HBE 2303

W1-2-60-1-6
JOMO KENYATTA UNIVERSITY
OF
AGRICULTURE AND TECHNOLO7GY
University Examinations 2018/2019
THIRD YEAR FIRST SEMESTER EXAMINATION
FOR THE DEGREE OF BACHELOR OF ECONOMICS
HBE 2303: ADVANCED STATISTICS FOR ECONOMISTS
DATE: DECEMBER 2018 TIME: 2 HOURS
INSTRUCTIONS: ANSWER QUESTION ONE AND ANY OTHER TWO
QUESTIONS

Question One (30 Marks)

a) What are the errors in hypothesis testing? (2 Marks)

b) The data below shows the years of on–the–job experience and amount of monthly
wages received by workers of a company in July 2018:

Worker 1 2 3 4 5 6 7 8 9 10
Experience 8 11 12 17 21 15 19 22 14 21
Wages 67 114 144 130 157 147 167 243 122 219
(Kshs.000)

(i) Develop a scatter diagram with on–the–job experience on x – axis. (2 Marks)

(ii) What does the scatter diagram developed in part (i) indicate about the
relationship between the two variables? (2 Marks)

(iii) Use the least squires method to develop the estimated regression equation.
(6 Marks)

(iv) Provide an interpretation for the slope of the estimated regression equation.
(2 Marks)

(v) What is the expected monthly wage of a worker with three years of on–the–job
experience? (2 Marks)

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(vi) Find and interpret the coefficient of determination for the estimated regression
in (iii) above. (3 Marks)

(vii) Use the regression equation estimated in (iii) above to estimate the years of
on–the –job experience of a worker if the worker received a monthly salary of
Kshs. 266, 000 in July 2018. (3 Marks)

c) With reference to sampling differentiate between the following terms: (8 Marks)

(i) Simple random sample and random sample

(ii) Quantitative and qualitative data

(iii) Finite population and infinite population

(iv) Sample and population

Question Two (20 Marks)

a) What is the difference between coefficient of determination and correlation

coefficient? Which one is a better measure than the other? Why? (3 Marks)

b) A random variable X represents the time in minutes between incoming trucks at the
busy Thika Highway. Suppose that a reasonable probability model for x is given by
the pdf:

(i) Show that the distribution satisfies the properties of a pdf. (3 Marks)

(ii) Find the probability that the time between successive trucks is atleast 1 minute.
(4 Marks)

c) Consider the distribution: (10 Marks)

Evaluate:

(i) E (x)

(ii) E (x2)

(iii) Var (x)

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(iv) E (6x + 3x2)

Question Three (20 Marks)

a) The estimated regression equation below shows the relationship between house rental
price (measured in Kshs.) room size (measured in square feet) and the number of
bedrooms for a certain city of Kenya:

Price = 4245.84 + 0.553 sqrft + 610.87 bdrms + μ

(26.71) (0.23) (108.13)
2
n = 26 R = 0.542

(i) Interpret the intercept in this equation. (2 Marks)

(ii) Interpret the values of R – squared (2 Marks)

(iii) State the null and alternative hypothesis and test the significance of the
parameters of the regression equation above at 5% significance level.
(6 Marks)

(iv) What is the predicted price of a 3 bedroom house with an estimated area of 500
square feet? (2 Marks)

(v) Construct 95% confidence interval for the parameters and state the degrees of
freedom. (2 Marks)

(vi) Illustrate the equation by use of a graph. (2 Marks)

b) Consider the distribution:

0 < x < ∞, c ≠ 0, c > 0

Find the moments generating function of x. (4 Marks)

Question Four (20 Marks)

a) With reference to sampling, clearly discuss the sampling techniques used in research.
(10 Marks)

b) A vector (x, y) is continuous with joint pdf given as:

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(i) Find the value of α (2 Marks)

(ii) Find the marginal pdf’s of x and y (4 Marks)

(iii) Find P (x ≥ ½ , y < ¾ ) (4 Marks)