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Q1. Describe briefly the questionnaire method of collecting primary data.

State the essentials of a good questionnaire.

Ans- The questionnaire method is one of the most commonly used techniques for collecting
primary data in research, surveys, and market studies. It involves preparing a set of written or
digital questions designed to collect information from respondents. The questionnaire may
include structured (close-ended), unstructured (open-ended), or a mix of both types of
questions to obtain precise and detailed responses.

A questionnaire can be distributed through various means, including:

 Face-to-Face Interviews (researcher asks questions directly).

 Mail Surveys (questionnaires sent via postal service).
 Online Surveys (Google Forms, SurveyMonkey, etc.).
 Telephone Interviews (questions asked over a phone call).

This method is widely used in social research, market research, public opinion surveys, and
business analytics due to its effectiveness in gathering standardized data from a large number
of respondents.

Advantages of the Questionnaire Method

1. Cost-Effective – Questionnaires can be distributed at a low cost compared to personal

interviews.
2. Time-Saving – A large number of responses can be collected in a short time.
3. Anonymity Encourages Honest Responses – Respondents are more likely to provide
truthful answers when they can remain anonymous.
4. Large Coverage – A well-designed questionnaire can collect data from respondents
across different locations.
5. Standardized Data Collection – Ensures consistency in responses, making data
analysis easier.

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Types of Questionnaires

Questionnaires are broadly classified into three types based on their structure:

1. Structured Questionnaire (Close-Ended Questions)

 These questionnaires consist of predefined, fixed-response questions.

 They are easy to analyze since responses are limited to multiple-choice answers or
scales.
 Example:
o Do you use online banking?

 Yes
 No
o How satisfied are you with our service?
 Very Satisfied
 Satisfied
 Neutral
 Dissatisfied
 Very Dissatisfied

2. Unstructured Questionnaire (Open-Ended Questions)

 These questionnaires allow respondents to express their thoughts freely.

 Useful in qualitative research where detailed opinions or suggestions are needed.
 Example:
o What features do you think should be added to our product?
o Describe your experience with our customer service.

3. Mixed Questionnaire (Combination of Close-Ended and Open-Ended Questions)

 Combines both structured and unstructured questions.

 Balances statistical analysis with qualitative insights.
 Example:
o How often do you visit our store?

 Weekly
 Monthly
 Rarely
o What improvements would you like to see in our store?

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Essentials of a Good Questionnaire

A well-structured questionnaire is clear, objective, and easy to understand. The following

elements are crucial for designing an effective questionnaire:

1. Clarity and Simplicity

 Questions should be clear, concise, and free from technical jargon.

 Avoid complex words or phrases that might confuse respondents.
 Example:
o Instead of: "What is your annual remuneration?"
o Ask: "What is your yearly income?"

2. Unbiased and Neutral Wording

 Avoid leading or suggestive questions that may influence the respondent’s answer.
 Example:
o Instead of: "Don’t you think our product is the best?"
o Ask: "How would you rate our product?"

3. Logical Order and Flow

 Questions should follow a logical sequence, starting from general to specific.

 Group similar topics together to maintain coherence.
 Example of sequence:
o General Information: Age, Gender, Location
o Main Topic: Purchase behavior, satisfaction level
o Specific Questions: Recommendations, feedback

4. Avoid Ambiguity and Double-Barreled Questions

 Double-barreled questions ask about two things at once, making them confusing.
 Example:
o Incorrect: "Do you like our pricing and customer service?"
o Correct:
 "Are you satisfied with our pricing?"
 "Are you satisfied with our customer service?"

5. Use the Right Type of Questions

 Use close-ended questions for statistical analysis (e.g., multiple-choice, rating scales).
 Use open-ended questions for in-depth responses.
 Example of Close-Ended Question:
o Which social media platform do you use the most?

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 Facebook
 Instagram
 Twitter
 LinkedIn

6. Balanced Response Options

 Provide neutral response choices to avoid bias.

