[BBALLB, SEMESTER II] [BUSINESS STATISTICS]
Module III
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Table of Contents
Sl. No. Topic Name Page
No.
1. Meaning and Significance of dispersion 2
2. Range 3
3. Quartile deviation 4
4. Mean deviation 5
5. Standard deviation 6
6. Coefficient of variation 9
7. Moments 10
8. Skewness 12
9. Kurtosis 13
10. Exercise 15
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Measures of Dispersion
[Link]:
It is hardly fully representative of a mass, unless we know the manner in which the individual items
scatter around it. A further description of the series is necessary if we are to gaugehow representative
the average is.
Importance or Significance of Measures of Dispersion:
The reliability of a measure of central tendency is known.
1. Measures of Dispersion provide a basis for the control of variability.
2. They help to compare two or more sets of data with regard to their variability.
3. They enhance the utility and scope of statistical techniques.
The Usual Measures of Dispersion:
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The usual measures of dispersion, very often suggested by the statisticians, are exhibited
with the aid of the following chart:
Difference between the Absolute measure and Relative Measure:
Absolute measure Relative measure
Range Co-efficient of Range
Quartile deviation Co-efficient of Quartile Deviation
Mean Deviation (about Mean) Co-efficient of Mean Deviation (about Mean)
Median Deviation (about Median) Co-efficient of Median Deviation (about
Mode Deviation (about Mode Median)
Co-efficient of Mode Deviation (about Mode)
Standard deviation and Variance Co-efficient of Variation
Absolute Measures of Dispersion:
[Link]
Definition: Range is the difference between the greatest (largest) and the smallest ofthe values.
In Symbols, Range = = L-S.
L- Largest Value
S- Smallest Value
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In individual observations and discrete series, L and S are easily identified. In Continuous series, the
following two method are followed.
Method-I
L- Upper boundary of the highest class
S - Lower boundary of the lowest class
Method-2
L - Mid value of the highest class
S - Mid value of the lowest class
𝐿−𝑆
Co-efficient of Range = 𝐿+𝑆 .
Uses of Ranges:
1. Range is used in finding the control limits of mean chart and Range chart in S.Q.C.
2. While Quoting the prices of shares, bonds, gold, etc. on daily basis or yearly basis, the minimum
and the maximum prices are mentioned.
3. The minimum and the maximum temperature likely to prevail on each day are forecasted.
Merits:
1. It is simple to understand and easy to calculate.
2. It can be calculated in no time.
Demerits:
1. Its definition does not seem to suit continuous series.
2. It is based on the two extreme items. It does not consider the other items.
3. It is usually affected by the extreme items.
4. It cannot be manipulated algebraically. The Range of combined set cannot be found from
the range of the individual sets.
5. It does not have sampling stability.
6. It cannot be calculated from open-end class intervals. It is a very rarely used measure. Its
Scope is limited.
[Link] Deviation (Q.D)
Definition : Quartile Deviation is half of the difference between the first and the third quartiles.
Hence it is called Semi Inter Quartile Range.
𝑄 −𝑄
In symbols, Q.D = 3 2 1 .
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𝑄 −𝑄
Coefficient of Quartile Deviation = 𝑄3+𝑄1 .
3 1
Merits:
1. It is simple to understand and easy to calculate.
2. It is not affected by extreme items.
3. It can be calculated for data with open and classes also.
Demerits:
1. It is not based on all items. It is based on two positional values Q1 and Q3 and ignores
theextreme 50% of the items.
2. It cannot be manipulated algebraically.
3. It is affected by sampling fluctuations.
4. Like range, it does not measure the deviation about any measure of central tendency.
[Link] Deviation or Average Deviation:
Definition: Mean deviation is the arithmetic mean of the absolute deviations of the values about
their arithmetic mean or median or mode.
M.D. is the abbreviation for Mean Deviation. There are three kinds of mean deviations, Viz.,
1. mean deviation or mean deviation about mean
2. mean deviation about median
3. mean deviation about mode.
Mean deviation about median is the least. it could be easily verified in individual observations and
discrete series where the actual values are considered.
