Question

Problem 16

Many retail stores have cash registers with price scanners, which use lasers to read barcode on packages. The barcode typically contains a UPC (uniform product code) number, which the cash register looks up in a database to find the item price. The scanners are very reliable, in the sense that they rarely make errors in reading the barcode. However, the price databases sometimes contain errors, which can result in overcharging or undercharging customers. Many of the pricing errors are caused by the price database not being "in synch" with the signs in the store. For example, prices in the database need to be changed whenever items go on sale. Customers are supposed to be charged the lowest marked price, so if sale signs go up before the database reflects the sale prices, customers could be overcharged. Similarly, if a sale ends (and all sale signs are removed) before prices in the database are raised, customers could be undercharged.

A large department store routinely audits the accuracy of its price scanning system by taking a random sample of products off its shelves and scanning them. Each type of product the store stocks is called a "line item" in the inventory. Every line items corresponds to exactly one UPC code, and different line items have distinct UPC codes. However, the store typically stocks many units of each line item. The store designs the sample to be a simple random sample of UPC codes of items they stock---that is, line items are sampled without replacement, with equal probability of selecting each line item, regardless of how many units of each line item are in stock. Each product in the sample will be scanned, and the price the scanner gives will be compared to the correct price for the product. We assume that the auditors have a way to determine the correct price of the product with perfect accuracy. Each product in the sample will then be classified as correctly priced, underpriced, or overpriced. Technically, both overpricing and underpricing are illegal, but law enforcement agents tend to be more concerned with overcharges than with undercharges.

As a first step, the store seeks to estimate the percentage of pricing errors. The internal auditors take a simple random sample of 26 line items from their inventory of 8,500 line items. The percentage of overpriced items in the sample is 7.7%, and the percentage of underpriced items in the sample is 7.7%.

**A conservative 80% confidence interval for the
percentage of line items in the store that are priced incorrectly
would extend from (Q21)_______ (low) to (Q22)________
(high).**

The store also wants to estimate the average net price error (overcharges - undercharges) to customers. Because the net error to customers depends on the mix of items that customers buy (the items in customers' shopping baskets), the store management decides that an appropriate measure is the average net price error per shopping basket. Estimating this net error requires sampling customers' shopping baskets. The store samples shopping baskets by pulling customers aside at random, and having them check out in special lines in which the price of every product in their baskets is scanned and also verified manually. Suppose that this results essentially in a simple random sample of shopping baskets.

In the course of a month, 100 shopping baskets are pulled aside; there were 34,000 shopping baskets of goods sold during that month. The mean net price error per shopping basket in the sample was -10.25 cents/basket (a net undercharge), with a sample standard deviation of 4.89 cents per basket.

**An approximate 95% confidence interval for the net price
error per shopping basket of goods sold during the month would
extend from (Q23)_______cents (low) to (Q24) ________ cents
(high).**

Answer #1

Here the percentage of line items in the store that are priced incorrectly is .

The estimated proportion is

The confidence interval for proportion is

The 80% two-sided confidence interval for proportion is (Here )

Would extend from (low) to (high).

Given the sample size and sample mean , sample standard deviation .

Since the population standard deviation is not known.

The two sided confidence interval for mean based on the sample data is

An approximate 95% confidence interval for the net price error per shopping basket of goods sold during the month

Would extend from (low) to (high).

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