ECM2102

UNIVERSITY OF EXETER

COLLEGE OF ENGINEERING, MATHEMATICS

AND PHYSICAL SCIENCES

May 2016

Management & Management Science

Module Convenor: Dr Allen He

Duration: TWO HOURS

Answer ALL questions in Section A and ONE of the TWO questions in Section B.

Additional answers will not be marked.

Provided: Statistical Tables, Formula Sheets

Provided on request: Graph paper

Candidates are permitted to use approved portable electronic calculators in this

examination. The use of Graphic calculators is not permitted. All working must be
shown clearly.

This is a CLOSED BOOK examination.

The marks for this module are calculated from 60% of the percentage mark for this
paper plus 40% of the percentage mark for associated coursework.

ECM2102 2015-16 1
 SECTION A
Question 1 (25 marks)

All numerical answers must be kept to three decimal places if necessary.

a) Explain the difference between a statistic and a parameter? Explain the relationship
between these two terms in statistical implementation? (3 marks)
b) Suppose that we have three boxes: Box 1, Box 2 and Box 3. Each box contains a number
of components of Type A and Type B, as shown in Table of Q1. An inspector randomly
selects a box and picks up exactly one component from the box for inspection.
Table of Q1

Box 1 Box 2 Box 3

Type A 4 6 3
Type B 4 2 6

Using Bayes Theorem, find what is the probability that a component picked up is from
Box 2, given it is a component of Type A. (8 marks)
c) There are two route options (Route 1 and Route 2) from city A to city B. The time
through Route 1 is in a normal distribution (1 = 55, 1 = 10), whereas the
time through Route 2 is in another normal distribution (2 = 60, 2 = 4).
Assuming that you depart from city A and need to arrive in city B in 65 mins, which is
the best route you should take? Please show clearly your decision-making process and
the relevant calculation process. (6 marks)
d) The mean strength of a sample of 30 concrete test cubes is 27.8 N/mm2 with a standard
deviation of 3.6 N/mm2. Assuming the strength is normally distributed, estimate:
i. 95% confidence interval for the mean length of the population. (4 marks)
ii. 95% confidence interval for the population standard deviation. (4 marks)

ECM2102 2015-16 2
Question 2 (25 marks)

In setting down a Product Design Specification (PDS), it is essential to take account of the
requirements and expectations of the market for the product. This is particularly so in a
highly competitive market like that for tablets, samples of which are given in the appendix of
Q2.

Answer the following parts of this question, illustrating your answers with examples from
this market.

a) Explain how the concept of market segmentation and stratification leads to identification
of competing products. (3 marks)
Give an example of competing wristwatch products, and why these are competitors by
reference to the target market for the wristwatches in question. (3 marks)
b) Show how different parts of a market may have different levels of product
differentiation. (3 marks)
Give an example of competing wristwatch products which are differentiated and explain
why these different market segments may have differing requirements from
wristwatches. (3 marks)
c) Describe the technique of Matrix Analysis. (3 marks)
Explain how the Matrix Analysis might be used to determine the PDS for a new entry
into a particular segment of the market. (2 marks)
Give an example of competing wristwatch products in a matrix analysis, maybe using the
Appendix Q2 as a reference for this. (2 marks)
d) Explain how the technique of Parametric Analysis might be used to determine a suitable
sales price for a new product. (3 marks)
Give an example of parametric analysis plots and the drawing of conclusions from them,
using the information in the Appendix Q2. One parameter in this analysis must be price.
(3 marks)

ECM2102 2015-16 3
 SECTION B
Question 3 (50 marks)

The following chart (i.e., Fig. of Q3) shows the activities of a project:

Activity Estimated Duration (weeks) Immediate Predecessors

A 2 -
B 3 A
C 5 B
D 7 C
E 6 C
F 4 E
G 7 D
H 3 E,G
I 7 C
J 4 F,I
K 2 J
L 5 J
M 4 H
N 2 K,L,M

Fig. of Q3

a) Analyse the network to determine the time required to carry out the project (6 marks)
Identify the critical path. (8 marks)
b) Calculate Earliest Start, Earliest Finish, Latest Start, Latest Finish for activities
(21 marks)
c) Draw a Gantt chart on which the critical path is clearly identified. Use the blank chart
provided in the appendix of Q3 and attaches it to your answer book. (15 marks)

