Pestle analysis of indian tourism industry

Pestle analysis of indian tourism industry PESTLE Analysis of Indian tourism industry Introduction about the topic : It is time for Indias Tourism sector. Driven by a surge in business traveller arrivals and a soaring interest in India as a tourist destination, the year 2006 has been the best year till date. Incredible India !! India is probably the only country that offers various categories of tourism. These include history tourism, adventure tourism, medical tourism (ayurveda and other forms of Indian medications), spiritual tourism, beach tourism (India has the longest coastline in the East) etc. Explore India choose the locales of your choice, and see what each state has to offer. Lose yourself in the wonder that is India. Meander through lands steeped in chivalry and pageantry that begin before recorded history. Explore modern cities that have grown organically from the roots of a multi-hued past. Make a pilgrimage to holy shrines that echo with tales of antiquity. Frolic on a vast array of golden beaches that dot an enviable coastline, washed by two seas and an ocean. Sport with adventure in style. Let the jungle lure you to a fascinating world at a diverse array of wildlife sanctuaries and national parks. this is the wonder that is India. Indian Tourism industry is one of the most important export industries of the country. Although the international tourist inflow is relatively low, India has found tourism emerging as an important sector of its economy. Tourism yields substantial foreign exchange for India. It is turning into a volume game where a large number of participants are contributing to the revenue of the industry. Segments such as hotels, tour operators, airlines, shipping etc. Growth period of Indian tourism industry The tourism industry in India is substantial and vibrant, and the country is fast becoming a major global destination. Indias travel and tourism industry is one of them most profitable industries in the country, and also credited with contributing a substantial amount of foreign exchange. This is illustrated by the fact that during 2006, four million tourists visited India and spent US $8.9 billion. Several reasons are cited for the growth and prosperity of Indias travel and tourism industry. Economic growth has added millions annually to the ranks of Indias middle class, a group that is driving domestic tourism growth. Disposable income in India has grown by 10.11% annually from 2001-2006. Thanks in part to its booming IT and outsourcing industry a growing number of business trips are made by foreigners to India, who will often add a weekend break or longer holiday to their trip. Foreign tourists spend more in India than almost any other country worldwide. Tourist arrivals are projected to increase by over 22% per year through till 2010, with a 33% increase in foreign exchange. The Tourism Ministry has also played an important role in the development of the industry, initiating advertising campaigns such as the Incredible India campaign, which promoted Indias culture and tourist attractions in a fresh and memorable way. The campaign helped create a colorful image of India in the minds of consumers all over the world, and has directly led to an increase in the interest in tourism industry has helped growth in other sectors as diverse as horticulture, handicrafts, agriculture, construction and even poultry. Welcome to Incredible India Namaskar, Welcome to Incredible India! A journey into mysticism through the land of the unexpected. Bounded by the majestic Himalayan ranges in the north and edged by an endless stretch of golden beaches, India is a vivid kaleidoscope of landscapes, magnificent historical sites and royal cities, misty mountain retreats, colorful people, rich cultures and festivities. Modern India is home alike to the tribal with his anachronistic lifestyle and to the sophisticated urban jet-setter. It is a land where temple elephants exist amicably with the microchip. Its ancient monuments are the backdrop for the worlds largest democracy. If youre planning a holiday to India, looking for hotels and accommodation and events information or simply interested in India as a country you are sure to find many insights on the multifaceted travel options to India here.The timeless mystery and beauty of India can be experienced only by visiting this ancient Land. Theres just one thing youll need to travel through 5000 years of culture and tradition- A comfortable pair of shoes. The following table provides the major tourist attractions in India by state: < Tourist Attraction State Charminar Hyderabad, Andhra Pradesh Kaziranga National Park Assam Qutub Minar Delhi Mangueshi Temple Goa Shimla Himachal Pradesh Dal Lake Jammu and Kashmir Jog Falls Shimoga District, Karnataka Kovalam Beach Kerala Amarkantak Madhya Pradesh Ajanta Maharashtra Puri Orissa Golden Temple Amritsar, Punjab Jaipur Rajasthan Chennai Tamil Nadu Badrinath Temple Uttarakhand Varanasi Uttar Pradesh The various segments within tourism are: Medical Tourism It is one of the fastest growing segments in India. India has been able to leverage on certain advantages it has over other countries like highly skilled doctors, cost effective treatment, improved quality of private healthcare etc. Some of the common treatments for which overseas patients to come to India are heart surgery, knee transplant, cosmetic surgery and dental care. Indias traditional rejuvenation therapy like yoga and ayurvedic therapy are also becoming popular. Eco Tourism It is relatively new segment in India. It involves visiting natural areas without disturbing the fragile ecosystem. Eco tourism generates wealth for the local people, who in turn take measures to conserve and protect the environment and natural resources. India with its natural diversity is one of the pristine places in the world for eco tourism. The Himalayan region, Kerala, Northeast, Andaman and Nicobar Islands and Lakshadweep islands the Western and Eastern Ghats are some of the hot spots for eco tourism in India. India has some of the best wildlife reserves in the world, rich in flora and fauna. Heritage Tourism Heritage tourism is a very lucrative segment in India. It is widely believed it would emerge as the most important segment within tourism in terms of revenue generation by 2010.India has a rich cultural history and reflection of its glorious past is still visible in its numerous forts, monuments, palaces, places of worship etc. Heritage tourism itself can be further classified as colonial heritage, urban renewal, religious tourism, industrial heritage and ethnicity. The Indian government must show keen interest in preserving the heritage sites from a tourism perspective. Adventure Tourism Indias varied geographical and climatic conditions offer excellent opportunity for adventure sports. In recent times the popularity of adventure tourism has increased. Adventure sports like river rafting, rock climbing, mountaineering, trekking, skiing, snow climbing, scuba diving and angling can be undertaken in the country and the country offers multiple locations to choose from. The trans Himalayan region, the Garhwal and Kumaon mountains, the Western Ghats, deserts of Rajasthan, Andaman and Lakshadweep islands are some of the most popular destination for adventure tourism. Future trends The real GDP growth for travel and tourism economy is expected to be 0.2 per cent in 2009 and is expected to grow at an average of 7.7 per cent per annum in the coming decade. Earning through exports from international visitors and tourism goods are expected to generate 6.0 per cent of total exports (nearly $16.9 billion) in 2009 and expected to increase to US$ 51.4 billion in 2019. According to the Ministry of Tourism, Foreign Tourist Arrivals (FTAs) for the period from January to March in 2009 was 1.461 million. For the month of March 2009 the FTAs was 472000.The reason for the decline is attributed to the ongoing economic crisis. In spite of the short term and medium term impediment due to the global meltdown the revenues from tourism is expected to increase by 42 per cent from 2007 to 2017. PESTLE Analysis of tourism industry Definition The PESTLE framework is an analysis tool that is used to identify the key drivers of change in the strategic environment (Johnson et al., 2008). PESTLE analysis includes Political, Economic, Social, Technological, Legal, and Environmental factors. Political effect on tourism industry- Political violence has done considerable damage to tourism in Asia and the Pacific over the past few years. But industry experts say the damage is not necessarily permanent. Governments and industry leaders say much can be done to rebuild tattered tourism reputations. As the world watched, a small band of