 Example of a Likert Scale (for measuring satisfaction):
o How satisfied are you with our service?

 Very Satisfied
 Satisfied
 Neutral
 Dissatisfied
 Very Dissatisfied

7. Keep It Short and Concise

 The questionnaire should not be too lengthy, as long surveys reduce response rates.
 Include only relevant questions to avoid wasting the respondent’s time.

8. Use Simple and Familiar Words

 Avoid technical terms or industry jargon unless the survey targets professionals in a
specific field.
 Example:
o Avoid: "How frequently do you engage in e-commerce transactions?"
o Better: "How often do you shop online?"

9. Pilot Testing Before Full Distribution

 A pilot study (trial run) with a small group of respondents helps identify any issues
before finalizing the questionnaire.
 Pilot testing ensures that questions are clear, relevant, and unbiased.

Challenges in Using Questionnaires for Data Collection

Despite their advantages, questionnaires also have some challenges:

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1. Low Response Rate: Many respondents ignore surveys, especially if they are too
long.
2. Misinterpretation of Questions: Without an interviewer’s assistance, some questions
might be misunderstood.
3. Lack of Depth in Responses: Close-ended questions provide limited insights
compared to in-depth interviews.
4. Dishonest Answers: Respondents may provide socially desirable answers instead of
truthful ones.
5. Incomplete Responses: Some participants may skip certain questions, leading to data
gaps.

CONCLUSION

The questionnaire method is a widely used technique for collecting primary data in research
and business studies. A well-structured questionnaire should be clear, concise, unbiased, and
logically organized to ensure reliable and accurate data collection. While it is a cost-effective
and efficient method, challenges such as low response rates and misinterpretation should be
considered. Conducting pilot testing and designing well-balanced questions help improve the
effectiveness of the questionnaire method.

Q2. Discuss the importance of measuring variability for managerial

decision-making.

Ans- In managerial decision-making, understanding and measuring variability (also known

as dispersion) is crucial for assessing risks, predicting outcomes, and optimizing business
strategies. Variability refers to the extent to which data points in a dataset differ from the
average (mean) or each other. Managers rely on statistical measures of variability to make
informed decisions in finance, production, marketing, human resources, and other business
functions.

The most commonly used measures of variability include:

 Range
 Variance
 Standard Deviation
 Mean Absolute Deviation (MAD)
 Coefficient of Variation (CV)

These measures help managers evaluate stability, predictability, and risk associated with
various business processes.

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Key Measures of Variability and Their Importance in Decision-Making

1. Range

 The range is the simplest measure of variability and is calculated as:

Range = Maximum Value − Minimum Value

 Example in Business: If a company tracks monthly sales revenue and finds that sales
range from ₹5,00,000 to ₹12,00,000, the range is ₹7,00,000. This information
highlights the extent of fluctuations in revenue.
 Importance: Helps in assessing business stability and identifying extreme variations,
but it is limited because it considers only the highest and lowest values without
accounting for other data points.

2. Variance

 Variance measures how far each data point is from the mean (average). It is calculated
as:

=
i

 Where:
o Xi= Each data point
o 𝑥 = Mean of the dataset
o N = Number of observations
 Example in Business: A manufacturing company may calculate the variance in
product defect rates to determine how consistently quality standards are met.
 Importance: A high variance indicates large fluctuations, signaling instability, while a
low variance suggests more consistent performance.

3. Standard Deviation (SD)

 Standard deviation (SD) is the square root of variance, making it a more interpretable
measure of variability. It is calculated as:

∑(𝑥 − 𝑥)
i

𝜎=
𝑁

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 Example in Business:
o A low SD in employee salaries means that employees have similar pay levels,
helping HR managers ensure pay equity.
o A high SD in daily stock market returns indicates high investment risk.
 Importance in Decision-Making:
o Helps in risk assessment and forecasting.
o Used in quality control to ensure consistency in production.
o Aids in financial planning to determine investment risks.

