Business Statistics

Unit – I: Introduction – Meaning and Definition of Statistics – Collection and Tabulation of Statistical
Data – Presentation of Statistical Data – Graphs and Diagrams.

Meaning of Statistics
The word “Statistics” has been derived from the Latin word “Status” or Italian word “Statista” or German
word “Statistika”. Each of these words means Political State. Initially, Statistics was used to collect the
information of the people of the state about their income, health, illiteracy and wealth etc. But now a day,
Statistics has become an important subject having useful application in various fields in day-to-day life.
“Statistics” means numerical presentation of facts. Its meaning is divided into two forms - in plural form and
in singular form. In plural form, “Statistics” means a collection of numerical facts or data example price
statistics, agricultural statistics, production statistics, etc. In singular form, the word means the statistical
methods with the help of which collection, analysis and interpretation of data are accomplished.
Statistics is a branch of mathematics that involves collecting, analyzing, interpreting, presenting, and
organizing data. It provides methods for making inferences about the characteristics and behaviors of groups
or phenomena based on a limited set of observations. In a broader sense, statistics is also used to describe and
summarize data, identify patterns and trends, and make predictions or informed decisions.
Definition of Statistics
● According to Bowley - “Statistics are numerical statements of facts in any department of enquiry
placed in relation to each other.”
● According to Yule and Kendall ----- “By Statistics we mean quantitative data affected to marked extent
by multiplicity of causes.”
● “The classified facts relating the condition of the people in a state specially those facts which can be
stated in members or in tables of members or in any tabular or classified arrangements.” -Webster
● “Statistics may be regarded as (i) the study of population (ii) The study of variation (iii) The study of
method of reduction of data” -R.A. Fisher
● Horace Secrist defined Statistics as “Certain essential characteristics which must be possessed by
numerical data, in order to be called ‘Statistics’.
Types of Statistics:
1. Descriptive Statistics: This involves the methods used to summarize and organize data. Descriptive
statistics provide a way to simplify large amounts of data in a meaningful way. Common measures in
descriptive statistics include measures of central tendency (mean, median, and mode) and measures of
dispersion (range, variance, standard deviation).
2. Inferential Statistics: This branch involves making inferences or predictions about a population based
on a sample of data drawn from that population. It allows researchers to generalize findings from a
sample to a larger population. Common techniques in inferential statistics include hypothesis testing,
regression analysis, and analysis of variance.
Meaning of Business Statistics
Business statistics refers to the application of statistical techniques and methods to analyze and interpret data
in a business context. It involves the use of statistical tools to make informed decisions, solve business
problems, and gain insights into various aspects of an organization's operations. Business statistics
encompasses a range of activities, including data collection, summarization, analysis, interpretation, and
presentation of data relevant to business decision-making.
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Characteristics of Statistics
1. Statistics are Aggregate of Facts: Only those facts which are capable of being studied in relation to
time, place or frequency can be called statistics. Individual, single or unconnected figures are nor
statistics because they cannot be studies in relation to each other. Due to this reason, only aggregate of
facts. Example: Data relating to IQ of a group of students, academic achievement of students, etc are
called statistics and are studied in relation to each other.
2. Statistics are affected to a marked Extent by Multiplicity of causes: Statistical data are more related to
social sciences and as such, changes are affected to a combined effect of many factors. We cannot
study the effect of a particular cause on phenomenon. It is only in physical sciences that individual
causes can be traced and their impact is clearly known. In statistical study of social sciences, we come
to know the combined effect of multiple causes.
3. Statistics are Numerically Expressed: Qualitative phenomena which cannot be numerically expressed
cannot be described as statistics. Example: Honesty, Goodness, ability, etc. But if we assign numerical
expression, it may be described as ‘Statistics’.
4. Statistics are Enumerated or Estimated according to Reasonable Standards of Accuracy: The Standard
of estimation and of accuracy differs from enquiry to enquiry or from purpose to purpose. There cannot
be one standard of uniformity for all types of enquiries and for all purposes.
5. Statistics are collected in a Systematic Manner: In order to have reasonable standard of accuracy
statistics must be collected in a very systematic manner. Any rough and haphazard method of collection
will not be desirable for that may lead to improper and wrong conclusion. Accuracy will also be not
definite and as such cannot be believed.
6. Statistics for a Pre-determined Purpose: The investigator must have a purpose beforehand and then
should start the work of collection. Data collected without any purpose is of no use.
7. Statistics are capable of being placed in relation to each other: Statistics is a method for the purpose of
comparison etc. It must be capable of being compared, otherwise, it will lose much of its values and
significance. Comparison can be made only if the data are homogeneous. Data on memory test can be
compared with IQ not with salary status of parents. It is with the use of comparison only that we can
depict changes which may relate to time, place, frequency or any other character, and statistical devices
are used for this purpose.
Scope of Statistics:
1. Statistics and Planning: In the modern age statistics is indispensable into planning which as known as
the age of planning. There is need to do planning for economic development all over the world.
2. Statistics and business: Statistics is an irresponsible tool of production control. Business executive is
relying more and more on statistical techniques for studying.
3. Statistics and modern science: In medical science the statistical tool for collection, presentation and
analysis of observed facts relating to causes.
4. Statistics and mathematics: Statistics are intimately related recent advancements in statistical technique
are the outcome of wide applications of mathematics.
5. Presents facts in numerical figures: The first function of statistics is to present a given problem in terms
of numerical figures. We know that the numerical presentation helps in having a better understanding
of nature an of problem.
6. Presents complex facts in a simplified form: Generally, a problem to be investigated is represented by
a large mass of numerical figures which are very difficult to understand and remember. Using various
statistical methods, this large mass of data can be presented in a simplified form.
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7. Studies relationship between two or more phenomena: Statistics can be used to investigate whether
two or more phenomena are related. For example, the relationship between income and consumption,
demand and supply, etc.
8. Helps in the formulation of policies: Statistical analysis of data is the starting point in the formulation
of policies in various economic, business and government activities. For example, using statistical
techniques a firm can know the tastes and preferences of the consumers and decide to make its product
accordingly.
9. Helps in forecasting: The success of planning by the Government or of a business depends to a large
extent upon the accuracy of their forecasts. Statistics provides a scientific basis for making such
forecasts.
10. Provides techniques for testing of hypothesis: A hypothesis is a statement about some characteristics
of a population (or universe).
11. Provides techniques for making decisions under uncertainty: Many times, we face an uncertain
situation where any one of the many alternatives may be adopted. A businessman might face a situation
