MEC-203: Quantitative Methods - Important Concepts for Exams

    Focus on these key topics that are frequently covered in exams and assignments for MAEC.

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    Most Important Topics
    High Priority
    Core principles that are asked in exams almost every year

    Key Topics:

    • Maxima minima, extreme values

    • Production function, demand function, marginal productivity, marginal revenue, price elasticity

    • Statistics Theory

      Hypothesis testing, One tailed and two tailed tests, Estimators - LSE, point, interval, Method of Maximum Likelihood for estimating the value of a population parameter

    • Probability Numericals

      Probability theory, distribution functions, Normal PDF, Poisson distribution function, binomial distribution

    • Matrix - inverse, Cramer's rule

    • First and second order differential equations and their use in economics

    • Short Notes

      One tailed and two tailed tests, Sampling error, sampling means, Kuhn Tucker condition, Cramer Rao inequality, Eigen vector and value, Skewness and Kurtosis, Inverse function, discontinuous function, Adjoint and reciprocal matrix, Orthogonal matrix, Rank of a matrix, inverse of a matrix, determinant of a matrix, rank correlation

    Topics in Detail

    Linear independence

    Let k = number of vectors
    Let r=rank(A)

    Rank rrr Condition Linear Independence?
    r=k Full column rank Independent
    r<k Not full rank Dependent
    k>n More vectors than dimensions Always dependent

    Consistency

    A system of equations is consistent if it has at least one solution. It is inconsistent if no solution exists.

    Using rank: the system is consistent when the rank of the coefficient matrix equals the rank of the augmented matrix; otherwise it is inconsistent.

    Let A = coefficient matrix
    Let [A∣B] = augmented matrix
    Let r(A) = rank of coefficient matrix
    Let r([A∣B]) = rank of augmented matrix

    Case 1: Consistent System

    r(A)=r([A∣B])

    Then:

    • If this common rank = number of unknowns → unique solution

    • If this rank < number of unknowns → infinite solutions

    Case 2: Inconsistent System

    r(A)≠r([A∣B])​

    Meaning: the augmented matrix introduces a contradiction.

    Eigen values

    det(A−λI)=0 → λ = a, b

    eigen vectors

    (A−aI)v=0; with v=(x,y) → x+y=0⟹y=−x →

    Lets choose x=1 $$v = egin{bmatrix} 1 -1 end{bmatrix}$$ also, $$egin{bmatrix} 1 -1 end{bmatrix} = egin{bmatrix} -1 1 end{bmatrix}$$ in terms of eigen vectors.

    (A−bI)v=0; similar.

    Maximization using lagrange's multiplier

    Step 1: Form the Lagrangian

    $L = 4u_1^2 + 3u_1u_2 + 6u_2^2 + lambda(56 - u_1 - u_2)$$

    Step 2: Take partial derivatives and set them to zero

    (i) Derivative w.r.t. $u_1$​:

    $$ rac{partial mathcalL}{partial u_1} = 8u_1 + 3u_2 - lambda = 0$$

    (ii) Derivative w.r.t. $u_2$​:

    $$ rac{partial mathcalL}}{partial u_2} = 3u_1 + 12u_2 - lambda = 0$$

    (iii) Derivative w.r.t. constraint:

    $$u_1 + u_2 = 56$$

    Step 3: Use the first two equations to eliminate λ and substitute into the constraint

    $$oxed{u_1 = 36,quad u_2 = 20}$$

    These values maximize the function under the given constraint

    Cramer's rule to solve equations

    Taylor's series and Maclaurin’s series expansion

    Taylor's polynomial

    same formular f(x) = ....

    A question

    Concave, Convex, Inflection

    Convex flexes. Concave caves.

    Hessian of a function

    Jacobian

    Mean value theorem

    Theory

    Open and Close Set

    • A set is open if it does not include its boundary points.
      • A set S is open if every point in S has a small neighborhood (a ball around it) that is also completely inside S.
      • (2,5), R, {(x,y):x2+y2<1}, ∅ (empty set)
    • A set is closed if it contains all its limit points.
      • A set is closed if it contains its boundary or if its complement is open.
      • [2,5], {(x,y):x2+y2≤1}, {2,7,10},
      • Complement of an Open Set
        • Example: The complement of the open interval (0,1) is: $(-infty, 0] cup [1, infty)$
    • A set can be neither open nor closed
      • [2, 5)

    How is Euler’s theorem used in product exhaustion theorem ?

    Advantages of Sample Survey + Explain Sampling Design (12 marks)

    Advantages of Sample Survey

    1. Lower Cost:
      Sampling is cheaper than a census because fewer observations are collected.

    2. Less Time:
      Results can be obtained quickly since only part of the population is studied.

    3. Greater Accuracy (in many cases):
      With trained investigators and smaller data size, errors are often lower than full census.