4. Mean Absolute Deviation (MAD)

 MAD is another measure of spread, calculated as:

∑ | 𝑿i 𝑿|
=
𝑵
 Example in Business: A manager may use MAD to measure variations in delivery
times and adjust logistics accordingly.
 Importance:
o Provides a more interpretable measure than variance (since variance squares
the deviations).
o Useful in analyzing customer satisfaction variations based on service times or
product quality.

5. Coefficient of Variation (CV)

 CV measures relative variability and is calculated as

𝝈
=
𝑿

 Example in Business:
o If two factories produce different products with different average costs, CV
helps compare cost variability between them.
o If one investment has a CV of 5% and another has CV of 15%, the latter is
riskier.
 Importance:
o Useful for comparing variability across datasets with different units.
o Helps assess the risk-to-reward ratio in investments and financial decisions.

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Importance of Measuring Variability in Managerial Decision-Making

IMPORTANCE OF MEASURING VARIABILITY IN MANAGERIAL DECISION-

MAKING

1. Risk Assessment and Management

 Variability in financial returns helps businesses decide whether an investment is

stable or risky.
 Example: A business comparing two investment options will prefer the one with
lower standard deviation in returns, indicating lower risk.

2. Quality Control and Process Optimization

 Manufacturing firms use standard deviation to monitor consistency in product quality.

 Example: If a factory producing bottles finds a high variance in bottle weights, it may
need to adjust machinery settings to maintain uniformity.

3. Forecasting and Demand Planning

 Businesses track seasonal sales variations to predict future demand.

 Example: A retailer may analyze historical sales variability to decide stock levels for
an upcoming festival season.

4. Decision-Making in Pricing Strategies

 Companies use variability to analyze customer price sensitivity.

 Example: If customer spending habits show low variability, businesses can introduce
premium pricing strategies, assuming stable demand.

5. Workforce Planning and Human Resource Management

 HR departments analyze variations in employee performance, absenteeism, and salary

distribution.
 Example: If salary variability is too high, it may indicate an imbalance that requires
adjustments in compensation policies.

6. Investment and Financial Planning

 Investors and financial managers evaluate stock market trends using standard
deviation and variance.
 Example: A mutual fund with high return variability may indicate higher risk,
requiring careful decision-making by investors.

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7. Customer Satisfaction and Service Quality

 Businesses analyze variability in customer feedback and service response times.

 Example: A telecom company tracking call-center wait times may use MAD or SD to
identify performance inconsistencies.

8. Inventory and Supply Chain Management

 Stock level fluctuations impact procurement decisions.

 Example: A supermarket chain may measure demand variability to optimize stock
levels and reduce wastage.

CONCLUSION
Measuring variability is essential for managerial decision-making across various business
functions, including finance, marketing, HR, supply chain, and operations. By using
statistical tools like range, variance, standard deviation, MAD, and CV, managers can make
data-driven decisions that minimize risks, improve efficiency, and enhance profitability. A
company that understands and manages variability effectively can achieve better stability,
optimize performance, and maintain a competitive edge in the market.

Q3. An investment consultant predicts that the odds against the price of a
certain stock will go up during the next week are 2:1 and the odds in favour
of the price remaining the same are 1:3. What is the probability that the
price of the stock will go down during the next week?

Soln - To solve this problem, let's define the probabilities based on the given odds.