terrorists killed scores in Mumbai last November. Although India has often suffered from political violence, this attack aimed largely at travelers and foreigners was a new horror. The globally televised attack, coming during an international economic slump, contributed to an eight percent fall in tourist arrivals this year. In Thailand, tens of thousands of anti-government protesters laid siege to Bangkoks airports late last year, essentially trapping more than 350,000 travelers in the country for a week. Before that shock had worn off, a few months later, another group of protesters led violent riots in Bangkok. The two incidents added to the damage from the world economy cut tourist arrivals to Thailand by 20 percent in the first six months of 2009. Phornsiri Manoharn, the chairwoman of the Pacific Asia Travel Association, says many tourists still worry that Thailands political tensions could spoil their visits. When people saw any demonstration like that they associate with the closing of the airport, said Manoharn. Even [though] we dont close [the airport] but they look like the demonstration, that they might and thats why theyre afraid. Tourism is important to the Asia-Pacific region. In Southeast Asia, it contributes over three percent to economic output. In some parts of the region, tourism accounts for 10 percent of employment; in the Pacific island nations of Fiji and Vanuatu, the figure is over 30 percent. But as India and Thailand have seen, violence and instability quickly scare away visitors. Recovery comes, but usually more slowly than after natural disasters. John Koldowski is PATAs communications director. What we have seen in many cases is where there is some sort of intervention effect its been natural or no fault of anybody the rebound has been very quick, he said. Where there has been intent to cause harm as in the case of a say terrorist attack and where there has been a long history of such attacks occurring in that destination or nearby destination, it takes a little longer to come back. But with the right government and industry responses, visitors will return. For instance, in October 2002, bombs set off by Islamic militants on the island of Bali killed more than 200 people, most of them foreigners. The island, one of the worlds most famous tourist destinations, saw arrivals fall by 36 percent in 2003. Koldowski said the first bombings shocked the tourism industry. Bali is a classic case there it took some time [to recover] because it had never occurred there before it was so dramatic and affected specific western tourists, he said. But the Indonesian government cracked down on terrorists and boosted security. And tourism industry professionals worked hard to woo back visitors. When another attack three years later left 20 people dead, PATA reported that tourist arrivals were little affected. And twin bombings at international hotels in Jakarta last July are expected to do little damage to tourism. In South Asia, Sri Lanka and Nepal hope the end of long-running conflicts will entice more visitors. Sri Lankan officials say the end of a civil war earlier this year brought a surge of interest from foreign investors and hotel operators. Dileep Mudadeniya, Sri Lankan Tourism Promotion Bureau managing director, says there are opportunities for tourism, particularly in areas long closed off by the war. North and east, which have not actually taken any kind of development for the last 20 years, virgin beaches, land, monuments is available and the people also come and exploit something or look at something totally undiscovered, said Mudadeniya. We are going on the line which is undiscovered, unspoiled, an island of authenticity, which we can offer. In Nepal, political agreements have ended a Maoist insurgency that lasted more than a decade. The minister for Tourism and Civil Aviation, Sharatsingh Bhandari, says Nepals transition from conflict to peace is in itself a tourism draw. Now we are going to form a new Nepal. So giving the message for the New Nepal and inviting the people to see, not only the prospect of tourism itself but even the process of transition of the political system from bullet to ballot. That was done successfully by the Nepalese themselves, he said. Industry analysts say tourism in Asia is likely to expand rapidly over the next few years. But, the key, they say, is that governments find ways to prevent political violence, and act quickly to calm fears when it does happen. Economic effect on tourism industry- The service economy is driving growth in most OECD countries. It represents a large part of economic activity and its importance continues to grow. Tourism, a large, complex and fragmented industry which is still very difficult to define and measure, is a key component of the service economy (30% of international trade in services in the OECD area). In terms of revenue, OECD countries generate about 70% of world tourism activity. Tourism, which has expanded dramatically over the past 30 years, looks set to continue growing as societies become more mobile and prosperous. Obtaining better information on services, the least developed side of statistics, is an important challenge for statistical agencies and a necessity for political analysis. Measuring tourism is part of a wider move to improve our knowledge of how economies work, what they produce and what changes occur over time. It is no longer enough to measure physical flows (arrivals and overnight stays) and monetary data (revenue and expenditure relating to international tourism). In the early 1980s, the OECD began work to set up a model acceptable at international level which gave rise to the OECD Tourism Economic Accounts, which measure certain socio-economic aspects of tourism. While developing this tool, the OECD produced a more precise definition of tourism, visitors and tourist expenditure [Note: OECD (1996), OECD Tourism Statistics Design and Application for Policy]. Despite its economic importance, governments, especially in developed economies, still do not adequately recognise tourism. For this reason, the OECD has developed and recently approved the OECD Guidelines for a Tourism Satellite Account and an Employment Module. These integrated statistical tools aim to measure the economic aspects of tourism (value added, jobs, revenue, investment, profits) in order to provide a more convincing demonstration of this activitys economic significance. Furthermore, together with the United Nations, the World Tourism Organization and the European Commission (Eurostat), the OECD has developed a UN-WTO-OECD-EUROSTAT Tourism Satellite Account: Recommended Methodological Framework, approved by the 25-member United Nations Statistical Commission on 1 March 2000. A publication is available. Other work undertaken in this area includes statistical research. OECD and Eurostat regularly organise international forums on tourism statistics to share ideas, experiences and concepts with Member and non-members countries, the scientific community and the tourism industry. The United Kingdom, with the support of Eurostat and the OECD, organised the Fifth International Forum on Tourism Statistics (Glasgow, 20-23 June 2000). Similar forums have been organised in Vienna (1994), in Venice (1995), in Sintra (1996) and in Copenhagen (1998). Technological effect on tourism industry- Definition of Tourism Technology The convergence of industries has forced people to create terminology such as information technology, biotechnology, ubiquitous technology and even cultural technology to explain frequently talked about topics. Tourism Technology is a term that encompasses all social, cultural, managerial, and value-adding activities of the tourism industry. Tourism Technology also incorporates and encourages technological advancements and economic development in the tourism industry. The Origin of Tourism Technology Tourism Technology, initially based on the concept of cultural technology, is a more comprehensive term covering knowledge used to add to the value of tourism products on a micro level and the management of the travel and tourism industry on a macro level. New tourism products are also the end result of tourism technology combining with other industries. These include medical tourism, educational tourism, agricultural tourism, marine tourism and the application of information technology to the travel and tourism industry. Application of Tourism Technology The term technology can easily call to mind scientific achievements, computer graphic skills, special effects and other engineering-related images. However, Tourism Technology encompasses the integrated fields mentioned in the previous paragraph, statistics, managerial and socio-cultural know-how, and skills that the tourism industry can adopt to