ECM2102 2015-16 4
Question 4 (50 marks)

UK inflation rises in January as fuel price fall eases

(Edited article from BBC News website, dated 17th of February 2016).
Inflation, as measured by the Consumer Prices Index, rose by 0.3%. It was helped by smaller falls in
food and fuel prices than a year ago.
Annual inflation has been below the Bank of England's (BoEs) 2% target for two years, and last year
it was zero. The BoE said earlier this month that it expected inflation to stay below 1% this year.
North Sea oil prices dropped to a 12 year low of $27.10 last month and have almost halved over the
past 12 months.
But the Office for National Statistics measure of fuels and lubricants costs was only 7.3% lower than
in January 2015, the smallest drop since November 2014. Continuing low inflation makes the chance
of an interest rate rise in the near future unlikely.
Few economists expect the BoE to raise rates before late this year at the earliest, and some analysts
see a risk that the BoE could instead have cut to rates below the record low of 0.5% where they have
been for almost seven years.
Financial markets do not currently expect interest rates to rise until the end of the decade due to
concerns including a global economic slowdown and continuing low oil prices.
Food and alcohol
Food prices fell by 0.6% between December and January as opposed to a 1% fall a year earlier.
Supermarkets have been engaged in a long-running price war, and discounters such as Aldi and Lidl
continue to take market share from the "big four" supermarkets - Tesco, Asda, Sainsbury's and
Morrisons.
In terms of your study of economics, answer the following questions:
a) Explain the underlined terms in the extract above. (15 marks)
b) Explain the main functions of the Bank of England. (12 marks)
c) Using the price mechanism, explain why the oil prices keep falling. (8 marks)
d) Analyse the food retail market from the competition point of view. Define the oligopoly.
(6 marks)
e) A pebble processor has two production lines each of which has its output (measured by
the diameter) normally distributed. A sample of 25 pebbles randomly collected from one
production line gave a mean diameter of 105mm with a standard deviation of 10mm.
Another sample of 18 pebbles randomly collected from the other production line gave a
mean of 110mm and a standard deviation of 8mm.
i. Select an appropriate method for the hypothesis test of the mean pebble diameters of
the two production lines (i.e., identify the proper Test Statistic formula for your test)
and state why. (3 marks)
ii. Test at 5% significance and determine if there is any significant difference in the
mean diameters of the two production lines. (6 marks)