of uncertain investment opportunities in which he can lose or gain. He may be interested in knowing
whether to undertake a particular investment or not. The answer to such problems are provided by the
statistical techniques of decision-making under uncertainty.
Importance of Statistics
● Statistics helps in gathering information about the appropriate quantitative data
● It depicts the complex data in graphical form, tabular form and in diagrammatic representation to
understand it easily
● It provides the exact description and a better understanding
● It helps in designing the effective and proper planning of the statistical inquiry in any field
● It gives valid inferences with the reliability measures about the population parameters from the sample
data
● It helps to understand the variability pattern through the quantitative observations
Functions of Statistics
1. Condensation: Statistics can be used to compress a large amount of data into small meaningful
information; for example, aggregated sales forecast, BSE indices, GDP growth rate, etc. It is almost
impossible to get a complete idea of the profitability of a company by looking at the records of its
income and expenditure. Financial ratios such as return on investment, earnings per share, profit
margins, etc., however, can be easily remembered and thus can be used in quick decision making.
2. Comparison: Statistics facilitate comparing different quantities. For example, the price-to-earnings
ratio of ITC as of January 22, 2021 is 19.54 as compared to HUL. HUL is overvalued, quoting a price-
to-earnings ratio of 71 times.
3. Forecast: Statistics helps forecast by looking at trends of a variable. It is essential for planning and
decision-making. Predictions or forecasts based on intuition can be disastrous for any business.
For example, to decide the production capacity for a vehicle-manufacturing plant, we need to predict
the demand for the product mix, supply of components, cost of manpower, competitor strategy, etc.,
over the next 5 to 10 years, before committing an investment.
4. Testing of Hypotheses: Hypotheses are statements about population parameters based on knowledge
from literature that a researcher would like to test for validity in the light of new information. Drawing
inferences about the population using sample estimates involves an element of risk.
5. Preciseness: Statistics visualises and presents facts precisely in a quantitative form. Facts and
information conveyed in quantitative terms are more convincing than qualitative data. For example,
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‘increase in profit margin is less in the year 2020 than in the year 2019’ does not convey a precise and
complete piece of information. On the other hand, statistics summarise the information more precisely.
For example, ‘profit margin is 5% of the turnover in the year 2020 against 7% in the year 2019’.
6. Expectation: Statistics can act as the basic building block for framing clear plans and policies. For
example, how much raw material to be imported in a year, how much capacity to be expanded, or
manpower to be recruited, etc., depends on the expected value of outcome of our decisions taken under
different situations.
Limitation of Statistics
1. Statistics Suits to the Study of Quantitative Data Only: Statistics deals with the study of quantitative
data only. By using the methods of statistics, the problems regarding production, income, price, wage,
height, weight etc. can be studied. Such characteristics are quantitative in nature. The characteristics
like honesty, goodwill, duty, character, beauty, intelligence, efficiency, integrity etc. are not capable
of quantitative measurement and hence cannot be directly dealt with statistical methods. These
characteristics are qualitative in nature. In such type of characteristics, only comparison is possible the
use of statistical methods is limited to quantitative characteristics and those qualitative characteristics
which are capable of being expressed numerically.
2. Statistical Results are not exact: The task of statistical analysis is performed under certain conditions.
It is not always possible, rather not advisable, to consider the entire population during statistical
investigations. The use of samples is called for in statistical investigations. And the results obtained
by using samples may not be universally true for the entire population. Data collected for a statistical
enquiry may not be hundred percent true. Statistical results are true on an average.
3. Statistics Deals with Aggregates Only: Statistics does not recognise individual items. Consider the
statement, “The weight of Mr X in the college is 70 kg”. This statement does not constitute statistical
data. Statistical methods are not going to investigate anything about this statement. Whereas, if the
weights of all the students of the college are given, the statistical methods may be applied to analyse
that data. According to Tippett, “Statistics is essentially totalitarian because it is not concerned with
individual values, but only with classes”. Statistics is used to study group characteristics of aggregates.
4. Statistics is Useful for Experts Only: Statistics is both a science and an art. It is systematic and finds
applications in studying problems in Economics, Business, Astronomy, Physics, and Medicines etc.
Statistical methods are sophisticated in nature. Everyone is not expected to possess the intelligence
required to understand and to apply these methods to practical problems. This is the job of an expert,
who is well-versed with statistical methods
5. Statistics does not Provide Solutions to the Problems: The statistical methods are used to explore the
essentials of problems. It does not find use in inventing solutions to problems. For example, the
methods of statistics may reveal the fact that the average result of a particular class in a college is
deteriorating for the last ten years, i.e., the trend of the result is downward, but statistics cannot provide
solution to this problem. It cannot help in taking remedial steps to improve the result of that class.
Statistics should be taken as a means and not as an end. The methods of statistics are used to study the
various aspects of the data.
Phases of Statistical Process/ Statistical Investigation
According to Croxton and Cowden statistics may be defined as a science of collection, organization,
presentation, analysis and interpretation of numerical data. The analysis of this definition highlights the five
phases of statistical process/statistical investigation:
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Collection: it is the first step in the statistical process/statistical investigation. A lot of care has to be taken
while collecting the data because it forms the foundation of analysis and interpretation of the data. If this step
goes wrong the conclusions drawn will be wrong and misleading
Organization: Data collected from published sources are generally well organized data. However, the data
collected from primary source needs careful attention to organizing such data. This necessitates the following:
(a) Careful Editing of Data: When data is edited it leads to elimination of irrelevant and inconsistent statistical
facts and figures. (b) Classification of data: it is necessary to classify the data with some common
characteristics. (c) Tabulation: it is the arrangement of data in columns and rows so that there is no ambiguity
in the data presented.
Presentation: the third step is after the collection of data, and organization of the same, then the data is ready
for presentation in order to facilitate the statistical analysis.
Analysis: after collection, organization and presentation, the next step is analysis. Various methods are used
for analysis of data such as simple observation to complex statistical techniques.
Interpretation: this is the last stage in the statistical process/statistical investigation. It involves drawing
meaningful conclusions from the collected data. But this is an intellectual process as it calls for a high degree
of skill and experience.
Collection of Statistical Data
Any statistical data can be classified under two categories depending upon the sources utilized. These
categories are Primary data & Secondary data

Collection of Statistical Data

Primary Data Secondary Data

Direct personal interviews

Indirect Oral interviews
Published sources
.Information from correspondents
Unpublished sources
Mailed questionnaire method
Schedules sent through enumerators