design, produce, and market various tourism products. In addition to coordinating various aspects of human resources in the travel and tourism industry, â€Å"Tourism Technology† describes a comprehensive field containing but not limited to such widely referred to subjects as entertainment technology, contents technology and creative technology. Software for Tourists One of the latest applications is software that permits tourists to customize their visits according to their preferences. Luis Castillo Vidal, computer engineer of the University of Granada and one of the authors of the study, points out that, in order to design the customized visit plans, they have used Artificial Intelligence techniques, â€Å"a science that provides computers with abilities to solve problems which, in principle, can only be solved by humans†. Users must have access to the internet, either through a computer, a mobile phone or a PDA, in order to be able to access a web where they can define their preferences and needs, such as their artistic, cultural and gastronomic preferences, their lifestyle and favourite hours, whether they are disabled or not and the spending capacity. Environmental effect on tourism industry- The quality of the environment, both natural and man-made, is essential to tourism. However, tourisms relationship with the environment is complex. It involves many activities that can have adverse environmental effects. Many of these impacts are linked with the construction of general infrastructure such as roads and airports, and of tourism facilities, including resorts, hotels, restaurants, shops, golf courses and marinas. The negative impacts of tourism development can gradually destroy the environmental resources on which it depends. On the other hand, tourism has the potential to create beneficial effects on the environment by contributing to environmental protection and conservation. It is a way to raise awareness of environmental values and it can serve as a tool to finance protection of natural areas and increase their economic importance. Three main impact areas: natural resources, pollution, and physical impacts Environmental impacts at the global level Other industry impacts on tourism How tourism can contribute to environmental conservation Social effect on tourism industry- Jamaica is primarily a sun, sea and sand destination and, therefore, the primary recreational activities of visitors include sun and sea bathing on the beaches. Tourists who visit Jamaica are, therefore, primarily involved in activities such as going to the beach, snorkelling, scuba diving and glass-bottom boating. Jamaicas tourism product is dependent on the coral reefs and their associated ecosystems such as seagrass beds and mangroves. These ecosystems are, however, threatened by natural causes and human behaviour such as coastal pollution, rapid coastal development, over-fishing and global warming. All parties involved (the citizens, the tourism industry and the visitors) have a vested interest in the management of the environmental resource base and an obligation to do their part to support this management. If the environment is degraded all parties stand to lose visitors will fail to come (or will be willing to pay less) and the countries will lose an important source of economic benefit. In other words the environment will produce reduced economic, ecological, and amenity benefits. Microeconomic theory is essentially the study of the equitable distribution of scarce goods or benefits. In this example the scarce benefit is the Jamaican beach tourism product. The economic theory provides approaches to making the demand and supply of these scarce benefits more efficient. Demand of the good in this case is the beach-lust (sun, sand, sea) tourism of Jamaica. This is in contrast to the wonder-lust tourism such as safaris, mountain climbing, cultural and heritage tourism that is observed in other parts of the world. The good is supplied at a cost which would include the traditional costs of, labour and capital etc. However when the cost of the provision of the good does not take into account negative externalities such as environmental damage, this results in market failure. If this market failure is not corrected it will result in a loss in social welfare (dead-weight loss). Jamaicas current tourism model is based on the construction of mega super inclusive resorts, which often require engineering solutions such as dredging, groyne construction and limestone blasting in order to create swimming beaches, and construct buildings a few meters away from the high water mark. Construction and operation of tourist facilities such as hotels and other attractions also result in significant alterations to the terrestrial environment, trees, insects, birds etc. Operation of these entities also results in the diversion of resources such as water and electricity which could have been used elsewhere in the society. MARKET FAILURE Increased construction activity in the coast provides relatively short term and low-skilled employment. The intermittent demand for this pool of labour often results in the proliferation of unplanned settlements and squatter communities that are established close to the resort areas. These settlements are typically located in the hills and mountains above the coast. The creation of these communities results in the destruction of the watershed in these areas as well as inadequate sewage treatment and solid waste management. All of which contribute to reduced environmental quality; for example, reduced water quality as a result of increased nutrients and turbidity in the coastal waters. The simple economic analysis of Jamaicas tourism model outlined above suggests that market failure exists. The fundamental reason for the market failure associated with Jamaicas tourism model is the fact that the economic rent associated with the natural environment is not captured by the people of Jamaica. Economic rent is an excess return on an asset, a profit above normal market rates of return. Rents usually arise from assets that are scarce and fixed in supply. Beachfront property is a very good example of the type of assets that will yield economic rent. Or another example is the higher property costs in Coopers Hill or Beverly Hills when compared to Havendale or Mona, the economic rent (or value added) in this case being a view of the city. It can be argued that economic rents such as the beauty and natural environment should accrue to the people of Jamaica and not to foreign tourists or tourism operators. Rents are essentially a type of payment for the use of the resource. So the first reason for market failure is that there is no real capture of economic rents. A second example of market failure is that these tourism entities that are currently gaining all of the rents are also not accounting for the negative externalities of their activities. For example, hotels do not pay for the true costs of pollution and negative impacts associated with the use and operation of their facilities. However the problem of market failure does not stop here. As with several other Caribbean nations, the development of the tourism industry is heavily subsidised by the Jamaican government. Hotels and attractions are given tax holidays (e.g. no taxes for 10, 15, 20 years), duty is waived on imports of construction materials among other things. Additionally, the Governments facilitation such as fast-tracking permit requirements and their suspected role in circumventing environmental and planning regulations can reduce costs to investors and also be viewed as a subsidy. So in addition to the non-capture of rent and ignoring negative externalities, government subsidies to the tourism industry through tax holidays and other waivers also exacerbate the problem of market failure. This in turn means that the welfare of the society i.e. the Jamaican people is even more reduced. POSSIBLE REMEDIES As was highlighted above correcting market failures can be achieved through the implementation of taxes. In the case of Jamaicas coastal tourism this would mean that investors are forced to internalise environmental costs. This would theoretically lead to better environmental management and sustainable development of the tourism industry. However, given the current political climate in Jamaica and the influence of the tourism industry players this suggestion is likely to be received with hostility. Given this fact a more feasible way of capturing some of the economic rent is to capture a small portion of the benefits that accrue to the visitors to the island. This would be through the use of the existing system of arrivals taxes from cruise and stopover visitors to the island. However, unlike the current system where the charges are often hidden in room