End of Paper

ECM2102 2015-16 5
 ECM2102 STATISTICAL TABLES

NORMAL DISTRIBUTION

Z 0 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

0 0.5000 0.4960 0.4920 0.4880 0.4840 0.4801 0.4761 0.4721 0.4681 0.4641
0.1 0.4602 0.4562 0.4522 0.4483 0.4443 0.4404 0.4364 0.4325 0.4286 0.4247
0.2 0.4207 0.4168 0.4129 0.4090 0.4052 0.4013 0.3974 0.3936 0.3897 0.3859
0.3 0.3821 0.3783 0.3745 0.3707 0.3669 0.3632 0.3594 0.3557 0.3520 0.3483
0.4 0.3446 0.3409 0.3372 0.3336 0.3300 0.3264 0.3228 0.3192 0.3156 0.3121
0.5 0.3085 0.3050 0.3015 0.2981 0.2946 0.2912 0.2877 0.2843 0.2810 0.2776
0.6 0.2743 0.2709 0.2676 0.2643 0.2611 0.2578 0.2546 0.2514 0.2483 0.2451
0.7 0.2420 0.2389 0.2358 0.2327 0.2296 0.2266 0.2236 0.2206 0.2177 0.2148
0.8 0.2119 0.2090 0.2061 0.2033 0.2005 0.1977 0.1949 0.1922 0.1894 0.1867
0.9 0.1841 0.1814 0.1788 0.1762 0.1736 0.1711 0.1685 0.1660 0.1635 0.1611
1 0.1587 0.1562 0.1539 0.1515 0.1492 0.1469 0.1446 0.1423 0.1401 0.1379
1.1 0.1357 0.1335 0.1314 0.1292 0.1271 0.1251 0.1230 0.1210 0.1190 0.1170
1.2 0.1151 0.1131 0.1112 0.1093 0.1075 0.1056 0.1038 0.1020 0.1003 0.0985
1.3 0.0968 0.0951 0.0934 0.0918 0.0901 0.0885 0.0869 0.0853 0.0838 0.0823
1.4 0.0808 0.0793 0.0778 0.0764 0.0749 0.0735 0.0721 0.0708 0.0694 0.0681
1.5 0.0668 0.0655 0.0643 0.0630 0.0618 0.0606 0.0594 0.0582 0.0571 0.0559
1.6 0.0548 0.0537 0.0526 0.0516 0.0505 0.0495 0.0485 0.0475 0.0465 0.0455
1.7 0.0446 0.0436 0.0427 0.0418 0.0409 0.0401 0.0392 0.0384 0.0375 0.0367
1.8 0.0359 0.0351 0.0344 0.0336 0.0329 0.0322 0.0314 0.0307 0.0301 0.0294
1.9 0.0287 0.0281 0.0274 0.0268 0.0262 0.0256 0.0250 0.0244 0.0239 0.0233
2 0.0228 0.0222 0.0217 0.0212 0.0207 0.0202 0.0197 0.0192 0.0188 0.0183
2.1 0.0179 0.0174 0.0170 0.0166 0.0162 0.0158 0.0154 0.0150 0.0146 0.0143
2.2 0.0139 0.0136 0.0132 0.0129 0.0125 0.0122 0.0119 0.0116 0.0113 0.0110
2.3 0.0107 0.0104 0.0102 0.0099 0.0096 0.0094 0.0091 0.0089 0.0087 0.0084
2.4 0.0082 0.0080 0.0078 0.0075 0.0073 0.0071 0.0069 0.0068 0.0066 0.0064
2.5 0.0062 0.0060 0.0059 0.0057 0.0055 0.0054 0.0052 0.0051 0.0049 0.0048
2.6 0.0047 0.0045 0.0044 0.0043 0.0041 0.0040 0.0039 0.0038 0.0037 0.0036
2.7 0.0035 0.0034 0.0033 0.0032 0.0031 0.0030 0.0029 0.0028 0.0027 0.0026
2.8 0.0026 0.0025 0.0024 0.0023 0.0023 0.0022 0.0021 0.0021 0.0020 0.0019
2.9 0.0019 0.0018 0.0018 0.0017 0.0016 0.0016 0.0015 0.0015 0.0014 0.0014
3 0.0013 0.0013 0.0013 0.0012 0.0012 0.0011 0.0011 0.0011 0.0010 0.0010

ECM2102 2015-16 6
Critical values of t
Level of significance for one-tailed test
0.10 0.05 0.025 0.01 0.005 0.001
Level of significance for two-tailed test
0.20 0.10 0.05 0.02 0.01 0.002