Step 1: Define Variables

Let:

 P(U) be the probability that the stock price goes up

 P(S) be the probability that the stock price remains the same
 P(D) be the probability that the stock price goes down

We are given the odds against the stock going up as 2:1, meaning:

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𝑃(𝐷) + 𝑃(𝑆)
= 2: 1
𝑃(𝑈)

This can be rewritten as:

P(D)+P(S)=2P(U) (EQUATION 1)

We are also given the odds in favor of the price remaining the same as 1:3, meaning:
𝑷(𝑺) 𝟏
=
𝑷(𝑫) + 𝑷(𝑼) 𝟑

This can be rewritten as:

𝟏
P(S) = 𝑷(𝑫) + 𝑷(𝑼) (Equation 2)
𝟑

Since probability must sum to 1:

P(U)+P(S)+P(D)=1 (Equation 3)

Step 2: Solve for Probabilities

Step 2.1: Express P(S) in Terms of P(U)

From Equation 1:

P(D)=2P(U)−P(S)

Substituting into Equation 2:

𝟏
P(S)= ((2P(U)−P(S))+P(U))
𝟑

𝟏
P(S)= (3P(U)−P(S))
𝟑

Multiplying both sides by 3 to eliminate the fraction:

3P(S)=3P(U)−P(S)
Rearrange:

4P(S) = 3P(U)
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𝟑
P(S)= P(U)(Equation 4)
𝟒

Step 2.2: Solve for P(U)

Substituting Equation 4 into Equation 1:

𝟑
P(D)+ P(U)=2P(U)
𝟒

Rearrange to express P(D):

𝟑
P(D) = 2P(U) − P(U)
𝟒
𝟖 𝟑 𝟓
P(D) = P(U)− P(U)= P(U)
𝟒 𝟒 𝟒

Now, using Equation 3:

P(U)+P(S)+P(D)=1

𝟑 𝟓
Substituting P (S)= P (U) and P (D) = P (U)
𝟒 𝟒

𝟑 𝟓
P (U)+ P (U)+ P (U)=1
𝟒 𝟒

𝟒 𝟑 𝟓
𝟒
P (U)+ 𝟒 P(U)+ 𝟒 P (U) = 1

𝟏𝟐
𝟒
P (U) = 1

𝟏
P (U) = 𝟑

Step 2.3: Compute P(S) and P(D)

𝟑 𝟏 𝟏
P (S)= × =
𝟒 𝟑 𝟒

𝟓 𝟏 𝟓
P (D)= × =
𝟒 𝟑 𝟏𝟐

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Final Answer:

𝟓
The probability that the stock price will go down is 𝟏𝟐 or approximately 0.4167 (41.67%).

Q4. In practice, we find situations where it is not possible to make any

probability assessment. What criterion can be used in decision-making
situations where the probabilities of outcomes are unknown?

Ans. In many real-world situations, decision-makers face uncertainty where it is not possible
to assign probabilities to different outcomes. This is known as decision-making under
uncertainty. In such cases, decision-makers rely on different decision criteria to choose the
best course of action.

Criteria for Decision-Making Without Known Probabilities

When probabilities are unknown, the following decision-making criteria can be applied:

1. Maximax Criterion (Optimistic Approach)

 This criterion is used by highly risk-taking decision-makers.

 The decision-maker assumes the best possible outcome for each available alternative
and selects the one with the highest payoff.
 This approach assumes a very optimistic view that the best-case scenario will always
occur.
 Example: If a company is deciding between launching three different products, the
maximax criterion would suggest launching the product with the highest potential
profit, assuming market conditions will be highly favorable.

2. Maximin Criterion (Pessimistic Approach)

 This criterion is used by risk-averse decision-makers.

 The decision-maker looks at the worst possible outcome for each alternative and
selects the one with the highest minimum payoff.
 This ensures that the worst-case scenario is as favorable as possible.
 Example: A farmer deciding between growing different crops would choose the crop
that has the least potential loss under worst-case weather conditions.

3. Minimax Regret Criterion (Opportunity Loss Approach)

 This criterion focuses on minimizing regret, which is the difference between the best
possible outcome and the actual outcome chosen.

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 The decision-maker first constructs a regret table, which shows the opportunity loss
for each alternative.
 Then, they select the alternative that minimizes the maximum regret.
 Example: A business choosing between advertising strategies would use this approach
to ensure that the potential regret (lost sales due to an ineffective strategy) is
minimized.