surcharges or airline tickets the additional environmental tax should be explicitly identified. HIDDEN COSTS There are, of course, wider questions of the true economic contribution of tourism. Clearly tourism is very important to Jamaicas economic sustainability. The Jamaican tourism industry accounts for 32 per cent of total employment and 36 per cent of the countrys GDP according to many studies. However, based on some of the market failures described above, are there more costs that are not being considered? Tourism has many hidden costs, which can have unfavourable economic effects on host countries such as Jamaica. The direct income for a country is the amount of tourist expenditure that remains after taxes, profits, and wages are paid and after imports are purchased; these subtracted amounts are called leakage. For the all-inclusive tourism model, studies show that about 80 per cent of travellers expenditures go to the airlines, hotels and other international companies, and not to local businesses or workers. In addition, significant amounts of income actually retained at the destination level can leave again through leakage. For example, the profits gained by foreign-owned tour operators, airlines, hotels, are repatriated to their home countries. Estimates made for Third World countries range from 80 per cent in the Caribbean to 40 per cent in India. In laymans term, on average, of each US$100 spent on a vacation tour by a tourist from a developed country, only about US$5 actually stays in the developing-country destinations economy. The current tensions between local craft vendors, restaurants and other service industries and large resort chains are all too common and point to the problem of leakage. Super inclusive hotels do not encourage guests to venture outside the walls of the hotel and so most of the tourists experience is limited to the entertainment as well as the sun, sea and sand activities available at that location. One could say that Jamaica the country is not the destination, it is actually the resort that is the destination. More comprehensive studies on this issue are urgently required by our academic institutions in the region. Caribbean researchers have a responsibility to provide balanced information that can enrich the discourse between all the relevant stakeholders. Much of the discourse is driven by short sightedness and politics on one side and passionate advocacy on the other. Too often the arguments of the contending parties (developers versus environmental advocates) are not supported by balanced information. Legal effect on tourism industry- MUSCAT Tourist traffic into the Sultanate is projected to scale new highs next year on the back of a raft of major initiatives, most notably an aggressive campaign targeting new markets, according to the Under-Secretary of the Ministry of Tourism Mini

Cases of Indian Contract Act 1872 Essay

The Carbolic Smoke Ball Company made a product called the â€Å"smoke ball†. It claimed to be a cure for influenza and a number of other diseases, in the context of the1889-1890 flu pandemic (estimated to have killed 1 million people). The smoke ball was a rubber ball with a tube attached. It was filled with carbolic acid (or phenol). The tube would be inserted into a user’s nose and squeezed at the bottom to release the vapours. The nose would run, ostensibly flushing out viral infections. The Company published advertisements in the Pall Mall Gazette and other newspapers on November 13, 1891, claiming that it would pay  £100 to anyone who got sick with influenza after using its product according to the instructions provided with it. â€Å"|  £100[1] reward will be paid by the Carbolic Smoke Ball Company to any person who contracts the increasing epidemic influenza colds, or any disease caused by taking cold, after having used the ball three times daily for two wee ks, according to the printed directions supplied with each ball. £1000 is deposited with the Alliance Bank, Regent Street, showing our sincerity in the matter.During the last epidemic of influenza many thousand carbolic smoke balls were sold as preventives against this disease, and in no ascertained case was the disease contracted by those using the carbolic smoke ball.One carbolic smoke ball will last a family several months, making it the cheapest remedy in the world at the price, 10s. post free. The ball can be refilled at a cost of 5s. Address: â€Å"Carbolic Smoke Ball Company, â€Å"27, Princes Street, Hanover Square, London.†| †| Mrs Louisa Elizabeth Carlill saw the advertisement, bought one of the balls and used it three times daily for nearly two months until she contracted the flu on 17 January 1892. She claimed  £100 from the Carbolic Smoke Ball Company. They ignored two letters from her husband, a solicitor. On a third request for her reward, they replied with an anonymous letter that if it is used properly the company had complete confidence in the smoke ball’s efficacy, but â€Å"to protect themselves against all fraudulent claims† they would need her to come to their office to use the ball each day and be checked by the secretary. Mrs Carlill brought a claim to court. The barristers representing her argued that the advertisement and her reliance on it was a contract between her and the company, and so they ought to pay. The company argued it was not a serious contract. Consideration 1.Abdul Aziz vs. Masum Ali, (1914). The secretary of a Mosque Committee filed a suit to enforce a promise which the promisor had made to subscribe Rs. 500 to the re-building of a mosque. Held: â€Å"the promise was not enforceable because there was no consideration in the sense of benefit†, as â€Å"the person who made the promise gained nothing in return for the promise made†, and the secretary of the Committee to whom the promise was made, suffered no detriment as nothing had been done to carry out the repairs. Hence the suit was dismissed. 2.Kedar Nath vs. Gauri Mohamed, (1886) The facts of this case were almost similar to those of the above case, but the secretary in this case incurred a liability on the strength of the promise. Held: The amount could be recovered, as the promise resulted in a sufficient detriment to the secretary. The promise could, however, be enforced only to the extent of the liability (detriment) incurred by the secretary. In this case, the promise, even though it was gratuitous, became enforceable because on the faith of the promise secretary had incurred a detriment. 3.Durga Prasad vs. Baldeo, (1880) B spent some money on the improvement of a market at the desire of the Collector of the district. In consideration of this D who was using the market promised to pay some money to B. Held: The agreement was void being without consideration as it had not moved at the desire of D. 4.Chinnaya vs. Ramayya, (1882) An old lady, by a deed of gift, made over certain property to her daughter D, under the direction that she should pay her aunt, P (sister of the old lady), a certain sum of money annually. The same day D entered into an agreement with P to pay her the agreed amount. Later, D refused to pay the amount on the plea that no consideration had moved from P to D. Held: P was entitled to maintain suit as consideration had moved from the old lady, sister of P, to the daughter, D. 5. Debi Radha Rani vs. Ram Dass, (1941) D is ready to sue her husband for maintenance allowance. On husband’s agreeing to pay her a monthly allowance by way of maintenance, she forbears to sue. Held: The wife’s forbearance to sue amount to consideration for the husband’s agreement for payment of maintenance allowance. 6. Ramchandra Chintaman vs. Kalu Raju, (1877) There was a promise to pay to the Vakil an additional sum if the suit was successful. Held: The promise was void for want of consideration. The Vakil was under a pre-existing contractual obligation to render the best of his services under the original contract. 7. Dunlop Pneumatic Tyres Co. Ltd. Vs. Selfridge & Co. Ltd., (1915) S bought tyres from the Dunlop Rubber Co. & sold them to D, a sub-dealer, who agreed with S not to sell these tyres below Dunlop’s list price and to pay the Dunlop Co.  £5 as damages on every tyre D undersold, D sold two tyres at less than the list price and thereupon the Dunlop Co. Sued him for the breach. Held: The Dunlop Co. Could not maintain the suit as it was stranger to the contract. Capacity to Contract Mohiri Bibi vs. Dharmodas Ghose, (1903) In this case, a minor mortgaged his house in favour of a money-lender to secure a loan of Rs. 20,000 out of which the mortgagee (the money-lender) paid the minor a sum of Rs. 8,000. Subsequently the minor sued for setting aside the mortgage, stating that he was underage when he executed the mortgage. Held: The mortgage was void and, therefore, it was cancelled. Further the money-lender’s request for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted. Mistake of Law Solle vs. Butcher, (1950) Ignorantia juris non excusat, i.e., ignorance of law is no excuse, is a well settled rule of law. A party cannot be allowed to get any relief on the ground that it had done a particular act in ignorance of law. A mistake of law is, therefore, no excuse, and the contract cannot be avoided. Mistake as to the Subject-Matter Couturier vs. Hastie, (1856) A agreed to sell a cargo of corn supposed at the time of contract to be in transit from Salonica to the United Kingdom. Unknown to the parties, the corn had become fermented and had already been sold by the master of the ship at Tunis. Held: The agreement was void and the buyer was not liable for the price. Mistake as to the Identity of the Subject-Matter Raffles vs. Wichelhaus, (1864) W agreed to buy from R a cargo of cotton â€Å"to arrive ex-peerless from Bombay†. There were two ships of that name sailing from Bombay, one sailing in October and the other in December. W meant the former ship but R meant the latter contract. Remedies for Breach of Contract Hadley vs. Baxendale X’s mill was stopped by the breakdown of a shaft. He delivered the shaft to Y, a common carrier, to be taken to a manufacturer to copy it make a new one. X did not make known to Y that delay would result in loss of profits. By some neglect on the part of Y the delivery of the shaft was delayed in transit beyond a reasonable time (so that the mill was idle for a longer period than otherwise would have been the case had there been no breach of the contract of carriage). Held: Y was not liable for loss of profits during the period of delay as the circumstances communicated to Y did not show that a delay in the delivery of the shaft would entail loss of profits to the mill. Alderson, B observed in this case as follows: â€Å"Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both the parties at the time they made the contract, as the probable result of the breach of it.† Quasi Contracts Damodar Mudaliar vs. Secretary of State for India, (1894) A village was irrigated by a tank. The Government effected certain repairs to the tank for its preservation and had no intention to do so gratuitously for the zamindars. The zamindars enjoyed the benefit thereof. Held: They were liable to contribute. A husband promised to pay his wife a house hold allowance of  £ 30 every month. Later the parties separated and the husband failed to pay the promised amount. The wife sued for the promised allowance Held: The wife will not succeed as agreements such as this did not create any legal obligations vis a vis legal relations. Rose & Frank Co. VS Crompton Bros. Ltd. – Intention to Create Legal Relationship Facts: There was an agreement between these two companies by means of which rose and frank co. was appointed as the agent of Crompton Bros. Ltd. One clause in the agreement stated that the agreement is not entered into as legal and formal and shall not be subject to legal jurisdiction in the law courts. Held: There was no binding and legally enforceable contract between the 2 companies as there was no intention to create legal relationship. Upton Rural District Council VS Powell – Implied Contract Facts: A fire broke out in Powell’s farm. He called upon the fire brigade to put out the fire which the latter did. Now Powell’s farm did not come under fire service zone although he believed it to be so. Held: He was liable to pay for the service rendered as the services were rendered by Upton Fire Brigade on an implied promise to pay. Willkie vs. London passenger transport board – Implied Agreement When a transport company runs a bus there is an implied offer by the transport company to carry passengers for certain fare. The acceptance of the offer is complete as soon as a passenger boards a bus – that is, implied acceptance. Boulton Vs Jones (1857) – Offer made to a particular person Facts : Jones used to have business dealings with Brockle Hurst. He sent an order (offer) to Brockle Hurst for the purchase of certain goods. By the time the order reached Brockle Hurst, he had sold his business to Boulton. Boulton receiving the order sent all the goods to Jones as per the order without informing Jones of the changing of the hands of the business. When Jones learnt that the goods were not supplied by Brockle Hurst, he refused to pay for the goods. His contention was that he had never placed an order to Boulton, the offer being made to Brockle Hurst, and therefore had no intention to make a contract with Boulton. Held: Jones was not liable to pay ( – Section 64 will also apply ) Carlill VS Carbolic Smoke Ball Co. (1893) – General offer Facts: The defendant company advertised in several newspapers that a reward of  £ 100 would be paid to any person who contracted influenza, cold, or any other disease associated with cold even after using the smoke balls of the company – a preventive remedy, 3 times a day, for 2 weeks in accordance with the printed directions. They also announced that a sum of  £ 1000 had been deposited with the Alliance Bank as a proof of their sincerity. The plaintiff, Mrs. Carlill had seen the advertisement, used the smoke balls according to the printed directions and for a period as specified, but still contracted influenza. She sued the defending company to claim the reward of  £ 100 as advertised by the company. The defendants argued inter alia that it was impossible to contract with the whole world and that she should have notified / communicated to them of her acceptance of the offer. Held: Rejecting the argument the Court held that the advertisement constituted the offer to the whole world at large ( – general offer) which was accepted by the plaintiff by conduct. ( – by using smoke balls) . Therefore she was justified to the reward of  £ 100. The Court observed that by performing the required act and complying with the necessary conditions attached to the offer of this kind ( – general offer) — the offeree has sufficiently accepted the offer and there is no need for any formal notification / communication of her acceptance to the offer. Note – This is the principle of English Law of contract and endorsed by Section 8 of ICA. The effect of the decision in Carlill’s case is that performance of stipulated condition of the proposal is not only acceptance of the proposal but it is also sufficient communication of the acceptance. Lalman Shukla vs. Gauri Dutt (1913) Facts : In this case, G (defendant) sent his servant l (plaintiff) in search of his missing nephew. G afterwards announced a reward for information concerning the missing boy. It traced the boy in ignorance of any such announcement. subsequently when he came to know of this reward, he claimed it. Held : It was held that since the plaintiff was ignorant of the offer of reward, his Act of bringing the lost boy didn’t amount to the acceptance of offer and therefore he was not entitled to claim the reward. Fitch vs. Smedabar Held : In this case the American Court has held that a reward cannot be claimed by one who didn’t know that it had been offered. Harbhajan Lal vs. Harcharan Lal Facts : In this case a young boy had run away from his father’s house. The father had offered a reward of Rs. 55 to anyone who finds the boy and brings him home. The plaintiff who was aware of the offer of reward found the boy on a railway station and informed the father. The plaintiff claimed the reward. the father contended that since the plaintiff had not brought the boy; he is not entitled to the reward. British judge means the( C.J of the privy council ) held that although there is no strict compliance of the condition of the reward, the plaintiff was however aware of the reward, the plaintiff was however aware of the reward an there is substantial performance. The plaintiff was held entitled to succeed. {information was very much trust worthy based on which father.} Harvy vs. Facey Facts : The defendants were the owners of the plot of land named † Bumper Hall Pen â€Å". The plaintiff being interested in purchasing the same sent a telegram to the defendants â€Å"will you sell us Bumper Hall Pen ? Telegraph lowest cash price â€Å".