The relative measures are the following:
𝑀𝑒𝑎𝑛 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 𝑎𝑏𝑜𝑢𝑡 𝑀𝑒𝑎𝑛
Coefficient of Mean deviation about Mean = .
𝑀𝑒𝑎𝑛
𝑀𝑒𝑎𝑛 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 𝑎𝑏𝑜𝑢𝑡 𝑀𝑒𝑑𝑖𝑎𝑛
Coefficient of Mean deviation about Median = .
𝑀𝑒𝑎𝑛
𝑀𝑒𝑎𝑛 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛 𝑎𝑏𝑜𝑢𝑡 𝑀𝑜𝑑𝑒
Coefficient of Mean deviation about Mode = .
𝑀𝑒𝑎𝑛
Individual Observations:
∑ 𝑓|𝑋−𝑋̅ |
Mean Deviation about Mean = .
𝑁
∑ 𝑓|𝑋−𝑀|
Mean Deviation about Median = .
𝑁
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∑ 𝑓|𝑋−𝑍|
Mean Deviation about Median = .
𝑁
Uses of Mean Deviation:
Mean deviation provides an opportunity to calculate deviation, absolute deviation, total
deviation and average of the deviations. Standard deviation is the most important absolute measure
of dispersion. knowledge of the principle of mean deviation facilities understanding the concept
of standard deviation. Standard deviation is a part of almost all the theories of Statistics, Viz.,
skewness, kurtosis, correlation, regression, sampling, estimation, inference, S.Q.C., etc. Mean
deviation is preferred when a particular discussion is not carried to other spheres. It is found to be
much useful in forecasting business cycles and a few other statistical activities connected with
business, economic and sociology.
Merits:
1. Mean deviations are rigidly defined.
2. They are based on all the items.
3. They are affected less by extreme items than standard deviation. Among the three
mean deviations, mean deviation about median is the least.
4. They are simple to understand and not difficult to calculate.
5. They do not vary much from sample to sample.
6. They provide choice. among the three mean deviations, the one that is suitable to a
particular situation can be used.
7. Formation of different distributions can be compared on the basis of a mean
deviation.
Demerits:
1. Omission of negative sign of deviations makes them non-algebraic. It is pointed out
as a great drawback.
2. They could not be manipulated. Combined mean deviation could not be found.
3. it is not widely used in business or economics.
[Link] Deviation:
Definition: Standard Deviation is the root mean square deviation of the values from their
arithmetic mean. S.D denoted by σ (read , sigma). Variance is denoted by σ2. S.D. is the
positivesquare root of variance. Karl Pearson introduced the concept of standard deviation in
1893. S.D is also called root mean square deviation. The corresponding relative measure is
𝑆𝑡𝑎𝑛𝑑𝑎𝑟𝑑 𝐷𝑒𝑣𝑖𝑎𝑡𝑖𝑜𝑛
Coefficient of Variation = × 100.
𝐴𝑟𝑖𝑡ℎ𝑚𝑎𝑡𝑖𝑐 𝑀𝑒𝑎𝑛
∑ 𝑥2 ∑𝑥 2
Standard deviation (σ)= √ − ( 𝑁 ) . (Individual observation)
𝑁
∑ 𝑓𝑥 2 ∑ 𝑓𝑥 2
Standard deviation (σ)= √ 𝑁
−( 𝑁
) . (Discrete series)
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∑ 𝑓𝑚2 ∑ 𝑓𝑚 2
Standard deviation (σ)= √ −( ) . (Continuous series)
𝑁 𝑁
Combined Standard Deviation
When two or three groups merge, the mean and standard deviation of the combined group are
calculated as follows:
Case 1. Merger of Two Groups
Size Mean S.D.
Group I N1 σ1
X1
Group II N2 σ2
X2
That is,
N1 – Number of items in the first group.
N2 – Number of items in the second group.
𝑥1 =Mean of items in the first group.
̅̅̅
𝑥2 =Mean of items in the second group.
̅̅̅
σ1 – Standard Deviation of items in the first group.
σ2 - Standard Deviation of items in the second group.
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The Standard Deviation of the combined group,
𝑁1 𝜎1 2 +𝑁2 𝜎2 2 +𝑁1 𝑑1 2 +𝑁2 𝑑2 2
𝜎12 = √ .
