part(9)

From page (91) to page (103)

Second Year - Descriptive Statistics -

2021-2022 - Dr. Moustafa Salem
09
Consider the following data on the respective masses X and Y
of a sample of 12 fathers and their oldest sons.
X 65 63 67 64 68 62 70 66 68 67 69 71
Y 68 66 68 65 69 66 68 65 71 67 68 70
(a) Compute the covariance.

a) b) c) d)
e) none of the above

(b) the correlation coefficient

a) b) c) d)
e) none of the above

(c) Find the correlation coefficient using the product

moment formula.
∑( ̅ )( ̅)
a)
√∑( ̅ ) √∑( ̅)
∑( ̅ )( ̅)
b)
√ ∑( ̅) √ ∑( ̅)
∑ ∑
∑
c)
(∑ ) (∑ )
√∑ √∑
∑ ∑ ∑
d)
√ ∑ (∑ ) √ ∑ (∑ )
e) None of the above

(d) Find the correlation coefficient using the short

computational formula.
∑( ̅ )( ̅)
a)
√∑( ̅ ) √∑( ̅)
∑( ̅ )( ̅)
b)
√ ∑( ̅) √ ∑( ̅)
∑ ∑
∑
c)
(∑ ) (∑ )
√∑ √∑

09
 ∑ ∑ ∑
d)
√ ∑ (∑ ) √ ∑ (∑ )
e) None of the above

(e) The coefficient of determination equal.

a) ( ) b) c) d) e)
none of the above

(f) The least squares equation to determine a linear

equation to express the relationship between the
two variables.
a) ̂
b) ̂
c) ̂
d) ̂
e) None of the above
(g) The Estimated value of Y when x=50

a) b) c) d) e) none
of the above

(h) Determine the standard error of estimate as a

measure of how well the values fit the
regression line.
a) b) c) d) e) none of
the above

∑ ∑
̅ ̅
(a) Covariance
∑( ̅)( ̅)

09
(b) The correlation coefficient using the product moment
formula:
∑( ̅)( ̅)
√∑( ̅) √∑( ̅) √ √

This shows that there is a strong linear correlation between the

variables.
(c) The correlation coefficient using the short computational
formula.
∑ ∑
∑

√∑ (∑ ) √∑ (∑ )

( )( )
( )

√( ( ) √( ( )
) )

This shows that there is a strong linear correlation between

the variables.
(d) ̂
∑ ∑ ∑ ∑ ( )( )
∑ (∑ ) ( ) ( )

̅ ̅
(e) ̂
∑ ∑ ∑
(f) √
( )( ) ( )( )
√

09
 Index Numbers
- An index number measures the relative change in
price, quantity, value, or some other item of interest
from one time period to another.
- A simple index number measures the relative change in
just one variable.

Example (1)

According to the Bureau of Labor Statistics, in January 1995

the average hourly earnings of production workers was $11.47.
In February 2006 it was $16.47.
What is the index of hourly earnings of production workers for
June 2006 based on January 1995?

An index can also compare one item with another.

Example (2)

The population of the Canadian province of British Columbia in

2004 was 4,196,400 and for Ontario it was 12,392,700. What
is the population index of British Columbia compared to
Ontario?

09
Example (3)

The following output shows the number of passengers (in

millions) for the five largest airports in the United States in
2004. What is the index for Atlanta, Chicago, Los Angeles, and
Dallas/Ft. Worth compared to Denver?

Why Convert Data to Indexes?

 An index is a convenient way to express a change in a diverse
group of items.
 Converting data to indexes also makes it easier to assess the
trend in a series composed of exceptionally large numbers.

09
 There are several ways we can combine the
items to determine the index.
 Unweighted Indexes
o Simple Average of the Price Indexes
o Simple Aggregate Index
Weighted Indexes
o Laspeyres Price Index (weighted with quantities)
o Paasche Price Index (weighted with quantities)
o Laspeyres quantity Index (weighted with Price)
o Paasche quantity Index (weighted with Price)
 Fisher’s Price Index
 Fisher’s quantity Index
 Value Index

Unweighted Indexes

Note
In simple average we get index for each item and then get
average but in simple aggregate index we get index to summation
of all item’s price.
09
 Simple Average

Simple Aggregate Index

09
 Weighted Indexes (VIP)

 Laspeyres
-Weighted with the base period.
 Paasche
-Weighted with the current period,

Laspeyres price Index

09
 Answer
Price-1995 Quantity-1995 Price-2005 Quantity-2005

77;; 97 77<= 99 88797 7<797

57<9 6: 57<8 67 8;7<8 8<757
77<< 576 5775 577 577776 <=7;:
578: 77 579: 87 8:7<7 877<7
579< 87 57;7 85 :<777 :7767
8787 56 87:6 56 99788 967<7
7:97: 77:75:
∑
∑

Paasche Index

Answer
Price-1995 Quantity-1995 Price-2005 Quantity-2005

77;; 97 77<= 99 88797 7<797

57<9 6: 57<8 67 8;7<8 8<757
77<< 576 5775 577 577776 <=7;:
578: 77 579: 87 8:7<7 877<7
579< 87 57;7 85 :<777 :7767
8787 56 87:6 56 99788 967<7
87879= 7:=7;7

∑
∑

00
 Fisher’s Ideal Index

 Laspeyres’ index tends to overweight goods whose prices

have increased. Paasche’s index, on the other hand, tends
to overweight goods whose prices have gone down.
 Fisher’s ideal index was developed in an attempt to
offset these shortcomings.

It is the geometric mean of the Laspeyres and

Paasche indexes.

Fisher’s Ideal Index

Determine Fisher’s “ideal” index for the data in the Table

With details

77;; 97 77<= 99
57<9 6: 57<8 67
77<< 576 5775 577
578: 77 579: 87
579< 87 57;7 85
8787 56 87:6 56
999
 ∑ ∑
√
∑ ∑

Value Index number

 A value index measures changes in both the price and
quantities involved.
 A value index, such as the index of department store sales,
needs the original base-year prices, the original base-year
quantities, the present-year prices, and the present year
quantities for its construction.
 Its formula is:

Example (4)

The prices and quantities sold at the Waleska Clothing

emporium for various items of apparel for May 2000 and May
2005 are:

What is the index of value for May 2005 using May 2000 as
the base period?
999
Example (5)

tem 1995 1995 2005 2005

price Quantity Price Quantity
Bread white cost per unit $0.77 50 $0.89 55
Eggs dozen 1.85 26 1.84 20
Milk gallon white .88 102 1.01 130
Apples red delicious 1 1.46 30 1.56 40
pound
Orange juice 12 oz 1.58 40 1.70 41
concentrate
Coffee 100% ground 1 4.40 12 4.62 12
pound
999
a. Determine the simple price index.
b. Determine the simple aggregate price indexes for
the two years.
c. Determine Laspeyres' price index.
d. Determine the Paasche price index.
e. Determine Fisher's ideal index.

Simple
index
$0.77 $0.89 115.5844 38.5 48.95 42.35 44.5
1.85 1.84 99.45946 48.1 36.8 37 47.84
.88 1.01 114.7727 89.76 131.3 114.4 103.02
1.46 1.56 106.8493 43.8 62.4 58.4 46.8
1.58 1.70 107.5949 63.2 69.7 64.78 68
4.40 4.62 105 52.8 55.44 52.8 55.44
10.94 11.62 336.16 404.59 369.73 365.6

∑
∑

∑
∑

∑
∑

∑ ∑
√
∑ ∑
√

999