(1st telegram) The defendants replied also by a telegram † lowest price for BHP,  £ 900 asked by you†. (2nd telegram) The plaintiff immediately sent another telegram to defendants – â€Å"we agree to buy BHP for  £ 900 as asked by you†. (3rd telegram) The defendants subsequently refused to sell the plot of land at that price. The plaintiffs contained that the telegram from the defendants quoting lowest price was an offer and the same has been accepted by the plaintiff and thus, the contract is complete. The defendants contended that quoting the price was not an offer which could be accepted. Held: The Judicial Committee of Privy Council held that the exchange of the above telegrams have not resulted into a contract. It was observed that the 1st telegram had asked two questions regarding willingness to sell and the other regarding the lowest price. In reply only the lowest price was quoted and this was not an offer but a mere supply of information as desired by the other party. The third telegram from the plaintiffs saying † he agrees to buy† was only an offer and not the acceptance of an offer. Since this offer of the plaintiff had not been accepted, there was no binding contract between the parties. Fischer vs. Bell (1961) – Display of goods Facts: The defendant – Bell, exhibited in a show window in his shop, a knife with a marked price. The question arose whether the exhibition of that knife in the show window executed an offer for sale. Held: Lord Parker, the chief justice, stated that the display of an article in a shop window is merely an invitation to treat. It is in sense an offer for sale, the acceptance of which constitutes a contract. It is quite impossible to say that an exhibition of goods in a shop window in itself an offer for sale. Pharmaceutical Society of Great Britain vs. Boots Cast Chemist Ltd. (1952) – Display of Goods Held : The display of articles on shelves in a self-service shop / store merely amounts to invitation to treat. Ramsgate Victoria Hotel Company vs. Montefeire (1866) – if time not stipulated Facts : On 8th June, M offered to take shares in R company. He received a letter of allotment on 23rd November. M refused to take the shares. Held: M was entitled to refuse as the offer had lost by the delay of acceptance since the period of 5 months was not a reasonable one. Hyde vs. Wrench (1840) – Counter offer Facts : W, the defendant, had offered to sell his farm to H, the plaintiff, for  £ 1000. upon the defendant’s refusal to sell the farm, the plaintiff brought an action for specific performance. Held: The Court held that an offer to buy for  £ 950 was not an acceptance of the offer to buy because the offer to sale was for  £ 1000. it was a counter offer and a counter offer to a proposal amounts to its rejection. As such no contract had come into existence between the parties. Neale vs. Merret – Counter offer Note – this case law also highlights that the offeree must not deviate from the terms and conditions of the original offer as laid down by the offerer. Facts : M, the defendant offered to sell land to N the plaintiff at  £ 280. N accepted and enclosed #80 with a promise to pay the balance by monthly installments of  £ 50 each. Held: There was no contract between M and N as the acceptance was not qualified ( unconditional). Thus, an offer once rejected is dead and cannot be revived by its subsequent acceptance. Brogden vs. Metropolitan Railway Co. (1877) – Acceptance communication necessary Facts : A draft agreement relating to supply of coal was sent to the manager of a railway company viz. Metropolitan Railway company. For his acceptance the manager wrote the words, approved and put the draft in his drawer of his table intending to sent it to the companies solicitors for a formal contract to be drawn up. Through oversight the contract remained in the drawer. Held: There was no contract because there was no communication of acceptance. Felthouse vs. Bindley (1862) – Acceptance communication necessary Facts : F (uncle) offered to buy his nephew’s horse for  £ 30 saying â€Å"if I hear no more about it I shall consider the horse mine at  £ 30.† (offer must not thrust the burden of acceptance.) the nephew did not write / reply to F at all. He told his auctioneer, B to keep the particular horse out of sale of his farm stock as he intended to reserve it for his uncle, F. B the auctioneer, inadvertently, sold the horse. F sued him, B, for conversion of his property. Held: F has no right of action against the auctioneer since the horse was not sold to him. This offer of  £ 30 having not been properly accepted, since the nephew had not properly communicated the acceptance to F. The Court observed that it was clear that the nephew had in his mind the intention to sell his horse to his uncle. But an unconditional assent to accept unaccompanied by any external inclination will not suffice. Normally the person to whom the proposal is sent need not reply and the general rule – acceptance of offer – will not be implied, intended from the mere silence on the part of the offeree. Adams vs. Mindsell (1818) – Acceptance by non-instantaneous methods Note – this was the first case in which the rule of acceptance by non – instantaneous methods was propagated. Household Fire & Carriage Accident Insurance Co. Ltd vs. Grant Note – one of the more obvious consequence of the postal acceptance rule is that the offerer must bear the price of the letter of acceptance being delayed or lost. This based on the fact that posting the acceptance makes it invariably out of the offeree’s control. Held: In household fire case, the Court of appeal held that the defendant, Grant, was the offerer who had applied for shares in the company and to whom a letter of allotment ( acceptance letter, hence the company is the acceptor) had been posted but which had not reached him was nevertheless, liable as a share holder. The legal defects of the Court’s decision is that acceptance is complete as against the offerer, that is, the offerer will be bound as soon as the letter is posted. A binding contract takes place between the parties even if the letter of acceptance is delayed due to postal strike or loss in transit. Where however, the delay or loss is due to the fault of the acceptor, as in the case of an acceptance, which is incorrectly addressed, or insufficiently stamped. The rule is that it will take effect of and when it is received by the offerer, provided the offer is still enforced by them or is received within a reasonable time. Durga Prasad vs Baldeo (1880) – Consideration must be given at the desire of the promisor. Facts : The plaintiff, baldeo, at the desire and requset of the elecotr of the town expanded money in the construcvtion of a marjet in the town. Subsequently the defendants, Durga Prasad & Ors. Occupied the shops in the market. Since the plaintff had spent money for the constructoin of the market, the defendants in consideratoin thereof, promised to pay to plaintiff, a commission on the articles ssold throuhg their (defendants) shops in that market. Defendants however, failed to pay the promised commission, the plaintiff brought an action to recover the promised commission. Held: The plaintiff will not succeed since the agreement was void for the want of consideration. It was observed in this case that the consideration of the promisre to pay the commission was the construction of market by the plaintiff. But the expenses incuurred by the plaintiff in construction of the market was not there in the desire of the defendants (promisors) but at the instance/ request of the 3rd party ie, contractor of the town. It was therefore, held that since the consideraion for the construction of markeet did not move at the desire of the defendants., that is, the promisor ( D & Ors.). It did not constitute a valid / good consideration. Hence the defendants were not liable in respect of the promise made by them, following the first legal rule. Kedarnath Bhaattacharya vs Gauri Mohammed. (1887, Cal HC ) Facts : The town planners of howrah,thought advisable to erect a townhall at howrah,provided sufficeient subscription were collected.with the object in view the commisioner of howrah municipality started to raise necessary fund by public subscription.the defendants one of the subscribor’s of this fund for Rs 100 signed his name in the subscription book at that amount. On the faith of the promised subscription the plaintiff (commisioner of the howrah municpality) entered into a contract with a contractor for the purpose of the building the town hall. Later the defendant subscriber referred to pay the amount upon the promise to pay / subscribe. In other words ,he contended that there would be no personal benefit / significance by the construction of the hall. Held : He was held liable. It was observed that in he case person were asked to knowingly subscribe the purpose to which the money was to be applied / use. They also knew, that on the faith of their subscription and an obligation was to be incurred to pay the contactor for the work. The Act of plaintiff is entering into contract with the contractor was done at the desire of the prommisor so as to constitute a good consideration within the meaning of the section 2(d) of ICA. Chinnaya vs ramayya (1882 Madr HC) Facts : A, an old lady, granted / gfted an estate to her daughter the defendant, with the direction / condition