ADDITIONAL MATHEMATICS PROJECT WORK 2013 SELANGOR (PROJECT 2)

INTRODUCTION History of Index Number Index numbers are meant to study the change in the effects of such factors which cannot be measured directly. According to Bowley, Index numbers are used to measure the changes in some quantity which we cannot observe directly. For example, changes in business activity in a country are not capable of direct measurement but it is possible to study relative changes in business activity by studying the variations in the values of some such factors which affect business activity, and which are capable of direct measurement. Index numbers are commonly used statistical device for measuring the combined fluctuations in a group related variables. If we wish to compare the price level of consumer items today with that prevalent ten years ago, we are not interested in comparing the prices of only one item, but in comparing some sort of average price levels. We may wish to compare the present agricultural production or industrial production with that at the time of independence. Here again, we have to consider all items of production and each item may have undergone a different fractional increase (or even a decrease). How do we obtain a composite measure This composite measure is provided by index numbers which may be defined as advice for combining the variations that have come in group of related variables over a period of time, with a view to obtain a figure that represents the result of the change in the constitute variables. Index numbers may be classified in terms of the variables that they are intended to measure. In business, different groups of variables in the measurement of which index number techniques are commonly used are (i)price, (ii) quantity, (iii) value and (iv) business activity. Thus, we have index of wholesale prices, index of consumer prices, index of industrial output, index of value of exports and index of business activity, etc. Here we shall be mainly interested in index numbers of prices showing changes with respect to time, although methods described can be applied to other cases. In general, the present level of prices is compared with the level of prices in the past. The present period is called the current period and some period in the past is called the base period. Index Numbers Index numbers are statistical measures designed to show changes in a variable or group of related variables with respect to time, geographic location or other characteristics such as income, profession, etc. A collection of index numbers for different years, locations, etc., is sometimes called an index series. Simple Index Number A simple index number is a number that measures a relative change ina single variable with respect to a base. Composite Index Number

A composite index number is a number that measures an average relative changes in a group of relative variables with respect to a base.

PART 1 (a) Describe in brief (i) price index, (ii) weightage, (iii) composite index. Answer : Price index : an index number expressing the level of a group of commodity prices relative to the level of the prices of the same commodities during an arbitrarily chosen base period and used to indicate changes in the level of prices from one period to another. Weightage : the assignment of a quota (as of members of a legislature) to a particular segment of the population as a special favor or concession in a proportion above that allowable on a strictly numerical basis

(iii) Composite index : A grouping of equities, indexes or other factors combined in a standardized way, providing a useful statistical measure of overall market or sector performance over time.

(b) State four ways of weightage representations. Find the examples of the representations using internet or any printed materials. Answer : Ways to represent weightage :

Pie chart

Bar graph

Line graph

Histogram

PART 2 We often hear complaints from the public about inflation. It causes an increase in the household expenditure in a family. The household expenditure for every family is different. a) Complete Table 1 for your family's monthly expenditure for the year 2013.

Answer: Average Monthly Expenditure for the year 2013 (to the nearest RM) 1200 Percentage of monthly expenses (to the nearest %) 20.0

Monthly salary

Number of family members

Item

Food Accomodation (Rental / Loan)

240

4.0

Transportation (Petrol/ Loan / Bus fare etc)

600

10.0

Clothing RM 6000 5 Education Recreation Utilities (Water / Electricity / Telephone)

240 1500 210

4.0 25.0 3.5

210

3.5

Medication Miscellaneous TOTAL

300 1500 6000

5.0 25.0 100

Table 1 (b) If we want to compare the cost of living from one year to another, we have to calculate the price index that involves some of the items mentioned above. (i) In order to calculate the price index of all the items above, we have to consider the average monthly expenses of any previous year as the base year. Select the appropriate year as the base year. Answer: Item Average Monthly Expenditure for the base year 2008 (RM) 700 200

Food Accomodation (Rental / Loan) Transportation (Petrol/ Loan / Bus fare etc) Clothing Education Recreation Utilities (Water / Electricity / Telephone) Medication Miscellaneous TOTAL

450

120 1000 150 180

200 1000 4000

(ii) Hence, complete Table 2 below: Answer: Average monthly expenses for the year 2008 as the base year (RM) 700 Average monthly expenses for the year 2013 (RM)

Item

Food Accomodation (Rental / Loan) Transportation (Petrol / Loan / Bus fare etc)

1200

200

240

450

600

Clothing

120

240

Education

1000

1500

Recreation Utilities (Water / Electricity / Telephone) Medication

150

210

180

210 300

200 Miscellaneous 1000 TOTAL 4000 Table 2 6000 1500

(c) ( i) Complete Table 3 based on the above information. Item Price indices for the year 2013 based on the year 2008 171.43

Weightage 20.0

Food Accomodation (Rental / Loan)

120.00

4.0

Transportation (Petrol / Loan / Bus fare etc)

133.33

10.0

Clothing

200.00

4.0

Education

150.00

25.0

Recreation Utilities (Water / Electricity / Telephone)

140.00

3.5

116.67

3.5

Medication

150.00

5.0

Miscellaneous

150.00

25.0

TOTAL Table 3 Formula to calculate price index :

1331.43

100

( ii)

Hence, calculate the composite index for the average monthly expenditure in the year 2013 based on the selected base year.

