conditions.

Question 6 The weekly wages of 1000 workers are normally distributed around a mean of Rs. 70 and a standard deviation of Rs. 5. Estimate the number of workers whose weekly wages will be: a. Between 70 and 72 b. Between 69 and 72 c. More than 75 d. Less than 63 (Formula 2 marks, Calculation/Solution/Interpretation-8 marks) Formula = mean * no of workers/higher range + lower range
No. of workers = 1000 Arithmetic mean of wages =Rs.70/Standard Deviation = Rs. 5/Total wages to be distributed in a week =1000*70 = Rs. 70000 /a) No. of workers whose wages lie between 70 to 72 is given by = 70000*2/70+72 No. of workers whose
wages lie between 70 to 72 is given by = 985.91

No. of workers whose wages lie between 70 to 72 is given by = 986(approx.) b) No. of workers whose wages lie between 69 to 72 = 70000*2/69+72 No. of workers whose wages lie between 69 to 72 =993 c) No. of workers whose wages greater 75 =70000*2/87.5 =800 d) No. of workers whose wages less than 63= 1000-70000/81.5 No. of workers whose wages less than 63= 1000-859 No. of workers whose wages less than 63= 141