1. 3.078 6.314 12.706 31.821 63.657 318.313

2. 1.886 2.920 4.303 6.965 9.925 22.327
3. 1.638 2.353 3.182 4.541 5.841 10.215
4. 1.533 2.132 2.776 3.747 4.604 7.173
5. 1.476 2.015 2.571 3.365 4.032 5.893
6. 1.440 1.943 2.447 3.143 3.707 5.208
7. 1.415 1.895 2.365 2.998 3.499 4.782
8. 1.397 1.860 2.306 2.896 3.355 4.499
9. 1.383 1.833 2.262 2.821 3.250 4.296
10. 1.372 1.812 2.228 2.764 3.169 4.143
11. 1.363 1.796 2.201 2.718 3.106 4.024
12. 1.356 1.782 2.179 2.681 3.055 3.929
13. 1.350 1.771 2.160 2.650 3.012 3.852
14. 1.345 1.761 2.145 2.624 2.977 3.787
15. 1.341 1.753 2.131 2.602 2.947 3.733
16. 1.337 1.746 2.120 2.583 2.921 3.686
17. 1.333 1.740 2.110 2.567 2.898 3.646
18. 1.330 1.734 2.101 2.552 2.878 3.610
19. 1.328 1.729 2.093 2.539 2.861 3.579
20. 1.325 1.725 2.086 2.528 2.845 3.552
21. 1.323 1.721 2.080 2.518 2.831 3.527
22. 1.321 1.717 2.074 2.508 2.819 3.505
23. 1.319 1.714 2.069 2.500 2.807 3.485
24. 1.318 1.711 2.064 2.492 2.797 3.467
25. 1.316 1.708 2.060 2.485 2.787 3.450
26. 1.315 1.706 2.056 2.479 2.779 3.435
27. 1.314 1.703 2.052 2.473 2.771 3.421
28. 1.313 1.701 2.048 2.467 2.763 3.408
29. 1.311 1.699 2.045 2.462 2.756 3.396
30. 1.310 1.697 2.042 2.457 2.750 3.385
31. 1.309 1.696 2.040 2.453 2.744 3.375
32. 1.309 1.694 2.037 2.449 2.738 3.365
33. 1.308 1.692 2.035 2.445 2.733 3.356
34. 1.307 1.691 2.032 2.441 2.728 3.348
35. 1.306 1.690 2.030 2.438 2.724 3.340
36. 1.306 1.688 2.028 2.434 2.719 3.333
37. 1.305 1.687 2.026 2.431 2.715 3.326
38. 1.304 1.686 2.024 2.429 2.712 3.319
39. 1.304 1.685 2.023 2.426 2.708 3.313
40. 1.303 1.684 2.021 2.423 2.704 3.307
60. 1.296 1.671 2.000 2.390 2.660 3.232
80. 1.292 1.664 1.990 2.374 2.639 3.195

ECM2102 2015-16 7
Table of critical values of Chi-squared
Area to the right of the Critical Value
Degrees of
Freedom 0.995 0.99 0.975 0.95 0.9 0.1 0.05 0.025 0.01 0.005
1 0 0 0.001 0.004 0.016 2.706 3.841 5.024 6.635 7.879
2 0.01 0.02 0.051 0.103 0.211 4.605 5.991 7.378 9.21 10.597
3 0.072 0.115 0.216 0.352 0.584 6.251 7.815 9.348 11.345 12.838
4 0.207 0.297 0.484 0.711 1.064 7.779 9.488 11.143 13.277 14.86
5 0.412 0.554 0.831 1.145 1.61 9.236 11.07 12.833 15.086 16.75
6 0.676 0.872 1.237 1.635 2.204 10.645 12.592 14.449 16.812 18.548
7 0.989 1.239 1.69 2.167 2.833 12.017 14.067 16.013 18.475 20.278
8 1.344 1.646 2.18 2.733 3.49 13.362 15.507 17.535 20.09 21.955
9 1.735 2.088 2.7 3.325 4.168 14.684 16.919 19.023 21.666 23.589
10 2.156 2.558 3.247 3.94 4.865 15.987 18.307 20.483 23.209 25.188
11 2.603 3.053 3.816 4.575 5.578 17.275 19.675 21.92 24.725 26.757
12 3.074 3.571 4.404 5.226 6.304 18.549 21.026 23.337 26.217 28.3
13 3.565 4.107 5.009 5.892 7.042 19.812 22.362 24.736 27.688 29.819
14 4.075 4.66 5.629 6.571 7.79 21.064 23.685 26.119 29.141 31.319
15 4.601 5.229 6.262 7.261 8.547 22.307 24.996 27.488 30.578 32.801
16 5.142 5.812 6.908 7.962 9.312 23.542 26.296 28.845 32 34.267
17 5.697 6.408 7.564 8.672 10.085 24.769 27.587 30.191 33.409 35.718
18 6.265 7.015 8.231 9.39 10.865 25.989 28.869 31.526 34.805 37.156
19 6.844 7.633 8.907 10.117 11.651 27.204 30.144 32.852 36.191 38.582
20 7.434 8.26 9.591 10.851 12.443 28.412 31.41 34.17 37.566 39.997
21 8.034 8.897 10.283 11.591 13.24 29.615 32.671 35.479 38.932 41.401
22 8.643 9.542 10.982 12.338 14.041 30.813 33.924 36.781 40.289 42.796
23 9.26 10.196 11.689 13.091 14.848 32.007 35.172 38.076 41.638 44.181
24 9.886 10.856 12.401 13.848 15.659 33.196 36.415 39.364 42.98 45.559
25 10.52 11.524 13.12 14.611 16.473 34.382 37.652 40.646 44.314 46.928
26 11.16 12.198 13.844 15.379 17.292 35.563 38.885 41.923 45.642 48.29
27 11.808 12.879 14.573 16.151 18.114 36.741 40.113 43.195 46.963 49.645
28 12.461 13.565 15.308 16.928 18.939 37.916 41.337 44.461 48.278 50.993
29 13.121 14.257 16.047 17.708 19.768 39.087 42.557 45.722 49.588 52.336
30 13.787 14.953 16.791 18.493 20.599 40.256 43.773 46.979 50.892 53.672
40 20.707 22.164 24.433 26.509 29.051 51.805 55.758 59.342 63.691 66.766
50 27.991 29.707 32.357 34.764 37.689 63.167 67.505 71.42 76.154 79.49
60 35.534 37.485 40.482 43.188 46.459 74.397 79.082 83.298 88.379 91.952
70 43.275 45.442 48.758 51.739 55.329 85.527 90.531 95.023 100.425 104.215
80 51.172 53.54 57.153 60.391 64.278 96.578 101.879 106.629 112.329 116.321
90 59.196 61.754 65.647 69.126 73.291 107.565 113.145 118.136 124.116 128.299
100 67.328 70.065 74.222 77.929 82.358 118.498 124.342 129.561 135.807 140.169