𝑁1 +𝑁2
̅̅̅1 − ̅̅̅̅̅
Where, 𝑑1 = 𝑋 ̅̅̅2 − ̅̅̅̅̅
𝑋12 , 𝑑2 = 𝑋 𝑋12.
Case 1. Merger of Three Groups
Size Mean S.D.
Group I N1 σ1
X1
Group II N2 σ2
X2
̅̅̅3
𝑋
Group II N2 σ2
That is
N1 – Number of items in the first group.
N2 – Number of items in the second group.
N3 – Number of items in the third group.
𝑥1 =Mean of items in the first group.
̅̅̅
𝑥2 =Mean of items in the second group.
̅̅̅
𝑥3 =Mean of items in the third group.
̅̅̅
σ1 – Standard Deviation of items in the first group.
σ2 - Standard Deviation of items in the second group.
σ3 - Standard Deviation of items in the second group.
The Mean of the combined group,
̅̅̅̅ ̅̅̅̅
𝑁 𝑋 +𝑁 𝑋2 +𝑁3 𝑋3 ̅̅̅̅
̅̅̅̅̅̅
𝑋123 = 1 𝑁1 +𝑁2 +𝑁 .
1 2 3
The Standard Deviation of the combined group,
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𝑁1 𝜎1 2 +𝑁2 𝜎2 2 +𝑁3 𝜎3 2 +𝑁1 𝑑1 2 +𝑁2 𝑑2 2 +𝑁3 𝑑3 2
𝜎123 = √ .
𝑁1 +𝑁2 +𝑁3
Where, 𝑑1 = ̅̅̅ ̅̅̅̅̅̅
𝑋1 − 𝑋 ̅̅̅ ̅̅̅̅̅̅ ̅̅̅ ̅̅̅̅̅̅
123 , 𝑑2 = 𝑋2 − 𝑋123 , and , 𝑑3 = 𝑋3 − 𝑋123 .
Difference between the Mean Deviation and standard Deviation:
Mean Deviations Standard Deviations
Deviations are calculated from Mean or Median Deviations are always calculated from
or Mode. Mean.
While finding the deviations, negative sign is Deviations are squared. Finally square root
omitted. is taken.
M.D.’s are simple to understand and not difficult It is not simple to under standard and it is
to calculate. not easy to calculate.
Omission of negative sign is considered to be It has many desirable mathematically
deficient mathematically. properties.
Uses:
Standard deviation is the best absolute measure of dispersion. It is a part of many
statistical concepts such as Skewness, Kurtosis, Correlation, Regression, Estimation, sampling,
tests of Significance and Statistical Quality Control. Not only in statistics but also in Biology,
education, Psychology and other disciplines standard deviation is of immense use.
Merits:
1. Standard deviation is rigidly defined.
2. It is calculated on the basis of the magnitudes of all the items.
3. It could be manipulated further. The combined S.D. can be calculated.
4. Mistakes in its calculation can be corrected. The entire calculation need not be redone.
5. Coefficient of variation is based on S.D.. It is the best and most widely used relative
measure of dispersion.
6. It is free from sampling fluctuations. This property of sampling stability has brought it
an indispensable place in tests of significance.
7. It reduces the complexity in the approach of normal distribution by providing standard
normal variable.
8. It is the most important absolute measure of dispersion. It is used in all the areas of
statistics. It is widely used in other disciplines such as Psychology, Education and
Biologyas well.
9. Scientific calculators show the standard deviation of any series.
10. Different forms of the formula are available.
Demerits:
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1. Compared with other absolute measures of dispersion, it is difficult to calculate.
2. It is not simple to understand.
3. It gives more weight age to the items away from the mean than those near the mean as
thedeviations are squared.
6. Coefficient of Variation
Definition: Coefficient of variation is the most widely used relative measure of dispersion. It
isbased on the best absolute measure of dispersion and the best measure of central tendency. It
is a percentage. While comparing two or more groups, the group which has less coefficient of
variation is less variable or more consistent or more stable or more uniform or more
homogeneous. Coefficient of Variation is denoted by the C.V.
