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IGNOU ASSIGNMENT GURU (2017-2018)
M.E.C.-3
Quantitaive Methods
Disclaimer/Special Note: These are just the sample of the Answers/Solutions to some of the Questions given in the
Assignments. These Sample Answers/Solutions are prepared by Private Teacher/Tutors/Authors for the help and guidance
of the student to get an idea of how he/she can answer the Questions given the Assignments. We do not claim 100%
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As these solutions and answers are prepared by the private Teacher/Tutor so the chances of error or mistake cannot be

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denied. Any Omission or Error is highly regretted though every care has been taken while preparing these Sample
Answers/Solutions. Please consult your own Teacher/Tutor before you prepare a Particular Answer and for up-to-date

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and exact information, data and solution. Student should must read and refer the official study material provided by the

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university.
SECTION-A

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Answer all the questions from this section.
Q. 1. (a) What is a first order linear differential equation? Write the steps to obtain the solution to

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homogenous differential equation.

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Ans. Solving Linear First Order Differential Equations

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A first order differential equation is of the form:

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dy
dx
The general solution is given by
+ p(x) y = q(x)

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[ y ( x ) q ( x ) dx + C]
y = ∫ y ( x)
where

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is called the integrating factor.
Homogeneous Equations

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dy
= f (x,y)
dx
is homogeneous if the function f(x, y) is homogeneous, that is
f (t x, t y) = f (x,y) for any number t
By substitution, we consider the new function
y
z = (which is equivalent to y = xz).
x
The new differential equation satisfied by z is
dz
x + z = f(1, z)
dx
which is a separable equation. The solutions are the constant ones f(1, z) –  z = 0 and the non-constant ones
given by

∫ f (1, z ) − z + C
dz
In | x | =

The old function y = xz.

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(b) Given the rate of investment is I (t) = 2-t1/3, where ‘t’ is time. Suppose the initial capital stock, K 0
is 25.
Find the amount of capital accumulation during the time intervals [0, 1] and [1, 3].
Ans.
dy
= 2t1/3
dt
dy = 2t1/3 dt.
Integrating both sides.

∫ dy ∫t
1/3
= dy

t 4/3
y = +c
dt
Now put y = 0 and t = 1 then
C = 1>t

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C = 1 > t.
Q. 2. (a) What is the normal probability distribution function? State its properties.
Ans. Probability Distribution Function: Probability distribution is a function that describes the probability of

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a random variable taking certain values.

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For a more precise definition one needs to distinguish between discrete and continuous random variables. In the
discrete case, one can easily assign a probability to each possible value: when throwing a die, each of the six

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values 1 to 6 has the probability 1/6. In contrast, when a random variable takes values from a continuum, probabilities

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are no-nzero only if they refer to finite intervals: in quality control one might demand that the probability of a “500 g”

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package containing between 500 g and 510 g should be no less than 98%.

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0.18

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0.16
0.14

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Probability

0.12

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0.10
0.08

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0.06

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0.04
0.02

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0.00

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2 3 4 5 6 7 8 9 10 11 12
Sum of Two Dice

Discrete probability distribution for the sum of two dice.

0.4

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34.1% 34.1%
0.2

0.1 2.1% 2.1%


0.1% 13.6% 13.6% 0.1%
0.0
– 3σ – 2σ – 1σ µ 1σ 2σ 3σ

Normal distribution, also called Gaussian or “bell curve”, the most important continuous random distribution.
If total order is defined for the random variable, the cumulative distribution function gives the probability that the
random variable is not larger than a given value; it is the antiderivative of the non-cumulative distribution.

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(b) Write down the distribution functions of the Binomial distribution and Poisson distribution. When
is a Poisson distribution an approximation of Binomial distribution? Obtain the mean and variance of the
Binomial and Poisson distribution.
Binomial Distribution
A binomial random variable is the number of successes x in n repeated trials of a binomial experiment.
The probability distribution of a binomial random variable is called a binomial distribution (also known as a Bernoulli
distribution).
Suppose we flip a coin two times and count the number of heads (successes). The binomial random variable is the
number of heads, which can take on values of 0, 1 or 2. The binomial distribution is presented below.
Number of heads Probability
0 0.25
1 0.50

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2 0.25
The binomial distribution has the following properties:

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• The mean of the distribution (µx) is equal to n * P .

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• The variance (σ2x) is n * P * (1 – P ).

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• The standard deviation (σx) is sqrt [ n*P*(1 – P)].

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Poisson Distribution
A Poisson random variable is the number of successes that result from a Poisson experiment. The probability

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distribution of a Poisson random variable is called a Poisson distribution.

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Given the mean number of successes (µ) that occur in a specified region, we can compute the Poisson probability

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based on the following formula:
SECTION-B

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Answer all the questions from this section.

