Chapter 12.1, Problem 63E

Product Response Rate. A company manufactures goods that are sold exclusively by mail order. The director of market research needed to test market a new product. She planned to send brochures to a random sample of households and use the proportion of orders obtained as an estimate of the true proportion, known as the product response rate. The results of the market research were to be utilized as a primary source for advance production planning, so the director wanted the figures she presented to be as accurate as possible. Specifically, she wanted to be 95% confident that the estimate of the product response rate would be accurate to within 1%.

1.                                                        a.      Without making any assumptions, determine the sample size required.
2.                                                        b.      Historically, product response rates for products sold by this company have ranged from 0.5% to 4.9%. If the director had been willing to assume that the sample product response rate for this product would also fall in that range, find the required sample size.
3.                                                         c.      Compare the results from parts (a) and (b).
4.                                                        d.      Discuss the possible consequences if the assumption made in part (b) turns out to be incorrect.