7. Moments:
Moment word is very popular in mechanical sciences. In science moment is a measure of
energy which generates the frequency. In Statistics, moments are the arithmetic means of first,
second, third and so on, i.e. r-th power of the deviation taken from either mean or an arbitrary
point of a distribution. In other words, moments are statistical measures that give certain
characteristics of the distribution. In statistics, some moments are very important.
Generally, in any frequency distribution, four moments are obtained which are known as first,
second, third and fourth moments. These four moments describe the information about mean,
variance, skewness and kurtosis of a frequency distribution. Calculation of moments gives
some features of a distribution which are of statistical importance. Moments can be classified
in raw and central moment. Raw moments are measured about any arbitrary point A (say). If A
is taken to be zero then raw moments are called moments about origin. When A is taken to be
Arithmetic mean we get central moments. The first raw moment about origin is mean whereas
the first central moment is zero. The second raw and central moments are mean square
deviation and variance, respectively. The third and fourth moments are useful in measuring
skewness and kurtosis.
Moments are of three types.
i) Ordinary moments
ii) Raw moments
iii) Central moment
The most general measure of moment ,which is calculated with respect to some value A is
termed as ordinary moment of order r. The formula is given by the equation,
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1
mr/(A) = 𝑛 𝛴(𝑥𝑖 − 𝐴)𝑟 , r=1,2,3,….
If the given data are arranged in a frequency table, the formula becomes,
1
mr/(A) = 𝑛 𝛴(𝑥𝑖 − 𝐴)𝑟 𝑓𝑖 , r=1,2,3,….
Where xi and fi are respectively the class-mark and frequency of the i-th class,where i=1,2,3..k
and n=Σ𝑓𝑖
The moments which are calculated with respect to zero or origin are called Raw moment, which
is given by the equation
1
mr = 𝑛 𝛴(𝑥𝑖)𝑟 , r=1,2,3,….
If the given data are arranged in a frequency table, the formula becomes,
1
mr = 𝛴(𝑥𝑖)𝑟 𝑓𝑖 , r=1,2,3,….
𝑛
Again, the moments which are calculated with respect to origin are called central moment. So
for n values xi, i=1(.)n, the central moment of order r is denoted by mr,
1
mr = 𝑛 𝛴(𝑥𝑖 − 𝑥)𝑟 , r=1,2,3,….
While for a frequency distribution,
1
mr = 𝑛 𝛴(𝑥𝑖 − 𝑥)𝑟 𝑓𝑖 , r=1,2,3,….
Note:
1
i) For any distribution,1st order raw moment is, m1=𝑛 𝛴𝑥𝑖 = mean
1
ii) 1st order central moment is, m1= 𝑛 𝛴(𝑥𝑖 − 𝑥)1 =0 i.e, m1=0
1
iii)2nd order central moment m2= mr = 𝑛 𝛴(𝑥𝑖 − 𝑥)2 = variance.
iv) 0th order raw/central/ordinary moment is , m0=1
[Link]:
Definition: Skewness is the degree of asymmetry, or departure from symmetry, of a
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distribution.
There are two types of Skewness: Positive and Negative
Positive Skewness means when the tail on the right side of the distribution is longer or fatter.
The mean and median will be greater than the mode.
Negative Skewness is when the tail of the left side of the distribution is longer or fatter than the
tail on the right side. The mean and median will be less than the mode.
Karl – Pearson (1867- 1936) was great British Biometric and Statistician. He introduced
theformula given below.
2. Quartile Measure of Skewness
Quartile Measure of Skewness is based on the three quartiles and is defined as
𝑆𝑘Q = 𝑄3 + 𝑄1 − 2𝑀
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or
𝑆𝑘Q = 𝑄3 + 𝑄1 − 2𝑄2
[Link] Measure of Skewness
Bowely Measure of Skewness or Bowely coefficient measure of Skewness is defined
as
4. Karl Pearson Measure of Skewness
Karl Pearson moment measure of skewness or Karl Pearson coefficient measure of
skewness or beta and gamma measure of skewness is defined as
The sign of the third central moment 𝑚3 indicates whether the skewness is positive or
negative. Also 𝛽1 is scale and location invariant. For a symmetric distribution 𝛽1=0.