that the daughter should pay an annuity ( annual payment ) of Rs 653 to A’s brother, the plaintiff. On the same day the defendant, daughter (promisor) , made a promise vis a vis an agreement with her uncle that sshe would pay the annuity as directed by her mother, the old lady. Later the defendant refused to pay on the ground that her uncle (promisee, plaintiff) has not given any consideration. She contended that her uncle was stranger to this consideration and hence he cannot claim the money as a matter of right. Held: The Madras HC held that in this agreement between the defendant and plaintiff the consideration has been furnished on behalf of the plaintiff (uncle ) by his own sister (defendant’s mother). Although the plaintiff was stranger to the consideration but since he was a party to the contract he could enforce the promise of the promisor, since under Indian law, consideration may be given by the promisee or anyone on his behalf – vide Section 2 (d) of ICA. Thus, consideration furnished by the old lady constitutes sufficient consideration for the plaintiff to sue the defendant on her promise. Held, the brother / uncle was entitled to a decree for payment of the annual sum of money. Thomas vs Thomas (1842) Tweddle vs Atkinson (1861) {See Bottom } Held: It was held in these cases that the under the English law, that if the consideration is furnished by any person other than the promisee himself, then the promisee is relegated to the position and status of a stranger to the consideration and therefore, he cannot sue for promise. Harvey vs Gibbons : Facts : In this case a servant was promised  £ 50 in consideration of promise that he would release a debt to his master. Held: This is legally impossible. Collins vs Godefroy (1831) – Facts : The promisee, plaintiff, received subpoena (summon from the Court) to appear at a trial as a witness on behalf of the defendant (promisor). The defendant promised him a sum of money for the troubles which was to be taken by him in appearing that case. A person who receives a subpoena is bound to attend and give evidence before the Court. Later the defendant refused to pay the promised amount. The plaintiff sued him to recover the promised amount. Held It was held that there was no consideration for promise. The plaintiff being already a legal duty to attend. But where the undertaking is to do something more than what the promisee is legally bound. This may constitute a good consideration for the promise of the promisor. Glasbrook Bros. Ltd. Vs Glamerglan County Council (1925) Facts : Glamerglan County Council, a police authority, sued for a summ of  £ 2200 promised to it by Glasbrook Brothers Ltd. a colliery company. The police authority had provided a stronger guard during a strike, as required by the company than was in its opinion, necessary. Held : It was held that providing stronger guard then what was actually necessary was a good consideration and the defendants were liable to pay for the same. Tweddle Vs Atkinson Note – The rule that only parties to the contract can sue each other was recognised for the first time in 1861 in this case. Facts: In this case, the plaintiff, A , married a girl B. After this marriage a contract in writing was made between the fathers of the married couple that each should make a payment of a certain sum to A who should have the power to sue the executors of her father in law’s estate for the promised money by the father in law. Held: It was held that the husband could not sue her since 1. He was not a party to the contract (stranger to a contract), as also 2. No consideration has moved from him to his father in law (stranger to the consideration) Guarantee – Bailment GUARANTEE Madho Shah vs Sita Ram Note – The liability of the surety is said to be † vicarious † with that of the Principal Debtor. Vicarious liability means that the liability between two parties is joined and several. The Principle of Vicarious Liability involved in a contract of guarantee was recognised for the first time in this case. R . Lilavati vs Bank of Baroda The loss of securities by the creditor results in the discharge of the surety – vide Section 141. If however the pledged securities are lost without any fault of the   Reed vs Dean Facts : ‘A’ hired a motor from B for a holiday on river Thames. The motor caught fire and A was unable to extinguish it as the fire fighting equipment was out of order. As such he was injured and suffered loss. Held : B was liable as it was a case of non gratuitous bailment. Misa vs Currie Facts : A customer had two separate accounts with a bank and he owes to the bank on of the accounts. The bank can liquidate / realize the debt due to it by transferring money there from. The same provision is equally applicable to India. UPTON-ON-SEVERN RURAL DISTRICT v. POWELL (1942); briefed 9/10/94, pg. 171. Prepared by Roger Martin (http://people.qualcomm.com/rmartin/) Facts: ∆’s barn was on fire and he called the local Upton police chief and asked him to send â€Å"the fire brigade†. The Upton fire brigade showed up and began to put out the fire. While the fire was still burning, a neighboring fire chief came by and informed all that the farm was really in his district, and so the Upton fire brigade was not under obligation to put it out for free. When the ∆ refused to pay for the service, they sued. Nature of the Risk: You may contract by implied promise when you ask for assistance in protecting your property. Issue: Was there a contract between the fire brigade and the farmer by implied promise of the farmer to pay if payment was required? Holding: Yes. Parties create a contract by implied promise when one renders service that requires payment, even though the other may not be aware that the service requires payment. Reasoning: The court reasoned that the fact that neither intended to enter into a contract was irrelevant. The contract was created because the service was performed and therefore there was an implied promise to pay. Pharmaceutical Society of Great Britain v Boots Cash Chemists (Southern) Ltd [1953] EWCA Civ 6 is a famous English contract law decision on the nature of anoffer. The Court held that the display of a product in a store with a price attached is not sufficient to be considered an offer, but rather is an invitation to treat.

Final Exam Ec315

PART I. HYPOTHESIS TESTING PROBLEM 1 A certain brand of fluorescent light tube was advertised as having an effective life span before burning out of 4000 hours. A random sample of 84 bulbs was burned out with a mean illumination life span of 1870 hours and with a sample standard deviation of 90 hours. Construct a 95 confidence interval based on this sample and be sure to interpret this interval. Answer Since population standard deviation is unknown, t distribution can be used construct the confidence interval. ? The 95% confidence interval is given by ? X ? t? / 2,n ? 1 ? S S? , X ? ? /2,n ? 1 ? n n? Details Confidence Interval Estimate for the Mean Data Sample Standard Deviation Sample Mean Sample Size Confidence Level 90 1870 84 95% Intermediate Calculations Standard Error of the Mean 9. 819805061 Degrees of Freedom 83 t Value 1. 988959743 Interval Half Width 19. 53119695 Confidence Interval Interval Lower Limit 1850. 47 Interval Upper Limit 1889. 53 2 PROBLEM 2 Given the following data from two independent data sets, conduct a one -tail hypothesis test to determine if the means are statistically equal using alpha=0. 05. Do NOT do a confidence interval. 1 = 35 n2 = 30 xbar1= 32 xbar2 = 25 s1=7 s2 = 6 Answer H0:Â µ1=Â µ2 H1: Â µ1>Â µ2 Test statistics used is t ? X1 ? X 2 S 2 (n1 ? 1) S12 ? (n2 ? 1) S2 n1n2 ~ tn1 ? n1 ? 2 where S ? n1 ? n2 ? 2 n1 ? n2 Decision rule : Reject the null hypothesis, if the calculated value of test statistic is greater than the critical value. Details t Test for Differences in Two Means Data Hypothesized Difference Level of Significance Population 1 Sample Sample Size Sample Mean Sample Standard Deviation Population 2 Sample Sample Size Sample Mean Sample Standard Deviation 0 0. 05 35 32 7 30 25 6Intermediate Calculations Population 1 Sample Degrees of Freedom 34 Population 2 Sample Degrees of Freedom 29 Total Degrees of Freedom 63 Pooled Variance 43. 01587 Difference in Sample Means 7 t Test Statistic 4. 289648 Upper-Tail Test U pper Critical Value p-Value Reject the null hypothesis 1. 669402 3. 14E-05 Conclusion: Reject the null hypothesis. The sample provides enough evidence to support the claim that means are different. 3 PROBLEM 3. A test was conducted to determine whether gender of a display model af fected the likelihood that consumers would prefer a new product.A survey of consumers at a trade show which used a female spokesperson determined that 120 of 300 customers preferred the product while 92 of 280 customers preferred the product when it was shown by a female spokesperson. Do the samples provide sufficient evidence to indicate that the gender of the salesperson affect the likelihood of the product being favorably regarded by consumers? Evaluate with a two-tail, alpha =. 