Question

The manufacturer of an MP3 player wanted to know whether a 10% reduction in price is enough to increase the sales of its product. To investigate, the owner randomly selected eight outlets and sold the MP3 player at the reduced price. At seven randomly selected outlets, the MP3 player was sold at the regular price. Reported below is the number of units sold last month at the regular and reduced prices at the randomly selected outlets. Regular price 134 124 87 119 115 126 98 Reduced price 126 138 150 136 114 125 131 128 .

Regular	134	124	87	119	115	126	98
Reduced	126	138	150	136	114	125	131	128

At the 0.03 significance level, can the manufacturer conclude that the price reduction resulted in an increase in sales? Hint: For the calculations, assume reduced price as the first sample.

a. compute the pooled variance of the estimate

b. compute the test statistic

Answer 1

(a)

From the given data, the following statistics are calculated:

Reduced:

n1 = 8

1 = 131

s1 = 10.6503

Regular:

n2 = 7

2 = 114.7143

s2 = 16.5903

Pooled Variance (s²)is given by:

So

Answer is:

188.1095

(b)

Test statistic is given by:

t = (131- 114.7143)/7.0989 = 16.2857/7.0989 = 2.2941

So,

Answer is:

2.2941