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ECON20003 – QUANTITATIVE METHODS 2

Second Semester, 2020
Assignment 2
Due date and time: Monday 28 September, 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
Monday 28 September. 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.
Students who intend to work on the assignment in pairs must register their
groups. To do so, click the “People” link and then the Groups tab in the
Canvas course navigation menu. The group names (set by default) are A2 1,
A2 2, A2 3 etc. Every assignment pair MUST register as one of these created
groups for submitting the assignment and not create a new group. The
deadline for registering your group is 5:00PM on Friday 18 September. 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. Paste your relevant R/RStudio scripts
and printouts in the document and 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.

ECON20003 Semester 2, 2020 Assignment 2

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Assignment Tasks and Questions

Exercise 1 (20 marks = 12 + 8)

A study of top executives’ midlife crises indicates that 45% of all top executives suffer
from some form of mental crisis in the years following corporate success. An executive
who had undergone a midlife crisis opened a clinic providing counseling for top
executives in the hope of reducing the proportion of executives who might suffer from
this problem. In a random sample of 135 executives who went through this counseling
program only 49 showed signs of midlife crisis eventually.

(a) Given this information, use R to test at the 5% significance level whether the
program is beneficial and indeed reduces the proportion of executives who show
signs of midlife crisis.

Specify the null and alternative hypotheses, report your observed test statistic,
make a statistical decision based on the p-value reported by R, and draw your
conclusion.

(b) Are the conditions required by the test you performed likely satisfied? Explain your
answer.

Exercise 2 (35 marks = 4 + 6 + 10 + 15)

The marketing manager at Hotel Bon Voyage, a chain of mid-market hotels, believes
that the company’s recent advertising campaign has significantly increased the
average occupancy rate at the hotels of the chain. To test this belief, a random sample
of daily occupancy rates (in percentages) before the advertising is collected. A similar
random sample of daily occupancy rates is collected after the advertising took place.
These two samples are saved in the a2e2.xlxs file.

(a) What is the variable of interest? Is it qualitative or quantitative? If it is qualitative,

is it ranked or unranked? If it is quantitative, is it discrete or continuous? What is
its level of measurement? Explain your answers.

(b) Which tests could be used to decide whether the data support the senior vice
president’s belief? Be precise and explain your choices.

(c) What are the required conditions of the tests in part (b)? Are they likely satisfied?
Explain your answer and present some1 reasonable evidence to support it.

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To spare time, this time you are not expected to use all possible checks to verify every assumption, it
is enough if you consider the strongest checks. If there is no relevant information available for a
particular requirement, just state so and assume that it is satisfied.

ECON20003 Semester 2, 2020 Assignment 2

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(d) Which of the tests in part (b) is the most appropriate to find out whether the data
support the marketing manager’s belief? Perform this test with R / RStudio at the
5% significance level.
Specify the null and alternative hypotheses, report your observed test statistic,
make a statistical decision based on the p-value reported by R, and draw your
conclusion.

Exercise 3 (45 marks = 10 + 6 + 20 + 9)

Four different processes for baking cakes commercially are considered. Eight different
cakes made of different ingredients are produced by each of the four processes and
are evaluated in terms of their overall quality on a scale of 0 to 100. Since the cakes
sometimes may not rise, these quality scores are not normally distributed.

To compare the four processes, four pieces of each type of cake are baked with the
four different processes. The resulting Quality scores are shown below and saved in
the a2e3.xlxs file.

Process1 Process2 Process3 Process4

Cake 1 87 65 73 20
Cake 2 98 60 39 45
Cake 3 85 70 50 60
Cake 4 90 80 85 50
Cake 5 78 40 60 45
Cake 6 95 35 70 25
Cake 7 70 60 55 40
Cake 8 99 70 45 60

(a) Which would be the most appropriate test to find out whether the four processes
differ in terms of the average Quality scores of the cakes? Explain your choice by
considering the research question, the experimental design, the type and
measurement scale of the variable of interest and any other relevant information.

(b) What conditions are required to validate the test you nominated in part (a)? Are
these conditions satisfied this time? Explain your answer.

(c) Using these data, perform the test nominated in part (a) at the 1% significance
level manually to find out whether the four processes are equally good. What are
your null and alternative hypotheses? State your decision rule, record the details
of your manual calculations, make a statistical decision and draw your conclusion.

(d) Repeat the test with R / RStudio. Does the printout support your statistical decision
in part (c)? If you were not given a level of significance, what conclusion could you
draw from the p-value on your printout?

ECON20003 Semester 2, 2020 Assignment 2