[Link]
Pearson (1905) introduced kurtosis as a measure of how flat the top of a symmetric distribution
is when compared to a normal distribution of the same variance. Thus kurtosis measurers the
flatness or peakedness of a distribution curve from the normal curve. In other words kurtosis
measurers the concentration of the observation in the neighbourhood of the mode.
If the observation in the neighbourhood of the mode may be much less than the normal curve,
then the curve will be much flatter than the normal curve This less flat-topped distributions as
is called “platykurtic” . If the concentration is more in the neighbourhood of the mode of the
normal curve the distributions is known as “leptokurtic” and equally flat-topped distributions or
normal distribution are called “mesokurtic”. Kurtosis is actually more influenced by scores in
the tails of the distribution than scores in the center of a distribution. Accordingly, it is often
appropriate to describe a leptokurtic distribution as “fat in the tails” and a platykurtic distribution
as “thin in the tails.”
Measure of Kurtosis
Karl Pearson Measure of Kurtosis
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Karl Pearson moment measure of kurtosis or Karl Pearson coefficient measure of
kurtosis or beta and gamma measure of kurtosis is defined as
1. For a platykurtic distribution 𝛽2 will be less than 3 and 𝛾2 is negative
2. For a leptokurtic distribution 𝛽2 will be more than 3 and 𝛾2 is positive
3. For a mesokurtic distribution 𝛽2 = 3 and 𝛾2=0.
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Exercise:
MCQ
Select the correct option: The mean of a distribution is 23, the median is 24, and the mode
is 25.5. It is most likely that this distribution is
1.
a) Positively Skewed b) Symmetrical
c) Asymptotic d) Negatively Skewed
Determine Which of the following is not a measure of central tendency
2. a) Percentile b) Quartile
c) Standard deviation d) Mode
If the standard deviation of a population is 9, then choose the population variance
3. a) 9 b) 3
c) 21 d) 81
Select the correct option: If a distribution is abnormally tall and peaked, then it can be said
that the distribution is:
4.
a) Leptokurtic b) Pyrokurtic
c) Platykurtic d) Mesokurtic
Select the correct option: The number of accidents in a city during 2010 is
55. a) Discrete variable b) Continuous variable
c) Qualitative variable d) Constant
Select the correct option: The mean deviation of each sample about mean is:
56. a) Maximum b) Zero
c) Minimum d) Undefined
Write the correct option: The first moment about means is always
57. a) Zero b) 1
c) Negative d) None of these
Write the correct option: The second moment about mean is
58. a) Standard Deviation b) Variance
c) Coefficient of Variation d) None of these
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Choose the correct option: If the third moment about mean is zero then the distribution is
59. a) Mesokurtic b) Positively Skewed
c) Symmetrical d) Negatively Skewed
Select the correct option: The degree of peakedness is called
60. a) Dispersion b) Skewness
c) Symmetry d) Kurtosis
Select the correct option: For Mesokurtic curve of the distribution, β 2 is
61. a) 0 b) <3
c) >3 d) =3
If the standard deviation of the values 2, 4, 6, 8 is 2.58, then calculate the standard
deviation of the values 4, 6, 8, 10
62.
a)0 b)2.58
c) 5 d)4.66
Select the correct option: Var(2X+3)=
63. a)2Var(X) b) 4Var(X)
c) 2Var(X)+3 d) None of these
The variance of 5 numbers is 10. If each number is divided by 2, then calculate the
variance of new numbers
64.
a)0 b)20
c) 5 d) 2.5
Choose the correct option: The variance of first n natural numbers is
2
a) n -1 n 2 -1
65. b) 10
n2 n2 1
c) 12 d) 12
Select the correct option: The first order raw moment is equal to
66. a) 0 b) 1
c) 2 d) None of these
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Write the correct option: If the fourth order central moment is zero then the distribution is
67. a) Leptokurtic b) Pyrokurtic
c) Platykurtic d) Mesokurtic
Write the correct option: Variance is always calculated from
68. a) Mean b) Mode
c) Median d) 0
Write the correct option: The standard deviation is always _________ than the mean
deviation
69.