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3. (a) What are the relationship between confidence interval and hypothesis testing? Distinguish
between Type I and Type II error and explain what are meant by the power of a test.

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Ans. The amount of evidence required to accept that an event is unlikely to have arisen by chance is known as

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the significance level or critical p-value.The higher the significance level, the higher the power of the test. If you

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increase the significance level, you reduce the region of acceptance. As a result, you are more likely to reject the null

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hypothesis. This means you are less likely to accept the null hypothesis when it is false; i.e., less likely to make a Type
II error. Hence, the power of the test is increased.

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Hypothesis is illustrated as declaration which may or may not be accurate. Two hypothesis testing are used in
statistics. They are null hypothesis and alternative hypothesis. These two hypothesis testing are opposed to each
other. In statistics the significance level is represented through alpha. The significance level can be recognizing as the
probability of creating a type I error. Hypothesis testing is the use of statistics to establish the probability that a
specified hypothesis is correct.
Type I and Type II Error: Two types of errors can result from a hypothesis test.
l Type I error. A Type I error occurs when the researcher rejects a null hypothesis when it is true. The
probability of committing a Type I error is called the significance level. This probability is also called alpha,
and is often denoted by a.
l Type II error. A Type II error occurs when the researcher fails to reject a null hypothesis that is false. The
probability of committing a Type II error is called Beta, and is often denoted by β. The probability of not
committing a Type II error is called the power of the test.
Power of the Test: The power of a statistical hypothesis test measures the test's ability to reject the null
hypothesis when it is actually false – that is, to make a correct decision.
In other words, the power of a hypothesis test is the probability of not committing a type II error. It is calculated
by subtracting the probability of a type II error from 1, usually expressed as:

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Power = 1 – P(type II error) = (1–β)
The maximum power a test can have is 1, the minimum is 0. Ideally we want a test to have high power, close
to 1.
(b) Describe the process of testing hypotheses about population proportion of a given attribute.
Ans. Procedure for Testing of Hypothesis
l We start with a research hypothesis of which the truth is unknown.
l The first step is to state the relevant null and alternative hypotheses. This is important as mis-stating the
hypotheses will muddy the rest of the process. Specifically, the null hypothesis allows to attach an attribute: it
should be chosen in such a way that it allows us to conclude whether the alternative hypothesis can either be
accepted or stays undecided as it was before the test.
l The second step is to consider the statistical assumptions being made about the sample in doing the test; for
example, assumptions about the statistical independence or about the form of the distributions of the obser-
vations. This is equally important as invalid assumptions will mean that the results of the test are invalid.

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l Decide which test is appropriate, and stating the relevant test statistic T.
l Derive the distribution of the test statistic under the null hypothesis from the assumptions. In standard cases
this will be a well-known result. For example the test statistics may follow a Student’s distribution or a normal

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distribution.

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The distribution of the test statistic partitions the possible values of T into those for which the null-hypothesis
is rejected, the so called critical region, and those for which it is not.
Compute from the observations the observed value tabs of the test statistic T.

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l Decide to either fail to reject the null hypothesis or reject it in favour of the alternative. The decision rule is to

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reject the null hypothesis H0 if the observed value tabs is in the critical region, and to accept or “fail to reject”

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the hypothesis otherwise.

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Type I and Type II Error: Two types of errors can result from a hypothesis test.
l Type I error. A Type I error occurs when the researcher rejects a null hypothesis when it is true. The

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probability of committing a Type I error is called the significance level. This probability is also called alpha,

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and is often denoted by a.

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l Type II error. A Type II error occurs when the researcher fails to reject a null hypothesis that is false. The
probability of committing a Type II error is called Beta, and is often denoted by β. The probability of not

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committing a Type II error is called the power of the test.

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Power of the Test: The power of a statistical hypothesis test measures the test's ability to reject the null
hypothesis when it is actually false – that is, to make a correct decision.

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In other words, the power of a hypothesis test is the probability of not committing a type II error. It is calculated

to 1. A
by subtracting the probability of a type II error from 1, usually expressed as:
Power = 1 – P(type II error) = (1–β)
The maximum power a test can have is 1, the minimum is 0. Ideally we want a test to have high power, close

Optimum Test Under Different Situations: A pre-decessor to the statistical hypothesis test. An experimental
result was said to be statistically significant if a sample was sufficiently inconsistent with the (null) hypothesis. This
was variously considered common sense, a pragmatic heuristic for identifying meaningful experimental results, a
convention establishing a threshold of statistical evidence or a method for drawing conclusions from data. The statis-
tical hypothesis test added mathematical rigor and philosophical consistency to the concept by making the alternative
hypothesis explicit. The term is loosely used to describe the modern version which is now part of statistical hypothesis
testing.
A statistical hypothesis test compares a test statistic (z or t for examples) to a threshold. The test statistic (the
formula found in the table below) is based on optimality. For a fixed level of Type I error rate, use of these statistics
minimizes Type II error rates (equivalent to maximizing power). The following terms describe tests in terms of such
optimality:

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Q. 4. A monopolist’s demand curve is given by p = 100 – 2q:
Ans. Demand curve b given by
p = 100 – 2q
Total Revenue will be given by
TR = P×q
= (100 – 2q)q
= 100q – 2q2
(a) Find his marginal revenue function.
Ans. Marginal Revenue is the desrivative of TR. So.
d ( TR )
MR =
dq
d
(
= dq 100q – 2q
2
)
MR = 100 – 4q
So Marginal revenue is 100 – 4q.
(b) What is the relationship between the slopes of the average and marginal revenue curves?
Ans.

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Average Revenue & Marginal Revenue

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N M E 8 AR

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6

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I G R U 2
MR

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1 2 3 4 5 6

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(c) At what price is marginal revenue zero?
Ans. MR = 0

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100 – 4q
4q
q
q
=
=
=
=
0
100
25
25
TR = 100 q – 2q2
= 100 × 25 – 2 × (25)2
= 2500 – 1250
= 1250
Marginal Revenue is 0 at price 1250.
Q. 5. Find the extreme value (s) z = 2x21 – x1 x2 + 4x22 + x1x3 + x23 + 2. and using the Hessian matrix
check whether the extreme value (s) is / are maximum or minimum.
Ans. Sol. z = 2 x12 − x1 x2 + 4 x22 + x1 x3 + x32 + 2
fx 1 = 4x1 – x2 + x3
fx 2 = 8x2 – x1
fx 3 = 2x3 + x1
fx1 = 4,fx2 = 8, fx3 = 2

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FOC requires fx1 = fx2 = fx3 = 0
4x1 – x2 + x3 = 0 ...(i)
8x1 – x1 = 0 ...(ii)
2x3 + x1 = 0 ...(iii)
From equation (i), (ii) and (iii), we get
x1 = 0, x2 = 0, x3 = 0
The given function reaches its minimum values at the stationary point and its minimum values zero.
fx 1 = 4 > 0
fx 2 = 8 > 0
fx 3 = 2 > 0
fx1 fx2 fx3 – (fx1 x2 x3)2 = 64 – 2 = 62 > 0.
Q. 6. Solve the following using simplex method of Linear programming Model in x1 and x2.
Maximize of z = 45x1 + 55x2
Sub to of 6x1 + 4x2 < 120

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3x1 + 10x2 < 180

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Ans. The Dual Method of Linear Programming Model

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Maximize W = 120u + 180v
Subject to

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64 + 4v ≥ 120

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34 + 10v ≤ 180

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Basic Variable Values of the basic Variable X1 X2 S1 S2 S3

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0
1
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X2
S2
X1
3
1
2
0
0
1
1
0
0
8/5
–12/5
4/5
0
1
0
–1/10
–3/10
1/5

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Zj
Cj – Zj

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1
0
4
0
30/5
–30/5
0
0
1/5
–1/5

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Q. 7. (a) Given the values of x and y

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X 1 2 3 4 5

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Y 3 7 5 1 14

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Regress ! on 6
Ans.

A x
1
2
3
y
3
7
5
x2
1
4
9
y2
9
49
25
xy
3
14
15
4 11 16 121 44
5 14 25 196 70
15 40 55 400 146
15
x = =3
5
40
y = =8
5

8
(15 × 40)
Sxy = 146 – = 26
5
(40) 2
Syx = 1600 – = 1280
5
x = 40, Σ y2 = 1600
For the regression line of x on y :
26
b′ = = 0·203
1280
a′ = x – b′ y
a′ = [3 – .0203 × 8]
a′ = [3 – .1625]
a′ = 2 .8375

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So the equation of the regression line of x on y is:
x = 0·375y

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(b) Given the values of x and y

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X 25 25 30 30 16

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Y 2 3 5 1 8

Sol.

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Regress 6 on x.

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x 25 25 30 30 16

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y 2 3 5 1 8

Σx = 126 , Σ x2 = 15, 876

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Σy = 19 , Σ y2 = 361

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Σ xy = 2394.

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126 19
= 25.2, y = = 3.8

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x =
5 5

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126 *19

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Sxy = 2394 – = 1915.2
5

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(126)2
Sxy = 15876 – = 12700·8
5
For the regression line y on x.
1915·2
b = = ·150
12700·8
a = y – bx
a =3·8 – ·150 (25·2), a = 3.8 – 3.78
a = 0.02
So the equation of the regression line of y on x is:
y = ·150 x
n n

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