ECM2102 2015-16 8
Table of critical values of F Distribution

ECM2102 2015-16 9
Table of critical values of F Distribution (Continued)

ECM2102 2015-16 10
 Critical Values of the Pearson Correlation Coefficient r
n = 0.05 = 0.01
4 0.95 0.99
5 0.878 0.959
6 0.811 0.917
7 0.754 0.875
8 0.707 0.834
9 0.666 0.798
10 0.632 0.765
11 0.602 0.735
12 0.576 0.708
13 0.553 0.684
14 0.532 0.661
15 0.514 0.641
16 0.497 0.623
17 0.482 0.606
18 0.468 0.59
19 0.456 0.575
20 0.444 0.561
21 0.433 0.549
22 0.423 0.537
23 0.413 0.526
24 0.404 0.515
25 0.396 0.505
26 0.388 0.496
27 0.381 0.487
28 0.374 0.479
29 0.367 0.471
30 0.361 0.463
35 0.334 0.43
40 0.312 0.403
45 0.294 0.38
50 0.279 0.361
60 0.254 0.33
70 0.235 0.306
80 0.22 0.286
90 0.207 0.27
100 0.197 0.256
200 0.139 0.182
300 0.113 0.149
400 0.098 0.129
500 0.088 0.115
1000 0.062 0.081

ECM2102 2015-16 11
 Statistics Formula Sheet
Descriptive Probability
Statistics
Arithmetic Complementary
() + () = 1
Mean = Events

Mean (. ) Addition Rule ( ) = () + () ( )
(Frequency = (OR)
Distribution)
Weighted (. ) Multiplication ( ) = () (|)
Mean = Rule (AND)
- Dependent

Standard Multiplication ( ) = () ()
Deviation (x x)2 Rule (AND)
(sample) s= - Independent
n1
Standard
()2
Permutations !
= =
Deviation
(population) ( )!

where: =

Standard Combinations !
Deviation [( )2 ] =
(Frequency = ( )! !
Distribution)
Law of Total
probability
() = (|) () + (| ) ( )
Bayes (| ) ( )
Theorem ( |) =
(|1) (1 ) + (|2) (2 ) + + (| ) ( )
Where
1 , 2 , , [1, ]
(1 ) + (2 ) + ( ) + + ( ) = 1
z Score z Score

(population) = (sample)
=

Discrete Distributions
Mean of a Binominal !
probability = [. ()] Probability () = . .
distribution Formula ( )! !
Variance of a Mean and
probability Standard
=
2
distribution Deviation
(Binominal
= [( )2 . ()] Distribution) =

Standard Poisson .
Deviation of a Distribution () = Where: e = 2.71828
probability = [( )2 . ()] Formula
!
distribution
Expected Value Standard
= [. ()] Deviation =
(Poisson
Distribution)
Continuous Distributions
Normal 1 2 z Tables
Distribution 2(
)
=
=
2