Primary data: Primary data is the one, which is collected by the investigator himself for the purpose of a
specific inquiry or study. Such data is original in character and is generated by survey conducted by individuals
or research institution or any organization.
Example: If a researcher is interested to know the impact of noon- meal scheme for the school children, he
has to undertake a survey and collect data on the opinion of parents and children by asking relevant questions.
Such a data collected for the purpose is called primary data.
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1. Direct personal interviews: The persons from whom information are collected are known as informants.
The investigator personally meets them and asks questions to gather the necessary information. It is the
suitable method for intensive rather than extensive field surveys. It suits best for intensive study of the limited
field.
2. Indirect Oral Interviews: Under this method the investigator contacts witnesses or neighbour or friends
or some other third parties who are capable of supplying the necessary information. This method is preferred
if the required information is on addiction or cause of fire or theft or murder etc., If a fire has broken out a
certain place, the persons living in neighbourhood and witnesses are likely to give information on the cause
of fire. In some cases, police interrogated third parties who are supposed to have knowledge of a theft or a
murder and get some clues. Enquiry committees appointed by governments generally adopt this method and
get people’s views and all possible details of facts relating to the enquiry. This method is suitable whenever
direct sources do not exist or cannot be relied upon or would be unwilling to part with the information.
The validity of the results depends upon a few factors, such as the nature of the person whose evidence is
being recorded, the ability of the interviewer to draw out information from the third parties by means of
appropriate questions and cross examinations, and the number of persons interviewed. For the success of this
method one person or one group alone should not be relied upon.
3. Information from correspondents: The investigator appoints local agents or correspondents in different
places and compiles the information sent by them. Information to Newspapers and some departments of
Government come by this method. The advantage of this method is that it is cheap and appropriate for
extensive investigations. But it may not ensure accurate results because the correspondents are likely to be
negligent, prejudiced and biased. This method is adopted in those cases where information is to be collected
periodically from a wide area for a long time.
4. Mailed questionnaire method: Under this method a list of questions is prepared and is sent to all the
informants by post. The list of questions is technically called questionnaire. A covering letter accompanying
the questionnaire explains the purpose of the investigation and the importance of correct information and
request the informants to fill in the blank spaces provided and to return the form within a specified time. This
method is appropriate in those cases where the informants are literates and are spread over a wide area.
5. Schedules sent through Enumerators: Under this method enumerators or interviewers take the schedules,
meet the informants and filling their replies. Often distinction is made between the schedule and a
questionnaire. A schedule is filled by the interviewers in a face-to-face situation with the informant. A
questionnaire is filled by the informant which he receives and returns by post. It is suitable for extensive
surveys.
Secondary Data: Secondary data are those data which have been already collected and analyzed by some
earlier agency for its own use; and later the same data are used by a different agency.
According to W.A. Neiswanger, ‘A primary source is a publication in which the data are published by the
same authority which gathered and analyzed them. A secondary source is a publication, reporting the data
which have been gathered by other authorities and for which others are responsible’. Sources of Secondary
data:
In most of the studies the investigator finds it impracticable to collect first-hand information on all related
issues and as such he makes use of the data collected by others. There is a vast amount of published information
from which statistical studies may be made and fresh statistics are constantly in a state of production. The
sources of secondary data can broadly be classified under two heads:
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1. Published Sources: The various sources of published data are: Clinical and other personal records, death
certificates, published mortality statistics, census, publications, etc. Examples include: Official publications
of Central Statistical Authority, Publication of Ministry of Health and Other Ministries, News Papers and
Journals, International Publications like Publications by WHO, World Bank, UNICEF, Records of hospitals
or any Health Institutions.
2. Unpublished Sources: All statistical material is not always published. There are various sources of
unpublished data such as records maintained by various Government and private offices, studies made by
research institutions, scholars, etc. Such sources can also be used where necessary
Precautions in the use of Secondary data
The following are some of the points that are to be considered in the use of secondary data
1. How the data has been collected and processed?
2. The accuracy of the data
3. How far the data has been summarized
4. How comparable the data is with other tabulations?
5. How to interpret the data, especially when figures collected for one purpose is used for another?
Generally speaking, with secondary data, people have to compromise between what they want and what they
are able to find.
Classification of Statistical Data
Classification is the process of arranging the collected data into classes and to subclasses according to their
common characteristics. The collected data, also known as raw data or ungrouped data are always in an
unorganized form and need to be organized and presented in meaningful and readily comprehensible form in
order to facilitate further statistical analysis. It is, therefore, essential for an investigator to condense a mass
of data into more and more comprehensible and assimilable form. The process of grouping into different
classes or sub classes according to some characteristics is known as classification, tabulation is concerned
with the systematic arrangement and presentation of classified data. Thus, classification is the first step in
tabulation.
For Example, letters in the post office are classified according to their destinations viz., Delhi, Madurai,
Bangalore, Mumbai etc.,
Definition of Classification: Prof. Connor defines classification as the process of arranging to their
resemblances and affinities and given expression to the unity of attributes that mean subsist amongst a
diversity of individuals.
Objectives of Classification:

 It condenses the mass of data in an easily assailable form.

 It eliminates unnecessary details.
 It facilitates comparison and highlights the significant aspect of data.
 It enables one to get a mental picture of the information and helps in drawing inferences.
 It helps in the statistical treatment of the information collected.
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Characteristics of Classification
Exhaustive: The Classification must be exhaustive. Each item of data must be presented in any one of the
classes. The classified data must not give any doubt in the mind of the individual that a particular data is
excluded.
Mutually Exclusive: Each item of data must be presented in one class only. No item of data should be
represented in more than one class.
Flexibility: Classification should be flexible one, so that it have the facility of making adjustment to new
situations.
Homogeneity: The variables included in all classes should be homogeneous.
Suitability: The classification must be most situated to the objects of the study.
Arithmetical Accuracy: A good classification must be prepared with arithmetical accuracy.
Methods / Types of classification
Statistical data are classified in respect of their characteristics. Broadly there are four basic types of
classification namely
a) Chronological classification
b) Geographical classification
c) Qualitative classification
d) Quantitative classification
Chronological classification: The collected data are arranged according to the order of time expressed in
years, months, weeks, etc., Example for Chronological classification is given below:
The estimates of birth rates in India during 1970 – 76 are