a) Less b) Greater
c) equal d) none of these
Choose the correct option: The variance of a constant is
70. a) Constant b) Zero
c) Negative d) None of these
Choose the correct option: Variance remains unchanged by the change of
71. a) Origin b) Scale
c) both origin and scale d) none of these
Select the correct option: Standard deviation is calculated from the Harmonic Mean (HM)
72. a) Always b) Sometimes
c) Never d) None of these
Suppose for 40 observations, the variance is 50. If all the observations are increased by 20,
then calculate the variance of these increased observations
73.
a) 50 b)40
c) 60 d) No increment
Select the correct option: Which one is true for Standard Deviation(S.D) and Mean
Deviation (M.D.)
74.
a) S.D>M.D. b) S.D=M.D
c) Both (a) and (b) d) None of these
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Select the correct option: If S.D(X) = 6 and S.D(Y) = 8. If X and Y are independent
random variables, then S.D(X-Y) is:
75.
a) 2 b) 10
c)14 d)100
Short Answer Type:
20 Examine the mean deviation of the following about median 46,79,26,85,39,65,29,59,73 is 18.
21
22
A group of students took a math test, and their scores were grouped into the following frequency
distribution:
Test 40-50 50-60 60-70 70-80 80-90 90-100
Score
No. of 5 8 12 15 10 5
student
23
The following frequency table is given below:
Class 10-20 20-30 30-40 40-50 50-60 60-70
Frequency 35 35 11 28 15 22
24 Predict the quartile deviation of the frequency distribution.
Explain that the standard deviation from the following table.
x 10 15 20 25 30 35 Total
f 9 17 25 29 12 8 100
25
26 Determine the standard deviation for the distribution 1,2,3,4,5.
Determine the standard deviation for the distribution 2,4,6,8.
27
28 Identify the second moment about 4 for the set of numbers 2,4,6,8.
29 Identify the third moment about 4 for the set of numbers 2,4,6,8.
30 Identify the standard deviation for the distribution 1,2,3,..,10.
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Identify the mean deviation of the following about median 46,79,26,59,85,39,65,29,59,73,59 is 18.
31
Identify the first moment about 4 for the set of numbers 2,4,6,8.
32
33 describe the requisites of a good measure of dispersion.
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Long Answer Type:
Illustrate the quartile deviation.
Height 125-135 135-140 140-155 155-165 165-175 175-185
No. of students 2 7 24 27 13 3
34
Illustrae the mean deviation from median.
Marks 0-10 10-20 20-30 30-40 40-50
No. of students 5 8 15 16 6
35
Show that the standard deviation of the following distribution is 7.177.
Weight 120-124 125-129 130-134 135-139 140-144 145-149
No of student 12 25 8 15 16 6
36
Evaluate the mean deviation about the arithmetic mean of the following distribution
x 10 11 12 13 14
f 1 2 4 2 1
37
Show that the coefficient of variation 0.4319.
Marks obtained 0-10 10-20 20-30 30-40 40-50
No of students 4 10 16 12 8
38
Calculate the mean deviation about arithmetic mean
x 5 15 25 35 45 55 65
f 4 6 10 20 10 6 4
39
The heights of the students of a college are given below. Show that the standard deviation of
heights is 5.38.
Height 160-163 164-167 168-171 172-175 176-179 180-183 184-187
No of students 22 80 98 148 14 43 5
40
21
Prepared by: Department of Mathematics
Brainware University, Barasat.
[BBALLB, SEMESTER II] [BUSINESS STATISTICS]
The following table represents the weights (in kg) of 60 students in a class:
Weight (kg) 40-50 50-60 60-70 70-80 80-90 90-100
Frequency 5 8 15 20 7 5
41 Calculate the Quartile Deviation (Q.D.).
Identify the quartile deviation.
Height 125- 135- 140- 155- 165- 175-
135 140 155 165 175 185
No. of 3 7 24 27 13 4
students
42
Identify the mean deviation from median.
Marks 0-10 10-20 20-30 30-40 40-50
No. of 5 10 17 16 6
students
43
22
Prepared by: Department of Mathematics
Brainware University, Barasat.