ECM2102 2015-16 12
Normal as
Approx. to Where =
Binominal

Estimating, Sample Sizing and Hypothesis tests

Confidence

Two
z
p1 p2 p1 p2
Intervals 2 < < + 2 Proportions
pq pq
(proportion)

n1 n2
Estimating a Margin of Error
Population 2 < < + 2 ( known) = 2
Mean (with
known)
Student t Chi-Square ( 1) 2 F Distribution
Distribution Distribution
2 = 2
Where s1 is the larger of
2 the two sample variances
Estimating a Margin of Error
= 2

df= n-1
Population 2 ( ) < < + 2 ( ) ( not known)
Mean (with
not known)
Constructing
( 1) 2 ( 1) 2 Two dependent
d d
a confidence 2
< < (Related)
t df= n-1
interval for
Variance
2 2 samples
sd / n

( X 1 X 2 ) ( 1 2 ) ( X 1 X 2 ) ( 1 2 )
Independent
Samples
where
t Independent
t
1 2 and s12 s22 s 2p s 2p

Samples

Unknown
1
n n2
where
n n
1 = 2 and
Unknown
1 2

Where: df = smaller of n1 1 and n2 1 df = n1 + n2 - 2

(n1 1) s12 (n2 1) s 22
Independent
Where:
s
Samples with 2
1 and 2
n1 n2 2
p
known

Correlation
Linear
Correlation
( ) ( )( )
Coefficient =
( 2 ) ( )2 ( 2 ) ( )2

Regression
Regression
Equation
= 0 + 1 Residuals

Slope
( )( )( ) or:
1 = 1 =
( 2 )( )2

( )( 2 ) ( )( ) 0 = 1
y-intercept or:
0 =
( 2 ) ( )2

ECM2102 2015-16 13
 Economics Formula Sheet
Supply and
Demand
Price % Total = .
Elasticity of = consumer
Demand % expenditure

Price %
Elasticity of =
Supply %
Index
numbers
Price Index Consumption
( ) 100 Index ( ) 100

Laspeyres Paasches
index 100 index 100

Inflation/
Deflation =

effects
Cost
Estimation
Factor
technique = +

Parametric
Cost
Estimation
Power-Sizing Learning = ( )
Technique = ( ) Curve
where
log
=
log 2
Project
Evaluation
Present Future Worth
Worth
=
(%) = (1 + ) (1 + )
=0

Annual (%) = (%)

Worth
or
(1 + )
=
(1 + ) 1
or

=
(1 + ) 1

ECM2102 2015-16 14
 Appendix of Q2

Sample Table1
Tablet Selected Details
Galaxy Tab 3 Lite Item Weight 281 g
Product Dimensions 11.6 x 1 x 19.3 cm
Batteries: 1 Lithium ion batteries required. (included)
Screen Size 7 inches
RAM Size 1 GB
Number of USB 2.0 Ports 1
Lithium Battery Energy Content 12.96 watt*hours

Fusion 5 Octa Core Quad Core 8x1.3 GHz

Screen size 10.1'' 1024*600
RAM - 1GB
Internal Storage - 16GB (Part of Storage is pre-occupied
by Android OS)
Dual Camera (Front - 0.3MP and Rear - 1.3MP)
Wireless N (802.11b/g/n), HDMI and Bluetooth
G-sensor

it 7 Octa Core HD IPS Fast quad-core processor

Front and rear-facing cameras,
USB port, Bluetooth, WIFI, 3G compatible HDMI.
FM RADIO and inbuilt GPS for navigation
16gb storage with 1gb Ram
Screen size: 7" HD display-Crisp

Lenovo A10-70 Item Weight 544 g

Product Dimensions 26.4 x 1 x 17.8 cm
Screen Size 10.1 inches
Processor Speed 1.3 GHz
RAM Size 1 GB
Hard Drive Size 16 GB
Average Battery Life (in hours) 8 hours
Lithium Battery Energy Content 23.46 watt_hours

1
All information derived from amazon.co.uk

ECM2102 2015-16 15
 Appendix of Q3

Empty Gantt chart for Question 3

ECM2102 Examination 2016 Candidate No. .