Year Birth Rate

1970 36.8
1971 36.9
1972 36.6
1973 34.6
1974 34.5
1975 35.2
1976 34.2

Geographical classification: The data are classified according to geographical region, place, states, zones,
cities, villages, etc.
Classification of Small Scale Industries

Name of Total Number of Small Scale C 111

Cities Industries (in ‘000s) D 100
A 145 E 95
B 122 F 85
Qualitative classification: The data are classified on the basis of same attributes or quality like Gender,
literacy, religion, employment etc. It cannot be quantitatively measured. Under this classification, the presence
or absence of an attribute is the basis of classification. This classification can be done by two methods. (i)
Two-fold or Dichotomous classification: Only one attribute is taken into consideration. Example: Literacy as
an attributes and (ii) Manifold classification: attributes of more than one. Example: male and female employed
and unemployed classification.
Example of Manifold Classification
Employed
Married
Unemployed
Male
Employed
Unmarried
Unemployed
Population
Employed
Married
Unemployed
Female
Employed
Unmarried
Unemployed

Quantitative classification: The classification of data according to some characteristics that can be measured
such as height, weight, etc., For example the group of a children may be classified according to weight as
given below. Weight (in kg)

Weight (in Kg) No. of Children 20 – 25 360

5 – 10 50 25 – 30 90
10 – 15 200 30 – 35 40
15 – 20 260 Total 1000

Tabulation of Statistical Data

Tabulation is the process of summarizing classified or grouped data in the form of a table so that it is easily
understood and an investigator is quickly able to locate the desired information. A table is a systematic
arrangement of classified data in columns and rows. Thus, a statistical table makes it possible for the
investigator to present a huge mass of data in a detailed and orderly form. It facilitates comparison and often
reveals certain patterns in data which are otherwise not obvious. Classification and ‘Tabulation’, as a matter
of fact, are not two distinct processes. Actually, they go together. Before tabulation data are classified and
then displayed under different columns and rows of table
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Table 1: Overall immunization status of children

Immunization Status Number Percent

Not Immunized 75 35.7
Partially Immunized 57 27.1
Fully Immunized 78 37.2
Total 210 100.0

Tabulation is the systematic arrangement of the statistical data in columns or rows. It involves the orderly and
systematic presentation of numerical data in a form designed to explain the problem under consideration.
Tabulation helps in drawing the inference from the statistical figures.
Tabulation prepares the ground for analysis and interpretation. Therefore, a suitable method must be decided
carefully taking into account the scope and objects of the investigation, because it is very important part of
the statistical methods.
Objectives of Tabulation:

 To present the data in a simplest possible form.

 To present the data in order to make it easy for further analysis.
 To facilitate for easy comparison of data.
Rules for Tabulation/ Principles of Tabulation:
1. Number: Table must be arranged with number, in order to identify the table.
2. Title: Table must have a title. The title should be clear, brief and concise. It should convey the content
and purpose of the table.
3. Stubs and Captions: The details about the information available in each rows are called stubs. Stubs
should be very clear and brief. The details about the information available in each column are called
captions. Captions should also be very clear and brief.
4. Body of the Table: Body of the table must contain only relevant information. It should be
comprehensive and consistent. The data should be arranged very systematically. The arrangements
may either be on ascending or descending order.
5. Spacing: Proper space should be provided in between various data presented in the table. It helps for
easy identification of data. Proper spacing gives good appearance for the table.
6. Average and Totals: If the data requires average and total it should be properly given. Totals may be
given for each column or for each row.
7. Footnotes: If any item presented in table needs further explanation, it should be given after the table.
Special markings can be used in the respective places where explanation is needed. The explanation
should follow with these markings.
8. Source: Source is an importance requirements for the table. Source indicates the place or person from
whom information is collected. It gives more authenticity for the table.
Requisites for a Good Tabulation
1. Table must be simple. It should clearly convey the purpose for which it is prepared.
2. Columns and rows should not be too narrow or too wide.
3. Brief description should be given for the particulars of columns and rows. If more details are required,
it should be given as footnotes.
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4. Table should clearly show the units of measurement.
5. Table should be an optimum one. It should appeal the readers.
6. Figures which are closely related should be kept together in columns or rows.
Types of Tables
Simple Table/ One way Table: It may be defined as a table showing only one characteristic. It is also called
one way table.
Marks scored by Students of a class

Marks in Statistics No. of Students

Below 20 5
20 – 40 8
40 – 60 13
60 – 80 12
80 – 100 7
Total 45

Complex Tables: It may be defined as tables showing two or more characteristics. If the table shows two
characteristics, it is called two way table or double tabulation.

Marks No. of Students Total

Class A Class B
Below 20 5 10 15
20 – 40 8 15 23
40 – 60 13 20 33
60 – 80 12 18 30
80 – 100 7 7 14
Total 45 70 115
General Purpose Table/ Reference Tables/ Repository Tables: It provides information for general use.
Example: Table published by the statistical department of Government like census, tables about the industrial
and agricultural production in various periods etc.
Special Purpose Table/ Summary Tables/ derivative Tables: Special purpose tables are derived from the
information of the general purpose tables. Example: When the data collected from the census report (which is
general purpose table) for any study and presented in tables, it is called the special purpose table.
Advantages of Tabulation
1. To Simplify Complex Data: Tabulation simplifies complex data by arranging them systematically in a
meaningful manner. So, tabulation converts confusing information into understandable form.
2. To Facilitate Comparison: Tabulation of data helps to compare different sets of series.
3. Saving Time and Space: Large number of information can be condensed systematically into one table. So,
it saves, space, time and money also.
4. Analysis and Interpretation: Tabulation facilitates comparison, analysis and interpretation of data easily
with the help of statistical measures such as averages, dispersion, correlation, regression, deviations, etc.
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5. Provides Reference: Tabulated data and information can be used in different researches and studies. So, it
also serves as a source of reference.
Presentation of Data
The presentation of data means exhibition of data in such a clear and attractive manner that these can be easily
understood and analysed.
Forms of Presentation of data:
1. Textual/Descriptive Presentation of Data: - In this, data is presented in the form of text. This is suitable
when quantity of data is not too large.
2. Tabulation– It is the process of presenting data in the form of a table.
3. Diagrammatic Presentation: When data is presented in a simple and attractive manner in the form of
diagrams is called diagrammatic presentation of data.
4. Graphical Presentation: It is a way of analyzing numerical data. It is a sort of chart which shows statistical
data in the form of lines or curves which are plotted on the surface. It enables studying the cause and effect
relationships between two variables. It helps to measure the extent of change in one variable when another
variable changes.
Classification of tabular presentation of data
a. Qualitative Classification: - When classification is done according to attributes such as social status,
nationality, etc. It is called qualitative classification.
b. Quantitative Classification: - In this, the data are classified on the basis of characteristics which are
quantitative in nature. e.g., age, height, income, etc.
c. Temporal classification: - In this, time becomes the becomes the classifying variable and data are
categorised according to time. Time may be in hours, weeks, years, etc.
d. Spatial classification: - When classification is done on the basis of place, it is called spatial classification.
The place may be village, town, state, country, etc.
Types of Diagrammatic Presentation:
1. Geometric Form
a. Pie or circular diagram is a circle divided into various segments showing the per cent values of a series
b. Bar Diagram: Bar diagrams are those diagrams in which data are presented in the form of bars or rectangles.
i. Simple: They are those diagrams which are based on a single set of numerical data. Different items are
represented by different bars.
ii. Multiple: They are those diagrams which show two or more sets of data simultaneously. This type of
diagram is, generally, used to make comparison between two sets of series.
iii. Sub Divided: These are those diagrams which present simultaneously, total values and parts there in a set
of a data.
iv. Percentage bar diagram: - They are those diagram which show simultaneously different parts off the values
of a sets of data in terms of percentage.
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v. Deviation bar diagram: - These are used to compare the net deviation of related variables with respect to
time and location. Bars which represent positive deviation and which represent negative deviation are drawn
above and below the base line respectively.
2. Frequency Diagram
a. Histogram: Histogram is graphical presentations of a frequency distribution of a continuous series. It can
never be drawn for a discrete series.
Construction of a histogram for continuous frequency distribution
Draw a histogram for the following table which represents the age groups from 100 people in a village.

