NUMERICAL MEASURES
BF1206- BUSINESS MATHEMATICS
SEMESTER 2 – 2016/2017
MEASURES OF CENTRAL TENDENCY
Arithmetic mean
• Summation of all numbers divided by the total
number of values (n)
Median
• The middle number (in a sorted list of numbers)
Mode
• The number which appears most often in a set of
numbers
ARITHMETIC MEAN
Arithmetic Mean is the most common measure of central tendency.
For a sample size, n:
ARITHMETIC MEAN
It is the most common measure of central tendency
Arithmetic mean equals to sums of values divided by the number of values
One of the disadvantages of Arithmetic mean is affected by extreme outliers
Median
In an ordered array, the median is the “middle” number (50% above, 50% below)
0 1 2 3 4 5 6 7 8 9 10 0 1 2 3 4 5 6 7 8 9 10
Median = 3 Median = 3
Not affected by extreme values
◦ If the number of values is odd, the median is the middle number
◦ If the number of values is even, the median is the average of the two middle
numbers
Finding the Median
The location of the median:
n 1
Median position position in the ordered data
2
◦ If the number of values is odd, the median is the middle number
◦ If the number of values is even, the median is the average of the two middle numbers
n 1
Note that is not the value of the median, only the position of the median in
2
the ranked data
EXAMPLES - Median
The ages for a sample of five The heights of four basketball
college students are:
players, in inches, are:
21, 25, 19, 20, 22 76, 73, 80, 75
Arranging the data in ascending Arranging the data in ascending
order gives: order gives:
73, 75, 76, 80.
19, 20, 21, 22, 25.
Thus the median is 75.5
Thus the median is 21.
The Mode
The mode is the value of the observation that appears
most frequently.
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Mode = 9
Review Example
Five houses on a hill by the beach
$2,000 K
House Prices:
$2,000,000
500,000 $500 K
300,000 $300 K
100,000
100,000
$100 K
$100 K
Review Example:
Summary Statistics
House Prices:
Mean: ($3,000,000/5)
$2,000,000 = $600,000
500,000
300,000
100,000
100,000 Median: middle value of ranked data
Sum 3,000,000 = $300,000
Mode: most frequent value
= $100,000
Quartiles
Quartiles split the ranked data into 4 segments with an
equal number of values per segment
25% 25% 25% 25%
Q1 Q2 Q3
The first quartile, Q1, is the value for which 25% of the
observations are smaller and 75% are larger
Q2 is the same as the median (50% are smaller, 50% are
larger)
Only 25% of the observations are greater than the third
quartile
Quartile Formulas
Find a quartile by determining the value in the
appropriate position in the ranked data, where
If Q1 is not integer
First quartile position: Q1 = 0.25(n+1) then round-up
Second quartile position: Q2 = 0.50(n+1)
(the median position)
If Q3 is not integer
Third quartile position: Q3 = 0.75(n+1) then round-down
where n is the number of observed values
Quartiles
Example: Find the first quartile
Sample Ranked Data: 11 12 13 16 16 17 18 21 22
(n = 9)
Q1 = is in the 0.25(9+1) = 2.5th position , round up hence
the 3rd position
so Q1 = 13
Chap 3-13
Exercise
FIND Q2, AND Q3
STATISTICS FOR BUSINESS AND ECONOMICS, 6E © 2007 PEARSON EDUCATION, INC. Chap 3-14
Measures of Variation
Variation
Range Interquartile Standard
Variance
Range Deviation
Measures of variation give information
on the spread or variability of the Same center,
data values. different variation
Range
Simplest measure of variation
Difference between the largest and the smallest observations:
Range = Xlargest – Xsmallest
Example:
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Range = 14 - 1 = 13
Disadvantages of the Range
Ignores the way in which data are distributed
7 8 9 10 11 12 7 8 9 10 11 12
Range = 12 - 7 = 5 Range = 12 - 7 = 5
Sensitive to outliers
1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,5
Range = 5 - 1 = 4
1,1,1,1,1,1,1,1,1,1,1,2,2,2,2,2,2,2,2,3,3,3,3,4,120
Range = 120 - 1 = 119
Interquartile Range
Can eliminate some outlier problems by using the interquartile range
Eliminate some high- and low-valued observations and calculate the range
from the remaining values
Interquartile range = 3rd quartile – 1st quartile
= Q3 – Q1
Interquartile Range
Example:
X Median
minimum Q1 (Q2) Q3 X
maximum
25% 25% 25% 25%
12 30 45 57 70
BOX-AND-WHISKER PLOT
Interquartile range
= 57 – 30 = 27
Variance
Average (approximately) of squared deviations of values from the mean
◦ Sample variance:
n
(X X)i
2
S 2 i1
n -1
Where X = arithmetic mean
n = sample size
Xi = ith value of the variable X
Standard Deviation
Most commonly used measure of variation
Shows variation about the mean
Has the same units as the original data
◦ Sample standard deviation:
(X X)
i
2
S i1
n -1
Calculation Example:
Sample Standard Deviation
Sample
Data (Xi) : 10 12 14 15 17 18 18 24
n=8 Mean = X = 16
(10 X ) 2 (12 X ) 2 (14 X ) 2 (24 X ) 2
S
n 1
(10 16) 2 (12 16) 2 (14 16) 2 (24 16) 2
8 1
130 A measure of the “average” scatter
4.3095
7 around the mean
Measuring variation
Small standard deviation
Large standard deviation
Comparing Standard Deviations
Data A
Mean = 15.5
11 12 13 14 15 16 17 18 19 20 21
S = 3.338
Data B
Mean = 15.5
11 12 13 14 15 16 17 18 19 20 21 S = 0.926
Data C
Mean = 15.5
11 12 13 14 15 16 17 18 19 20 21 S = 4.570
THANK YOU