    4. Operational Feasibility:
      Some studies (e.g., destructive testing, case studies) cannot be done via census.

    5. Better Quality Control:
      Supervising small samples is easier and more reliable.

    6. Useful when population is infinite:
      For example, quality control in industrial production.

    7. More detailed information:
      Researchers can collect high-quality data from fewer units.

    Explain Sampling Design

    Sampling design refers to the method and plan used to select the sample from the population.

    A good sampling design includes:

    1. Target Population:
      Define clearly who or what is being studied.

    2. Sampling Frame:
      A list or representation from which samples are drawn.

    3. Sampling Method:

      • Probability sampling: simple random, stratified, systematic, cluster.

      • Non-probability sampling: convenience, quota, judgement.

    4. Sample Size:
      Decide number of units based on cost, accuracy, and variability.

    5. Selection Procedure:
      How units will be chosen (random numbers, systematic rule, etc.)

    6. Execution:
      Collecting data according to the design while avoiding bias.

    Sampling design ensures:

    • Representativeness

    • Minimization of bias

    • Reliability of conclusions

    Sampling methods in breif

    1. Probability Sampling

    In probability sampling, the selection process is random, ensuring that the sample is statistically representative of the population and minimizing bias.

    Method Explanation
    Simple Random Every individual in the population has an equal, independent chance of being selected (like drawing names out of a hat or using a random number generator). It requires a complete list of the population.
    Stratified The population is divided into subgroups (strata) based on shared characteristics (e.g., age, gender, location). A simple random sample is then drawn from each subgroup to ensure representation of all strata.
    Systematic A starting point is randomly selected, and then every nth individual is chosen from a list (e.g., selecting every 10th customer entering a store). It is simpler than simple random sampling but still offers good coverage.
    Cluster The population is divided into clusters (e.g., geographic areas, schools). The researcher randomly selects a few clusters, and then all individuals within the chosen clusters are sampled. It is cost-effective for large, geographically dispersed populations.

    2. Non-Probability Sampling

    In non-probability sampling, the selection process is non-random and relies on the researcher's subjective judgment or convenience, which can introduce selection bias. These methods are often used in qualitative or exploratory research.

    Method Explanation
    Convenience Individuals are selected simply because they are easily accessible or "convenient" to the researcher (e.g., surveying friends, family, or students in a specific classroom). Results are often not generalizable to the wider population.
    Quota Similar to stratified sampling, the researcher identifies population subgroups and sets quotas for each. However, participants within those quotas are selected using non-random methods (e.g., convenience or judgment) until the quota is filled.
    Judgement (Purposive) The researcher intentionally selects participants based on their specific knowledge, expertise, or characteristics that are relevant to the study's purpose. The researcher uses their "judgment" to choose the most informative participants.

    Types of Biases in Sample Survey (6 marks)

    Bias = systematic error in data collection or sampling.

    1. Selection Bias

    Occurs when the sample is not representative of the population.
    Example: surveying only urban households for national consumption.

    2. Non-response Bias

    Some selected units refuse to respond or cannot be contacted.
    The final sample differs from intended one.

    3. Response Bias

    Respondents give inaccurate answers intentionally or unintentionally.
    Example: understating income, overstating charitable donations.

    4. Sampling Bias

    Arises due to poor sampling method, e.g., convenience sampling.

    5. Interviewer Bias

    Interviewer influences responses through tone, wording, or behaviour.

    6. Measurement Bias

    Errors introduced by faulty instruments, ambiguous questions, or poor questionnaire design.

    7. Recall Bias

    Respondents cannot remember past events correctly (common in surveys on spending, health, etc.).

    8. Processing Bias

    Mistakes in coding, entering, or processing data.

    Properties of a Continuous Function (4 marks)

    A function f(x)f(x)f(x) is continuous at a point aaa if:

    $$lim_{x o a} f(x) = f(a)$$

    Key properties:

    Homogeneous vs. Homothetic Functions

    Examples of Different Types of Sequences

    (a) Finitely Oscillatory Sequence

    A sequence that oscillates only a finite number of times and then settles.

    $$1,−1,1,−1,1,1,1,1,1,…$$

    (b) Sequence Divergent to $+infty$ $$a_n = n$$(c) Sequence Divergent to $-infty$ $$a_n = -n$$

    (d) Infinitely Oscillatory Sequence

    A sequence that keeps oscillating without settling.

    Example:

    $$a_n = (-1)^n$$ or $$a_n = sin(n)$$

    Terms

    (a) Critical region

    (b) One-tailed and two-tailed tests

    (c) Standard error

    (d) P-value method of hypothesis testing

    (e) Orthogonal Matrix

    (f) Idempotent Matrix

    (g) Eigenvalue, Eigenvector, Characteristic Equation

    (h) norm, inner product, linear independence of vectors

    • norm = magnitude of vector
    • inner product = dot product

    (i) Differences

    a. Parameter vs. Statistic

    b. Type I and Type II errors

    c. Normal distribution and Standard normal distribution