Answer : Formula to calculate composite index :

(171.43 X 20) + (120 X 4) + (133.33 X 10) + (200 X 4) + (150 X 25) + (140 X 3.5) + (116.67 X 3.5) +(150 X 5) + (150 X 25) (20 + 4 + 10 + 4 + 25 + 3.5 + 3.5 + 5 + 25)

151.90

(d) Make a conclusion about your family's expenditure based on your findings.

Answer : Based on the findings, I found that the average expenses for current year is higher than the base year 2008. We spent a total of RM1200 for food in 2013 compared to only RM700 in 2008. Other expenses such as accommodation, utilities, transportation, clothing, education, recreation, and medications also increase compared to the year 2008. This is due to the high inflation rate in 2008. After the year 2008, daily expenses for our family had increased due to the increasing of the prices of raw materials.

PART 3 Your family is planning to buy a new television set.

( a) You have conducted a survey on the price of the television for two different brands from three different shops. You would like to make a comparison between two modes of payment, namely, cash payment and payment by installment.

Table 4 (a) shows the prices of televisions by cash payment in three different shops whereas Table 4(b) shows the prices of televisions by instalment. Complete Table 4 (a) and 4(b) using the data you obtained. Answer:

Price (RM) Brand Size of Television (inches) Mean Price (RM) Standard Deviation (RM)

Hup Liong Shop 988 1788 2888 788 969 1288

TS

SH

24 32 40 24 32 40

Ramli Kedai Electonics Elektrik & Hardware Chong 788 888 1599 1690 2500 2300 699 999 848 1200 1269 1499 Table 4(a)

888.00 1693.33 562.67 828.67 1005.67 1352.00

81.65 1685.61 2512.02 125.78 1010.70 104.23

Price (RM) Brand Size of Television (inches) Ramli Hup Electronic Seng s& Hardware 1383.2 945.6 2503.2 1918.8 4043.2 3000.0 1103.2 838.8 1356.6 1017.6 1803.2 1522.8 Table 4(b) Mean Price (RM) Standard Deviation (RM)

Kedai Elektrik Chong 1154.4 2197.0 2990.0 1298.7 1560.0 1948.7

TS

SH

24 32 40 24 32 40

1161.07 2206.33 3344.40 1080.23 1311.40 1758.23

178.69 238.70 494.14 188.47 223.73 176.79

The mean and standard deviation of the data can be calculated using formula :

(b)

Determine the brand and size of the television that you have decided to buy. Give your reasons based on the findings from part (a) above.

Answer: I want to buy a size 32 inch TS television. This is because there are only five members in my family and only requires medium-sized television for our living room. I choose this brand because I am confident of its quality as our family has long been using this brand for other electrical appliances in our home. Although the brand TS is more expensive than the brand SH, our family still can afford to buy it. I plan to buy from Ramli Electronics & Hardware store because they offer 2 years of warranty. In addition, they also offer the lowest price of televisions compared to the other two shops.

(c) The Ministry of Domestic Trade and Consumer Affairs wishes to present the Fair Price Shop Award for one of the above shops. If you are one of the panels for this award, determine the shop that deserve the award. Do you consider the value of the mean and the value of standard deviation in making your decision? Give your justifications.

Answer: If I am one of the panel for the award, I would prefer Ramli Electronics & Hardware shop because the mean price of all types of television for both brands is the lowest compared to the other two shops. Standard deviation for the telivisons at the shop is also the lowest. It shows that the prices of television offered by the Ramli Electronics & Hardware shop is reasonable and affordable.

PART 4 (a) Your family has a fixed monthly income. In order to buy the television, your family needs to make some adjustment on the various types of expenditure. [You can choose to pay by cash or by installment] Show the average monthly expenditure that you have modified in a table.

Item

Average Monthly Expenditure (RM) 1200

Modified expenditure (RM) 1200

Food Accomodation (Rental / Loan)

240

240

Transportation (Petrol/ Loan / Bus fare etc)

600

500

Clothing Education Recreation Utilities (Water / Electricity / Telephone) Medication Miscellaneous Television TOTAL

240 1500 210

50 1300 100

210

210

300 1500 6000

150 750 1500 6000

(b)

Assuming you have just started working with a monthly salary of RM2 500. You intend to save 10% of your salary every month. Plan your monthly expenditure as in Table 1 above and add other items such as savings and contributions to your parents.

Item

Average Monthly Expenditure (RM) 400

Food Accomodation (Rental / Loan)

300

Transportation (Petrol/ Loan / Bus fare etc)

200

Clothing Education Recreation Utilities (Water / Electricity / Telephone)

100 100 50

100

Medication Savings Parents Miscellaneous TOTAL

100 250 600 300 2500