Solution

Construction of histogram for discontinuous frequency distribution

The following table gives the number of literate females in the age group 10 to 45 years in a town.
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Draw a histogram to represent the above data.
Solution
The given distribution is discontinuous. If we
represent the given data as it is by a graph, we shall
get a bar graph, as there will be gaps in between the
classes. So, convert this into a continuous
distribution using the adjustment factor 0.5. The
first-class interval can be written as 9.5-15.5 and
the remaining class intervals are changed in the
same way. There are no changes in frequencies.
The new continuous frequency table is

b. Frequency Polygon: Frequency polygon is drawn by joining the mid points of the tops of rectangles in a
histogram. It is constructed with the help of discrete as well as continuous series.
The following is the distribution of time spent in the library by students in a school.

Draw a frequency polygon using histogram.

Solution
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Draw a frequency polygon for the following data using histogram.

Solution

To draw a frequency polygon without using a histogram

(1) Find the midpoints of the class intervals and tabulate it.
(2) Mark the midpoints of the class intervals on x-axis and frequencies on y-axis.
(3) Plot the points corresponding to the frequencies at each midpoint.
(4) Join the points using a ruler, to get the frequency polygon.
Draw a frequency polygon for the following data without using histogram.

Solution
 Business Statistics
Find the midpoint of the class intervals and tabulate it.

The points are A (5,0) B (15,4) C (25,6) D (35,8) E (45,12) F (55,10) G (65,14) H (75,5) I (85,7) J (95,0). In
the graph sheet, mark the midpoints along the x- axis and the frequency along the y- axis. We take the imagined
class as 0 – 10 at the beginning and 90 – 100 at the end, each with frequency ‘zero’. From the table, plot the
points. We draw the line segments AB, BC, CD, DE, EF, FG, GH, HI, IJ to obtain the required frequency
polygon ABCDEFGHIJ.

c. Frequency Curve: Frequency curve is obtained by joining the points of a frequency polygon through free
hand smooth curve not by straight lines.
The ages of group of pensioners are given in the table below. Draw the Frequency curve to the following data.
 Business Statistics

Solution
Since we are displaying the distribution of Age and Number of Pensioners, the Frequency curve is drawn, to
provide better understanding about the age and number of pensioners than frequency polygon.
The following procedure can be followed to draw frequency curve:
Step 1: Age are marked along the X-axis and labeled as ‘Age’.
Step 2: Number of pensioners are marked along the Y-axis and labeled as ‘No. of Pensioners’.
Step3: Mark the midpoints at the top of each vertical bar in the histogram representing the age.
Step 4: Connect the midpoints by line segments by smoothing the vertices of the frequency polygon
The Frequency curve is presented

d. Ogive curve: Cumulative frequency curves or ogive curve is the curve which is constructed by plotting
cumulative frequency data on the graph paper in the form of a smooth curve.
Less than Ogive: Less than cumulative frequency of each class is marked against the corresponding upper
limit of the respective class. All the points are joined by a free-hand curve to draw the less than ogive curve.
More than Ogive: More than cumulative frequency of each class is marked against the corresponding lower
limit of the respective class. All the points are joined by a free-hand curve to draw the more than ogive curve.
Both the curves can be drawn separately or in the same graph. If both the curves are drawn in the same graph,
then the value of abscissa (x-coordinate) in the point of intersection is the median.
If the curves are drawn separately, median can be calculated as follows:
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Draw a line perpendicular to Y-axis at y=N/2. Let it meet the Ogive at C. Then, draw a perpendicular line to
X-axis from the point C. Let it meet the X-axis at M. The abscissa of M is the median of the data.
Draw the less than Ogive curve for the following data:

Also, find i. The Median ii. The number of workers whose daily wages are less than ` 125.
Solution
Since we are displaying the distribution of Daily Wages and No. of workers, the Ogive curve is drawn, to
provide better understanding about the wages and No. of workers.
The following procedure can be followed to draw Less than Ogive curve:
Step 1: Daily wages are marked along the X-axis and labeled as “Wages (in `)”.
Step 2: No. of Workers are marked along the Y-axis and labeled as “No. of workers”.
Step 3: Find the less than cumulative frequency, by taking the upper class-limit of daily wages. The cumulative
frequency corresponding to any upper class-limit of daily wages is the sum of all the frequencies less than the
limit of daily wages.
Step 4: The less than cumulative frequency of Number of workers are plotted as points against the daily wages
(upper-limit). These points are joined to form less than ogive curve.
The Less than Ogive curve is presented
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i. Median = ` 120 ii. 183 workers get daily wages less than ` 125
The following table shows the marks obtained by 120 students of class IX in a cycle test-I . Draw the more
than Ogive curve for the following data:

Also, find i. The Median & ii. The Number of students who get more than 75 marks.
Solution
Since we are displaying the distribution marks and No. of students, the more than Ogive curve is drawn, to
provide better understanding about the marks of the students and No. of students.
The following procedure can be followed to draw More than Ogive curve:
Step 1: Marks of the students are marked along the X-axis and labeled as ‘Marks’.
Step 2: No. of students are marked along the Y-axis and labeled as ‘No. of students.
Step 3: Find the more than cumulative frequency, by taking the lower class-limit of marks. The cumulative
frequency corresponding to any lower class-limit of marks is the sum of all the frequencies above the limit of
marks.
Step 4: The more than cumulative frequency of number of students are plotted as points against the marks
(lower-limit). These points are joined to form more than ogive curve.