Task Duration 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 22 24 25 26 27 28 29 30 31 32 33 34
(weeks)
A 2
B 3
C 5
D 7
E 6
F 4
G 7
H 3
I 7
J 4
K 2
L 5
M 4
N 2

ECM2102 2015-16 16
ECM2102 2015-16 17
ECM2102 MAIN EXAM SUMMER 2016

MARKING SCHEME
Section A

a) (3 marks)

A statistic is a measurement describing some characteristic of a sample, whereas a parameter

is a measurement describing some characteristic of a population (2 marks). During statistical
implementation, a statistic can be used to estimate the corresponding parameter if the later
one is unknown (1 mark).

b) (8 marks)

:
1: Box 1 is selected
2: Box 2 is selected
3: Box 3 is selected

A: Component-A is selected from the selected box

B: Component-B is selected from the selected box

Based on Bayes Theorem,

(|2 )(2)
(2|) = (2 )
(|1)(1) + (|2 )(2 ) + (|3 )(3 )

1 1 1
(1 ) = , (2 ) = , (3 ) = (1 marks)
3 3 3
1 6 3 3 1
(|1) = , (|2 ) = = , (|3) = = (3 )
2 8 4 9 3
3 1 1
(2|) = 43 = 4 = 108 0.474 (2 )
1 1 1 3 1 1 57 228
+ +
3 2 3 4 3 3 108

c) (6 marks)

The best route amongst the two options will be the route which has a higher probability of
actual time spent from city A to city B smaller than or equals to 65 minutes (1 mark).
6555
Route 1: 1 ( 65) = ( ) = ( 1) = 1 0.159 = 0.841 (2 marks)
10

6560
Route 2: 2 ( 65) = ( ) = ( 1.25) = 1 0.106 = 0.894 (2 marks)
4

Because1 < 2 , Route 2 is therefore the best option. (1 mark)

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d) (8 marks)
i. (4 marks)
Because the population is normally distributed and for the population is unknown, we
will use the Student t distribution to estimate the confidence interval of the population
mean.
= 30, = 1 = 29
A 95% confidence level corresponds to = 0.05
In a two tailed test, the critical value of = 0.025 = 2.045 (2 mark)
2

3.6
= /2 = 0.025 = 2.045 0.657 1.344 (1 mark)
30

< < +
26.456 < < 29.144 (1 mark)
ii. (4 marks)
Using Chi-square distribution to estimate the confidence limits of population variance
= 30, = 1 = 29
A 95% confidence level corresponds to = 0.05
By checking Chi-square table,
2 = 16.047, 2 = 45.722, (2 mark)
( 1)2 2 <
( 1)2
< (1 )
2 2
293.62 293.62
45.722
< 2 < 16.047
===> 8.22 < 2 < 23.421 (1 marks)
Question 2

a) Market segmentation involves dividing a broad target market into subsets of consumers
who have common needs and priorities, and designing to target them. It is used to identify the
target customers of a particular product. (3 marks)
Examples should be supplied by the student of competing wristwatch products, and why
these are competitors by reference to the target market for the wristwatches in question. (3
marks)
b) Product differentiation distinguishes a product or service from others, to make it more
attractive to a particular target market. It involves differentiating it from competitors'
products as well as a firm's own products, with the overall objective being to develop a
position that potential customers see as unique. (3 marks)
Examples should be supplied by the student of competing wristwatch products which are
differentiated, such as sports watches, leisure watches, diving watches, occupation watches
(pilots watches, or nurses watches) etc. and explain why these different market segments may
have differing requirements from wristwatches. (3 marks)
c) In Matrix Analysis a matrix of all the features of comparable competitor products (vertical
axis), against model features (horizontal axis) is given. These are then summed simply and

