Random Motors Project
Submission
Name – Digvijay Singh Rajput
Q-1a) Formulate the null hypotheses to check whether the new models are
performing as per the desired design specifications.
For Rocinante36: For Marengo32:
Mileage HO : Car Milage = 22 Mileage HO : Car Milage = 15
km/ltr km/ltr
Top speed HO : Top Top speed HO : Top speed =
speed=140Km/h 210Km/h
Q-1b) Formulate the alternate hypotheses to check whether the new models
are performing as per the desired design specifications.
For Rocinante36: For Marengo32:
Mileage H1 : Car Mileage ≠ Mileage H1 : Car Mileage ≠
22km/ltr 15km/ltr
Top speed H1 : Top speed ≠
140km/hr Top speed H1 : Top speed ≠
240km/hr
Q-2) In order to comment on whether the design specifications are being
matched or not, perform relevant hypothesis tests and calculate the p-value for
each. What will you conclude? Assume you are performing the tests at 95%
confidence level.
For Rocinante36: Conclusion
Observation : We fail to reject the null
hypothesis for all 4 hypothesis as p-
p-value for mileage = 0.0829 value is > 0.05 for all the 4 cases
p-value for top speed = 0.4316
Conclusion : There is no sufficient
For Marengo32: evidence to reject the claim made by
the chief engineers on specifications of
p-value for mileage = 0.1342 Rocinante 36 and Marengo 36
p-value for top speed = 0.373
Q-3) You have learnt about the possible errors that might result from the
hypothesis tests. What type of error is more expensive for Random motors
based on the hypothesis they are testing? Why? Assume that you need to
refund all your customers if your cars deviate from specifications.
No Hypothesis Test is 100% Certain because the test is based
on probabilities therefore there is always a chance of making Reason:
an incorrect conclusion. If we assume null hypothesis if FALSE claim
When you conduct a hypothesis test 2 types of errors are
possible and we failed to reject null hypothesis we will
TYPE I ERROR AND TYPE II ERROR- Risk of these two errors are have chances of selling car models which
inversely related and Determined by the level of significance
and the power for the test are not as per specifications
The type of error which is more expensive:
Type 2 error is very expensive for company -
Type 2 is More expensive due to selling the cars which are not as per
specs due to recalling of cars from market
Q-4) Develop a regression equation for each model at 95 percent confidence
level. From the regression equation predict the sales of the two models.
Develop the regression equation for the Develop the regression equation for the
Rocinante models and Predict the number Marengo models and Predict the number of
of unit sales of Rocinante36 model? unit sales of Marengo32 model?
Regression coefficients: 50.72312718
Regression coefficients: -13.44764889
Price : 0.795026441 (p-value <0.05)
Mileage: 0.795026441 (p-value <0.05) Price: -0.186728172 (p-value <0.05)
Top speed : -0.018572564 (p-value >0.05) Mileage: 0.041301187 (p-value >0.05)
Equation: Y(Sales)=50.7231271792463 -
Top speed: 0.220801682 (p-value <0.05)
0.795026440875324*Price + Equation: Y(Sales)= -13.4476488883451 -
8.30633109237939*Mileage - 0.186728172116573*Price +
0.0413011869886482*Mileage +
0.0185725639929489* Top Speed 0.22080168203862*Top Speed
Predicted Sales(in units): 225297
Predicted Sales(in units): 25884
Q-5) Based on sales prediction, what is the overall predicted profit for
Rocinante36 model and Marengo32 model ?
Overall predicted profit
Rocinante36 Model: Rs 225297 lacks
Marengo32 Model: Rs 207075 lacks
Q-6) As a CEO, you wish to invest only in the model which is predicted to be
more profitable. Which model among Rocinante36 and Marengo32 will you
invest in?
Which model you will invest in?
Since the predicated profit for Rocinante36 is Rs 227897 lacs is higher As
compared to predicted profit of Marengo Rs 202119 lacs.
The decision to invest in Rocinante36 is based in higher profits
So I will invest in Rocinante36 as it is giving higher profits
Q-7) Now you must have derived the regression equation for both models, Rocinante and
Marengo. Now if you increase the price of Rocinante36 and Marengo32 by 1 lac rupees
each, which car will have a higher impact on the sales due to increase in price? Give proper
logic for your answer. You can consider that all other specifications such as mileage and top
speed remain the same for both models.
Which car is most affected by a price increase? Why?
With an increase of price of Rs 1 lack for each model the figures will change as below in
table
Sales Parameter Marengo Rocenate
Old Sales 25884 227897.2261 Units
New Sales 25698 227102.1997 Units
Difference in sales -187 -795.026441 Units
As we can see that die to increase in price Rocinanate 32 sales figure will drop
substantially (by 795 units) as compared to Marengo (by 187 units)
Q-8) After developing the regression equation for both models (Rocinante and Marengo), if you
analyse the p values for coefficients in the regression results, you will notice that some of the
regression variables (top speed, mileage and price) are insignificant. Remove the insignificant
regression variables from your selection and rebuild the regression model using only significant
variables. Compare the Adjusted R square value for the new and old regression model. Do you
notice any change in Adjusted R square value? If yes, explain the reason for the change.
Is there a change on Adjusted R square Value? If so, Why?
Adjusted R Square Value
With All variables With Insignificant Variables Removed
Rocenate 0.995356039 0.995447556
Marengo 0.84787522 0.853091209
In the new regression model there is a slight increase in Adjusted R square values for both the
models. Considering only significant independent variables in the new regression model shows that
it is improving the adjusted R square value because the adjusted R square value increases when the
considered independent variable is improving the model