The More than Ogive curve is presented

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Marks More than No. of Students 50 54
0 120 60 32
10 118 70 14
20 112 80 6
30 104 90 2
40 84

i. Median =42 students & ii. 7 students get more than 75 marks
The yield of mangoes was recorded (in kg) are given below: Graphically, i. finds the number of trees which
yield mangoes of less than 55 kg. ii. find the number of trees from which mangoes of more than 75 kg. iii. find
the median. Draw the Less than and More than Ogive curves. Also, find the median using the Ogive curves.

Solution
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Since we are displaying the distribution of Yield and No. of trees, the Ogive curve is drawn, to provide better
understanding about the Yield and No. of trees
The following procedure can be followed to draw Ogive curve:
Step 1: Yield of mangoes are marked along the X-axis and labeled as ‘Yield (in Kg.)’.
Step 2: No. of trees are marked along the Y-axis and labeled as ‘No. of trees’.
Step 3: Find the less than cumulative frequency, by taking the upper class-limit of Yield of mangoes. The
cumulative frequency corresponding to any upper class-limit of Mangoes is the sum of all the frequencies less
than the limit of mangoes.
Step 4: Find the more than cumulative frequency, by taking the lower class-limit of Yield of mangoes. The
cumulative frequency corresponding to any lower class-limit of Mangoes is the sum of all the frequencies
above the limit of mangoes.
Step 5: The less than cumulative frequency of Number of trees are plotted as points against the yield of
mangoes (upper-limit). These points are joined to form less than ogive curve.
Step 6: The more than cumulative frequency of Number of trees are plotted as points against the yield of
mangoes (lower-limit). These points are joined to form more than O give curve.

The Ogive curve is Presented

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i. 16 trees yield less than 55 kg ii. 20 trees yield more than 75 kg iii. Median =66 kg
3. Arithmetic Line Graph or Time series graph
Arithmetic line Graphs or Time Series Graph: - In this graph, time (hour, day, date, week, month, and year) is
plotted along X-axis and the corresponding value of variable along Y-axis.
Differences between Diagrams and Graphs
The following are the major distinctions between diagrams and graphs.

 Diagrams are used only for comparison and give mostly qualitative analysis like higher or lower
whereas a graph is used mainly to present qualitative data.
 Diagrams show the approximated result whereas graphic presentation is more precise and accurate and
drawn only in graph papers for accuracy.
 The graphical presentation is done in two dimensions and they present mathematical relationships
between variables, whereas diagrams might be uni-dimensional or multidimensional.
 The diagrammatic presentation looks attractive and can be understood even by illiterate people, but a
graphic presentation of data is relatively complex and can be used to further mathematical treatment.
 Construction of graphs is easier as compared to the construction of diagrams because graphs take
concrete forms but drawing diagrams is like an art.
 The presentation of a frequency distribution is not used in diagrams, but these can be easily presented
in graphic presentation.
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Unit – II Measures of Central Tendency – Arithmetic Mean, Median and Mode – Harmonic Mean and
Geometric Mean. (16 Hours)

Measures of Central Tendency

In statistics, the central tendency is the descriptive summary of a data set. Through the single value from the
dataset, it reflects the centre of the data distribution. Moreover, it does not provide information regarding
individual data from the dataset, where it gives a summary of the dataset. Generally, the central tendency of a
dataset can be defined using some of the measures in statistics.
It is a numerical indices of statistical data that are generally indicative of the centre, middle or representative
of a data set.

Mean/ Arithmetic Mean:

Arithmetic mean represents a number that is obtained by dividing the sum of the elements of a set by the
number of values in the set. So you can use the layman term Average, or be a little bit fancier and use the
word “Arithmetic mean” your call, take your pick -they both mean the same. The arithmetic mean may be
either
1. Simple Arithmetic Mean
2. Weighted Arithmetic Mean
Properties of Arithmetic Mean
Some important properties of the arithmetic mean are as follows:
The sum of deviations of the items from their arithmetic mean is always zero, i.e. Σ(x – X) = 0.
The sum of the squared deviations of the items from Arithmetic Mean (A.M) is minimum, which is less than
the sum of the squared deviations of the items from any other values.
If each item in the arithmetic series is substituted by the mean, then the sum of these replacements will be
equal to the sum of the specific items.
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Advantages

 It depends on the value of each observation or their frequency in the dataset

 It is firmly defined
 It is easy to understand and compute
 It is not affected by the change in position of the values
 It can be subjected to more algebraic processing.
Disadvantages

 It is affected by extreme values which may not seem fit for the observation
 It is not possible to calculate the mean value through inspection or graph
 The mean value concept is not suitable for qualitative traits
 There is no full-proof method to calculate the mean value in open-end classes
Median
Median is defined as the middle value in a given set of numbers or data. In Mathematics, there are three
different measures, which are used to find the average value for a given set of numbers. They are mean, median
and mode. These three measures are called the measures of central tendency. The average value of the given
data is given by mean. The middle value of the given data is defined by a median. The repeated value of the
given data is defined by mode.
Properties of Median

 Calculating a median does not depend on all the values of data present in a dataset.
 It is the value given by the middle point of the data set, such that half of this data is present above it
and the other half is situated below it.
 Every array of data has a single median.
 The value for a median remains stable in a grouping procedure.
 Medians cannot be determined for interval, rational, and ordinal scales.
 The measure for the median is accurate over the mean when the distribution of data is skewed.
 Medians cannot be combined or weighed or in general, manipulated algebraically.
Merits of Median

 It is easily understandable and computable.