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represented graphically on the right-hand side of the matrix. A profile of features is thus
obtained. (3 marks)
Matrix analysis might be used to determine the PDS for a new entry into a particular segment
of the market by comparing and contrasting the features of competitors product against
proposed draft design, or be used to collect a set of idealized features for a specification to be
constructed. (2 marks)
Example should be supplied by the student of competing wristwatch products in a matrix
analysis, maybe using the appendix as a reference for this. (2 marks)
d) Parametric Analysis gains insights into the make-up and interrelationships between the
parameters inherent in the product under consideration. In this case the parameter of interest
is price. This could be used to plot simple graphs that show the relationship of particular
product features against the selling price for that product. The result can be used to create
generic conclusions about likely price-ranges for a particular PDS. (3 marks)
Examples should be supplied by the student of parametric analysis plots and the drawing of
conclusions from them. One parameter in this analysis must be price. The student may wish
to use the information in the appendix to show this. (3 marks)

Section B

Question 3

a) (14 marks)
Total duration of project: 33 weeks (6 marks)
Critical path: A-B-C-D-G-H-M-N (8 marks)
b) (21 marks)
Students must calculate the following to determine the results. (each correct cell is 0,3 marks)

Activity ES EF LS LF Slack
A 0 2 0 2 0
B 2 5 2 5 0
C 5 10 5 10 0
D 10 17 10 17 0
E 10 16 12 18 2
F 16 20 18 22 2
G 17 24 17 24 0
H 24 27 24 27 0
I 10 17 15 22 5
J 20 24 22 26 2
K 24 26 29 31 5
L 24 29 26 31 2
M 27 31 27 31 0
N 31 33 31 33 0

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c) Gantt chart (15 marks)
(1 mark for each activity correctly positioned and related = 14 marks)
Critical path is in red (1 mark)

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Question 4

a) Inflation = it refers to a general rise in the level of prices throughout the economy. If
aggregate demand rises substantially, then firms are likely to respond by raising their
prices, resulting in inflation. (5 marks)
Consumer Prices Index = the average of prices for a given class of goods or services in a
given region, during a given interval of time. It is designed to compare how these prices,
taken as a whole, differ between time periods or geographical locations. (6 marks)
Interest rate = the cost of borrowing money or the return for investing money. (4 marks)
b) Bank of England is UKs central bank. It oversees the whole monetary system and
ensures that banks and other financial institutions operate as stably and as efficiently as
possible. It acts as the governments agent, both as its banker and in carrying out
monetary policy. (6 marks)
Its functions are: it issues banknotes and it acts as a bank:
To government (two accounts: The Exchequer (taxes and government spending),
and National Loans Fund (government borrowing and lending)) (2 marks)
To banks (they hold operational balances for mainstream banks, to provide a source
of liquidity) (2 marks)
To overseas central banks (holds deposits made by authorities in other countries as
part of their official reserves, or to influence the exchange rate of their currency). (2
marks)
c) In past decade, soaring oil consumption in emerging countries like China and
conflicts in key oil nations like Iraq kept oil prices high. These high prices spurred
companies in the US and Canada to start drilling for new, hard-to-extract crude in
North Dakota's shale formations or Alberta's oil sands. (6 marks)
Demand for oil in places like Europe, Asia, and the US began tapering off, thanks to
weakening economies and new efficiency measures. (2 marks)
d) The food retail market has the characteristics of an oligopolistic competition (2 marks).
This occurs when just a few firms share a large proportion of the industry (2 marks).
Because products are fairly similar, when one company lowers prices, others are often
forced to follow suit to remain competitive (2 marks).
e)
i. (3 marks)

The two samples are independent with each other because they are collected from
two populations. (1 mark)
The standard deviations (1 , 2 ) for the two populations are unknown and there is no
evidence for us to assume 1 = 2 . (1 mark)

Therefore the Test Statistic for this hypothesis test will be

( X 1 X 2 ) ( 1 2 )
t (1 mark)
s12 s22

n1 n2

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 ii. (6 marks)

1 = 25,
1 = 105, 1 = 10, 1 = 1
2 = 18,
2 = 110, 2 = 8, 2 = 2

0 : 1 = 2 1 : 1 2 (1 mark)

(105110)0
= 2 2
1.819 (1 mark)
10 +8
25 18

= min[(1 1), (2 1)] = min[24, 17] = 17

= 0.05, the critical value of = 2.110 (2 mark)
Because the absolute value of the test statistic calculated is smaller than the critical
value, there is no sufficient evidence to reject the hypothesis of 0 . Therefore, at 5%
significance level there is no significant difference between the mean diameters of
pebbles produced by the two production lines. (2 mark)

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