01 test. Do NOT do a confidence interval. Answer H0: There no significant gender wise difference in the proportion customers who preferred the product.H1: There significant gender wise difference in the proportion customers who preferred the product. P ? P2 n p ? n p 1 The test Statistic used is Z test Z ? where p= 1 1 2 2 n1 ? n2 ?1 1? P(1 ? P) ? ? ? ? n1 n2 ? Decision rule : Reject the null hypothesis, if the calculated value of test statistic is greater than the critical value. Details Z Test for Differences in Two Proportions Data Hypothesized Difference Level of Significance Group 1 Number of Successes Sample Size Group 2 Number of Successes Sample Size 0 0. 01 Male 120 300 Female 92 80 Intermediate Calculations Group 1 Proportion 0. 4 Group 2 Proportion 0. 328571429 Difference in Two Proportions 0. 071428571 Average Proportion 0. 365517241 Z Test Statistic 1. 784981685 Two-Tail Test Lower Critical Value -2. 575829304 Upper Critical Value 2. 575829304 p-Value 0. 074264288 Do not reject the null hypothesis Conclusion: Fails to reject the null hypothesis. The sample does not provide enough evidence to support the claim that there significant gender wise difference in the proportion customers who preferr ed the product. 4PROBLEM 4 Assuming that the population variances are equal for Male and Female GPA’s, test the following sample data to see if Male and Female PhD candidate GPA’s (Means) are equal. Conduct a two-tail hypothesis test at ? =. 01 to determine whether the sample means are different. Do NOT do a confidence interval. Male GPA’s Female GPA’s Sample Size 12 13 Sample Mean 2. 8 4. 95 Sample Standard Dev .25 .8 Answer H0: There is no significant difference in the mean GPA of males and Females H1: There is significant difference in the mean GPA of males and Females. Test Statistic used is independent sample t test. ? X1 ? X 2 S 2 (n1 ? 1) S12 ? (n2 ? 1) S2 n1n2 ~ tn1 ? n1 ? 2 where S ? n1 ? n2 ? 2 n1 ? n2 Decision rule: Reject the null hypotheses, if the calculated value of test statistic is greater than the critical value. Details t Test for Differences in Two Means Data Hypothesized Difference Level of Significance Population 1 Sample Sample Size Sample Mean Sample Standard Deviation Population 2 Sample Sample Size Sample Mean Sample Standard Deviation Intermediate Calculations Population 1 Sample Degrees of Freedom Population 2 Sample Degrees of Freedom Total Degrees of Freedom Pooled Variance 0. 05 12 2. 8 0. 25 13 4. 95 0. 8 11 12 23 0. 363804 5 Difference in Sample Means t Test Statistic -2. 15 -8. 90424 Two-Tail Test Lower Critical Value Upper Critical Value p-Value Reject the null hypothesis -2. 80734 2. 807336 0. 0000 Conclusion: Reject the null hypotheses. The sample provides enough evidence to support the claim that there is significant difference in the mean GP A score among the males and females. 6 PART II REGRESSION ANALYSIS Problem 5 You wish to run the regression model (less Intercept and coefficients) shown below: VOTE = URBAN + INCOME + EDUCATEGiven the Excel spreadsheet below for annual data from1970 to 2006 (with the data for row 5 thru row 35 not shown), complete all necessary entries in the Excel Regress ion Window shown below the data. 1 2 3 4 A YEAR 1970 1971 1972 B VOTE C URBAN D INCOME E EDUCATE 49. 0 58. 3 45. 2 62. 0 65. 2 75. 0 7488 7635 7879 4. 3 8. 3 4. 5 36 37 38 2004 2005 2006 50. 1 92. 1 94. 0 95. 6 15321 15643 16001 4. 9 4. 7 5. 1 67. 7 54. 2 Regression Input OK Input Y Range: A1:A38 Input X Range: B1:E38 Cancel Help ? Labels Confidence Level: x X X Output options X Constant is Zero 95 % Output Range: New Worksheet Ply:New W orkbook Residuals Residuals Residual Plots Standardized Residuals Line Fit Plots Normal Probabilit y Normal Probability Plots 7 PROBLEM 6. Use the following regression output to determine the following: A real estate investor has devised a model to estimate home prices in a new suburban development. Data for a random sample of 100 homes were gathered on the selling price of the home ($ thousands), the home size (square feet), the lot size (thousands of square feet), and the number of bedrooms. The following multiple regression output was generated: Regression Statistics Multiple R 0. 8647 R Square . 7222 Adjusted R Square 0. 6888 Standard Error 16. 0389 Observations 100 Intercept X1 (Square Feet) X2 (Lot Size) X3 (Bedrooms) Coefficients -24. 888 0. 2323 11. 2589 15. 2356 Standard Error 38. 3735 0. 0184 1. 7120 6. 8905 t Stat -0. 7021 9. 3122 4. 3256 3. 2158 P-value 0. 2154 0. 0000 0. 0001 0. 1589 a. Why is the coefficient for BEDROOMS a positive number? The selling price increase when the number of rooms increases. Thus the relationship is positive. b. Which is the most statistically significant variable? What evidence shows this? Most statistically significant variable is one with least p value.Here most statistically significant variable is Square feet. c. Which is the least statistically significant variable? What evidence shows this? Least statistically significant variable is one with high p value. Here least statistically significant variable is bedrooms d. For a 0. 05 level of significance, should any variable be droppe d from this model? Why or why not? The variable bed rooms can be dropped from the model as the p value is greater than 0. 05. e. Interpret the value of R squared? How does this value from the adjusted R squared? The R2 gives the model adequacy. Here R2 suggest that 72. 22% variability can e explained by the model. Adjusted R2 is a modification of R2 that adjusts for the number of explanatory terms in a model. Unlike R2, the adjusted R2 increases only if the new term improves the model more than would be expected by chance. f. Predict the sales price of a 1134-square-foot home with a lot size of 15,400 square feet and 2 bedrooms. Selling Price =-24. 888+0. 02323*1134+11. 2589*15400+15. 2356*2=173419 8 PART III SPECIFIC KNOWLEDGE SHORT-ANSWER QUESTIONS. Problem 7 Define Autocorrelation in the following terms: a. In what type of regression is it likely to occur? Regressions involving time series data . What is bad about autocorrelation in a regression? The standard error of the estimat es will high. c. What method is used to determine if it exists? (Think of statistical test to be used) Durbin Watson Statistic is used determine auto correlation in a regression. d. If found in a regression how is it eliminated? Appropriate transformations can be adopted to eliminate auto correlation. Problem 8 Define Multicollinearity in the following terms: a) In what type of regression is it likely to occur? Multicollinearity occurs in multiple regressions when two or more independent variables are highly correlated. ) Why is multicollinearity in a regression a difficulty to be resolved? Multicollinearity in Regression Models is an unacceptably high level of intercorrelation among the independents, such that the effects of the independents cannot be separated. Under multicollinearity, estimates are unbiased but assessments of the relative strength of the explanatory variables and their joint effect are unreliable. c) How can multicollinearity be determined in a regression? Multic ollinearity refers to excessive correlation of the predictor variables. When correlation is excessive (some use the rule of thumb of r > 0. 90), tandard errors of the b and beta coefficients become large, making it difficult or impossible to assess the relative importance of the predictor variables. The measures Tolerance and VIF are commonly used to measure multicollinearity. Tolerance is 1 – R2 for the regression of that independent variable on all the other independents, ignoring the dependent. There will be as many tolerance coefficients as there are independents. The higher the inter-correlation of the independents, the more the tolerance will approach zero. As a rule of thumb, if tolerance is less than . 20, a problem with multicollinearity is indicated.When tolerance is close to 0 there is high multicollinearity of that variable with other independents and the b and beta coefficients will be unstable. The more the multicollinearity, the lower the tolerance, the more th e standard error of the regression coefficients. d) If multicollinearity is found in a regression, how is it eliminated? Multicollinearity occurs because two (or more) variables are related – they measure essentially the same thing. If one of the variables doesn’t seem logically essential to your model, removing it may reduce or eliminate multicollinearity.

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