 It is well defined as an average.
 It is not influenced by extreme values in a data set and is also independent of the dispersion and range
of data.
 Median can be utilised in the case of computing frequency distribution with open-ended classes.
 It can be plotted graphically with the help of an ogive curve.
 It can be used as a proper average for qualitative data for which items are scored, instead of being
measured.
 In a few cases, a median is a better measure of average than a mean.
Demerits of Median

 Since the computation of a median requires data to be arranged in ascending or descending order of
value, it can be time-consuming when a data volume is large.
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 It can be affected by fluctuations in sampling, more than that in the case of Arithmetic mean.
 It only gives a positional average and does not consider the magnitude of data.
 Since it does not consider all observations, it cannot be considered the ideal representation of the
average.
 In case of considerable variation among data, the median will not be able to represent the data
efficiently.
 Since it is a positional average, further algebraic treatment for the data is not possible. For instance,
computing the combined median between two groups of data is not possible.
 It neglects considering the extreme values.
Mode
The observation, which occurs most frequently among the given observations, i.e., the value of the observation
having maximum frequency is called mode.
Types of Mode

 Unimodal: It is a distribution of scores that consists of only one mode.

 Bimodal: It is a distribution of scores that consists of two modes.
 Trimodal: It is a distribution of scores that consists of three modes or multimodal is a distribution of
scores that consists of more than two modes.
Properties of the Mode

 It can be used when the data are qualitative as well as quantitative.

 It may not be unique
 It is affected by extreme values
 It may not exist
Advantages of Mode

 It is easy to understand and simple to calculate.

 It is not affected by extremely large or small values.
 It can be located just by inspection in ungrouped data and discrete frequency distribution.
 It can be useful for qualitative data.
 It can be computed in an open-end frequency table.
 It can be located graphically.
Disadvantages of Mode

 It is not well defined.

 It is not based on all the values.
 It is stable for large values so it will not be well defined if the data consists of a small number of values.
 It is not capable of further mathematical treatment.
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Mean for Continuous Series
The following data give the number of residents in an area based on their age. Find the average age of the
residents.

Solution

Assumed Mean Method

Find the mean for the following frequency table

Solution: Let Assumed Mean A = 170

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Step Deviation Method
Find the mean of the following distribution using Step Deviation Method

Solution: Let Assumed Mean A = 28, Class Width C = 8

The average mark of 25 students was found to be 78.4. Later on, it was found that score of 96 was misread as
69. Find the correct mean of the marks.

Solution

Given that the total number of students n = 25, = 78.4

So, Incorrect ∑x = × n = 78.4 × 25 = 1960

Correct ∑x = incorrect ∑x − wrong entry + correct entry

= 1960 − 69 + 96 = 1987

Correct = correct ∑x / n = 1987/25 = 79.48

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Median for Discrete Series

Calculate the median for the following data:

Solution

Let us arrange the marks in ascending order and prepare the following data

Here N = 41

Median = size of ([N + 1] / 2)th value = size of ([41 + 1] / 2)th value = size of 21th value.

Therefore, Median = 155 cm

Median − Grouped Frequency Distribution/ Continuous Series

The following table gives the weekly expenditure of 200 families. Find the median of the weekly expenditure.

Solution
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Mode for Ungrouped Frequency Distribution/ Discrete Series

In an ungrouped frequency distribution, the value of the item having maximum frequency is taken as the mode.
Problem: A set of numbers consists of five 4’s, four 5’s, nine 6’s, and six 9’s. What is the mode?

Solution: 6 has the maximum frequency 9. Therefore 6 is the mode.

Mode – Grouped Frequency Distribution/ Continuous Series
Find the mode for the following data.

Solution:
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Modal class is 16 -20 since it has the maximum frequency.

l = 15.5, f = 32, f1 = 16, f2=24, c = 20.5–15.5 = 5

Mode = 15.5 + (16/24) × 5 = 15.5 + 3.33 =18.83.

Geometric Mean

The Geometric Mean (G.M.) of a set of n observations is the nth root of their product. If x1, x2, ..., xn are n
observations then

Taking the nth root of a number is difficult. Thus, the computation is done as under

Geometric Mean – Individual Series

Calculate the geometric mean of the annual percentage growth rate of profits in business corporate from the
year 2000 to 2005 is given - 50, 72, 54, 82, 93

Solution
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Geometrical mean of annual percentage growth rate of profits is 68.26

Geometric Mean – Discrete Series

If x1, x2 …xn are discrete values of the variate x with corresponding frequencies f1, f2 ... fn. Then
geometric mean is defined as

Find the G.M for the following data, which gives the defective screws obtained in a factory.

Solution

Geometric Mean – Continuous Series

The following is the distribution of marks obtained by 109 students in a subject in an institution. Find the
Geometric mean.
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Solution

Geometric mean marks of 109 students in a subject is 18.14

Merits of Geometric Mean:

 It is based on all the observations

 It is rigidly defined
 It is capable of further algebraic treatment
 It is less affected by the extreme values
 It is suitable for averaging ratios, percentages and rates.

Demerits of Geometric Mean:

 It is difficult to understand
 The geometric mean cannot be computed if any item in the series is negative or zero.
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 The GM may not be the actual value of the series
 It brings out the property of the ratio of the change and not the absolute difference of change as the
case in arithmetic mean.

Harmonic Mean (H.M.)

Harmonic Mean is defined as the reciprocal of the arithmetic mean of reciprocals of the observations.
H.M. for Individual Series: Let x1, x2... xn be the n observations then the harmonic mean is defined as

From the following data find out Harmonic Mean

Solution

Average speed of the motorist is 60.5km/hr

H.M. for Discrete Series – for Frequency Distribution

The following data is obtained from the survey. Compute H.M

Solution
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H.M. for Continuous data

Where xi is the mid-point of the class interval

Find the harmonic mean of the following distribution of data

Solution

Merits of H.M:

 It is rigidly defined
 It is based on all the observations of the series
 It is suitable in case of series having wide dispersion
 It is suitable for further mathematical treatment
 It gives less weight to large items and more weight to small items
Demerits of H.M:

 It is difficult to calculate and is not understandable

 All the values must be available for computation
 It is not popular due to its complex calculation.
 It is usually a value which does not exist in series
When to use Harmonic Mean?
Harmonic mean is used to calculate the average value when the values are expressed as value/unit. Since the
speed is expressed as km/hour, harmonic mean is used for the calculation of average speed.
Relationship among the averages:
In any distribution when the original items are different the A.M., G.M. and H.M would also differ and will
be in the following order: A.M. ≥ G.M ≥ H.M
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Unit III Measures of Variation – Standard Deviation – Skewness – Lorenz Curve –Simple Correlation
– Scatter Diagram – Karl Pearsons Correlation – Rand Correlation – Regression. (24 Hours)

Measures of Variation
It is measure of degree of scatter of data from the central value.
Definition
A. L. Bowley defines dispersion as, “Dispersion is the measure of the variation of the items”
John F. Griffin defines dispersion as, “A Measure of variation or dispersion describes the degree of scatter
shown by value”.
According to Pro. L. R. Connor, dispersion is a measure of the extent to which the individual items vary.
Objectives or Importance of the Measure of Dispersion

 To find out the reliability of an average

 To Control the variation of data from the central value
 To compare two or more set of data regarding their variability
Characteristics of a good Measure of Dispersion

 It should be based on all observations in the data set.

