Solution CT – 2: Business Statistics

1 (b) Da
y
Price Per Share (x) No. of Shares Purchased w× x
1 120 50 6000
2 105 80 8400
3 90 100 9000
∑ w=230 ∑ wx=23400
Average Price per day=Weighted Average=
∑ wx
∑w
23400
¿
230
Average Price per day=101.73

2 (a)
p q p q
Item p1q0 p0q0 p1q1 p0q1
0 0 1 1
A 1 6 5 8 30 6 40 8
B 2 7 4 7 28 14 28 14
C 3 8 3 6 24 24 18 18
D 4 9 2 5 18 36 10 20
--- --- --- --- --- --- --- --- ---

Total ∑ p1 q 0=100 ∑ p 0 q 0=80 ∑ p1 q 1=96 ∑ p 0 q 1=60

Laspeyre's Index
Number

P01=
∑ p1 q0 × 100
∑ p0 q0
100
¿ ×100
80
P01=125
Thus, there is a rise of (125-100) = 25% in prices

Paasche's Index Number

P01=
∑ p1 q1 × 100
∑ p0 q1
96
¿ × 100
60
P01=1 60
Thus, there is a rise of (160-100) = 60% in prices

2 (b)

Calculation of 3 year moving averages of the data

year Sale 3 year moving total 3 year moving average
 s (3)÷3
2008 200
2009 120 200+120+280=600 600÷3=200
2010 280 120+280+240=640 640÷3=213.33
2011 240 280+240+160=680 680÷3=226.67
2012 160 240+160+330=730 730÷3=243.33
2013 330 160+330+360=850 850÷3=283.33
2014 360 330+360+400=1090 1090÷3=363.33
2015 400 360+400+320=1080 1080÷3=360
2016 320 400+320+360=1080 1080÷3=360
2017 360 320+360+360=1040 1040÷3=346.67

2018 360

Sale
year 3 year moving average Error |Error| Error 2
s
2008 200
2009 120
2010 280
2011 240 200 240-200=40 40 1600
2012 160 213.33 160-213.33=-53.33 53.33 2844.44
2013 330 226.67 330-226.67=103.33 103.33 10677.78
2014 360 243.33 360-243.33=116.67 116.67 13611.11
2015 400 283.33 400-283.33=116.67 116.67 13611.11
2016 320 363.33 320-363.33=-43.33 43.33 1877.78
2017 360 360 360-360=0 0 0
2018 360 360 360-360=0 0 0
2019 346.67 Total 473.33 44222.22

Forecasting errors

1. Mean absolute error (MAE), also called mean absolute deviation (MAD)

MAE=
∑|Error|
n
473.33
¿
8
MAE=59.17

2. Mean squared error (MSE)

 ∑ |Erro r 2|
MSE=
n
44222.22
¿
8
MSE=5527.78
3. Root mean squared error (RMSE)

RMSE=√ MSE
¿ √ 5522.78
RMSE=74.35
3 (b)
Items p0 q 0 p1 q 1 p1 q0 p0 q 0 p1 q1 p0 q1
U 5 20 8 12 200 100 96 60
V 8 12 14 7 168 96 98 56
W 6 6 8 5 48 36 40 30

Total ∑ p1 q 0=416 ∑ p 0 q 0=232 ∑ p1 q 1=234 ∑ p 0 q 1=146

Time Reversal Test: Laspeyre's Index Number

To prove P01 × P10 =1

P01 × P10=
∑ p 1 q 0 × ∑ p0 q 1
∑ p 0 q0 ∑ p1 q 1
416 146
¿ ×
232 234
¿ 1.79 ×0.62=1.11
P01 × P10 ≠ 1
Time reversal test is not satisfied

Factor Reversal Test: Laspeyre's Index Number

To prove P01 × Q 01=

∑ p1q1
∑ p0q0
P01 × Q01=
∑ p1q0 × ∑ p0q1
∑ p 0 q 0 ∑ p0 q 0
416 146
¿ ×
232 232
¿ 1.79 ×1.62
P01 × Q01=1.11

∑ p1 q1 = 234 =1.008
∑ p 0 q0 232
 P01 × Q01 ≠
∑ p1q1
∑ p0q0
Factor reversal test is not satisfied

Time Reversal Test: Paasche’s Index Number

To prove P01 × P10 =1

P01 × P10=
∑ p 1 q 1 × ∑ p0 q 0
∑ p 0 q1 ∑ p1 q0
234 232
¿ ×
14 6 416
¿ 1.6 0 ×0. 56=0.896
P01 × P10 ≠ 1
Time reversal test is not satisfied

Factor Reversal Test: Paasche’s Index Number

To prove P01 × Q 01=

∑ p1q1
∑ p0q0
P01 × Q01=
∑ p 1 q 1 × ∑ p1 q1
∑ p 0 q 1 ∑ p1 q0
23 4 234
¿ ×
14 6 416
¿ 1.6 0 ×0.56
P01 × Q01=0.896

∑ p1 q1 = 234 =1. 01
∑ p 0 q0 232
P01 × Q01 ≠
∑ p1q1
∑ p0q0
Factor reversal test is not satisfied

Time Reversal Test: Fisher’s Index Number

To prove P01 × P10 =1

P01 × P10=
√ √
∑ p1 q 0 × ∑ p1 q1 × ∑ p0 q 1 × ∑ p 0 q0
∑ p0 q 0 ∑ p0 q1 ∑ p1 q 1 ∑ p1 q0

√ 416 234 146 232

× × ×
232 146 234 416
 P01 × P10=1
Time reversal test is satisfied

Factor Reversal Test: Fisher’s Index Number

To prove P01 × Q 01=

∑ p1q1
∑ p0q0

P01 × Q01=
√ √
∑ p1 q 0 × ∑ p1 q1 × ∑ p 0 q 1 × ∑ p1 q1
∑ p0 q 0 ∑ p0 q1 ∑ p0 q 0 ∑ p1 q0
¿
√ 416 2 34 146 234
× × ×
232 1 46 232 416
2 34
P01 × Q01=
232

∑ p1 q1 = 234
∑ p 0 q0 232
P01 × Q01=
∑ p1q1
∑ p0q0
Factor reversal test is satisfied