4. Laplace Criterion (Equal Likelihood Criterion)

 This approach assumes that since probabilities are unknown, each possible outcome is
equally likely.
 The decision-maker calculates the average payoff for each alternative and selects the
one with the highest expected value.
 Example: A company choosing between different investment projects assumes all
economic conditions (good, bad, neutral) are equally likely and picks the project with
the highest average return.

5. Hurwicz Criterion (Weighted Decision Approach)

 This is a compromise between maximax and maximin approaches.

 The decision-maker assigns a coefficient of optimism (denoted as α, where 0 ≤ α ≤ 1)
to weigh the best and worst payoffs.
 The formula used is:

H=α×(Best Payoff)+(1−α)×(Worst Payoff)

 A higher α means a more optimistic approach, while a lower α indicates pessimism.

 Example: An entrepreneur considering different business expansion strategies might
use the Hurwicz criterion with α = 0.6 if they are moderately optimistic.

CONCLUSION

When probabilities are unknown, decision-makers must choose a method that aligns with
their risk tolerance and decision-making style.

 Risk-takers prefer the Maximax Criterion.

 Risk-averse individuals choose the Maximin Criterion.
 Those aiming to reduce regret use the Minimax Regret Criterion.
 If assuming equal likelihood, the Laplace Criterion is best.
 A mix of optimism and pessimism is handled by the Hurwicz Criterion.

Each method provides a structured approach to making decisions in uncertain environments,

ensuring that choices are logical and rational even when probabilities cannot be determined.

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Q5 A purchase manager knows that the hardness of castings from any
supplier is normally distributed with a mean of 20.25 and SD of 2.5. He
picks up 100 samples of castings from any supplier who claims that his
castings have heavier hardness and finds the mean hardness as 20.50. Test
whether the claim of the supplier is tenable.

Soln- We will use a hypothesis test for the mean to determine whether the supplier's claim
that the castings have heavier hardness is statistically significant.

Step 1: Define Hypotheses

We set up the null and alternative hypotheses:

 Null Hypothesis (H0): The supplier’s castings have the same hardness as the existing
ones.

H0 : μ = 20.25

 Alternative Hypothesis (H1): The supplier’s castings have a higher mean hardness.

H1 : μ > 20.25

This is a one-tailed test since the supplier claims that the hardness is higher than 20.25.

Step 2: Given Data

 Population mean μ0=20.25

 Sample mean 𝑥=20.50
 Standard deviation σ=2.5
 Sample size n=100
 Significance level α=0.05

Step 3: Test Statistic Calculation

Since the population standard deviation (σ\sigma) is known, we use the Z-test formula:

𝒙 𝝁0
Z= 𝝈
√𝒏

Substituting the given values:

𝟐𝟎.𝟓𝟎 𝟐𝟎.𝟐𝟓
Z= 𝟐.𝟓
√𝟏𝟎𝟎

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𝟎.𝟐𝟓 𝟎.𝟐𝟓
Z= 𝟐.𝟓 = = 𝟏. 𝟎
𝟎.𝟐𝟓
𝟏𝟎

Step 4: Determine the Critical Value

For a one-tailed Z-test at α = 0.05:

 The critical Z-value from the Z-table for α = 0.05 is 1.645.

Step 5: Decision Rule

 If Z ≥ 1.645, we reject H0 (i.e., the supplier’s claim is supported).

 If Z < 1.645, we fail to reject H0 (i.e., there is not enough evidence to support the
supplier’s claim).

Step 6: Conclusion

 The calculated Z-score = 1.0.

 The critical Z-value = 1.645.
 Since 1.0 < 1.645, we fail to reject H0.

CONCLUSION:

At a 5% significance level, there is not enough statistical evidence to support the supplier’s
claim that the castings have a significantly higher hardness. The observed difference in mean
hardness (20.50 vs. 20.25) could be due to random variation.

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