 It should be based on all observations in the data set.
 It should be easy to understand and compute.
 It should be capable of further mathematical treatment.
 It should be affected by fluctuations of sampling.
 It should be affected by extreme observations.
Methods of Measuring Dispersion

 Range
 Quartile Deviation
 Mean Deviation
 Standard Deviation
 Lorenz Curve
Range: It is the difference between the largest value and the smallest value of the variables

= −
R=L–S
−
=
+
The following data relates to the heights of 10 students (in cms) in a school. Calculate the range and coefficient
of range. 158, 164, 168, 170, 142, 160, 154, 174, 159, 146
Solution:
L=142 S=174
Range = L – S = 174 – 142 = 32
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Coefficient of range = (L-S)/(L+S) = (174-142)/ (174+142) = 32/316 = 0.101
Calculate the range and the co-efficient of range for the marks obtained by 100 students in a school.

Solution
L = Upper limit of highest class = 75
S = lower limit of lowest class = 60
Range = L-S = 75-60 = 15
Coefficient of range = (L-S)/(L+S) =15/ (75+60) = 0.111
Merits of Range

 Range is the simplest measure of dispersion.

 It is well defined, and easy to compute.
 It is widely used in quality control, weather forecasting, stock market variations etc.
Demerits of Range

 The calculations of range is based on only two values – largest value and smallest value.
 It is largely influenced by two extreme values.
 It cannot be computed in the case of open-ended frequency distributions.
 It is not suitable for further mathematical treatment.
Quartile Deviation/ Inter Quartile Range: It is the difference between the third quartile and the first quartile,
divided by two.
−
, . =
2
Where Q3 = Third Quartile Q1 = First Quartile
−
− =
+
The values of Q3 and Q1 may also be obtained through the following equation.
Q3 = Median + Q.D
Q1 = Median – Q.D
Quartile Deviation for Individual Series
Calculate Quartile Deviation from the following data: 25,15,30, 45, 40, 20, 50. Also calculate the co-efficient
of quartile deviation
Solution
Variables – 15, 20, 25, 30, 40, 45, 50
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!" nd
1= th item = 7+1/ 4 =2 item i.e. 20
#

(!" )
3= th item = 3(7+1)/ 4 =6th item i.e. 45
#

'( ) '*
. = = 45 – 20/2 = 25/2 = 12.5
+

'( ) '* #,)+-

− = = = 25/65 = 0.385
'( " '* #,"+-

Quartile Deviation for Discrete Series

Find out the value of quartile deviation and co-efficient of quartile deviation.

Marks 25 30 40 50 60 70 80 90
No. of Students 4 7 12 8 9 15 7 3
Solution

Marks (X) No. of Students (f) Cum. No. of Students (cf)

25 4 4
30 7 11
40 12 23
50 8 31
60 9 40
70 15 55
80 7 62
90 3 65
!"
1= #
th item = 65+1/ 4 = 16.5th item i.e. = 40 marks
(!" )
3= #
th item = 3(65+1)/ 4 =49.5th item i.e. 70 marks
'( ) '*
. =
+
= 70– 40/2 = 30/2 = 15 marks
'( ) '* .-)#-
− = = = 30/110 = 0.27
'( " '* .-"#-

Quartile Deviation for Continuous Series

Compute quartile deviation and co-efficient of quartile deviation from the following data.

X 0-10 10-20 20-30 30-40 40-50 50-60

f 5 12 15 9 10 3
Solution

X f Cf
0-10 5 5
10-20 12 17
20-30 15 32
30-40 9 41
40-50 10 51
50-60 3 54
! ,#th
Q1 = # th item = item = 13.5th item
#
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Which lies in 10-20, Hence L = 10, cf =5, f=12, and i=10
/
)12 .,), 3.,
0
Q1 = L + ( ) x i = 10 + ( ) x 10 = 10 + ( ) = 17.083
2 + +

! 4 ,#th
Q3 = th item = item = 40.5th item
# #

Which lies in 30-40, Hence L = 30, cf =32, f=9, and i=10

(/
)12 #-.,) + 3.,
0
Q1 = L + ( ) x i = 30 + ( ) x 10 = 30 + ( 5 ) = 39.444
2 5

'( ) '*
. = = 39.444– 17.083/2 = 30/2 = 11.1805
+

'( ) '* 5.###– ..-3

− = = = 22.36/56.52 = 0.396
'( " '* 5.###" ..-3

Merits of Quartile Deviation

 It is superior to range as a measure of dispersion.

 It can be measured for open – end distribution.
 It cannot be affected by extreme values.
Demerits of Quartile Deviation

 It is not capable for further algebraic analysis

 Sampling fluctuations affect much of its value
 It is not a good measure for distribution with greater degree of variation
Mean Deviation
The Mean Deviation (MD) is defined as the arithmetic mean of the absolute deviations of the individual values
from a measure of central tendency of the data set. It is also known as the average deviation. The measure of
central tendency is either mean or median. If the measure of central tendency is mean (or median), then we
get the mean deviation about the mean (or median).

The coefficient of mean deviation (CMD) is the relative measure of dispersion corresponding to mean
deviation and it is given by

Mean Deviation for Individual Series

The following are the weights of 10 children admitted in a hospital on a particular day. Find the mean
deviation about mean, median and their coefficients of mean deviation. 7,4,10,9,15,12,7,9,9,18
Solution
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Mean Deviation for Discrete Series

Calculate the Mean deviation about mean for the following data.

Solution,
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Calculate the Mean deviation about median and its relative measure for the following data.

Solution: Already the values are arranged in ascending order then Median is obtained by the following
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Mean deviation about Median

Mean Deviation for Continuous Series

Find out the coefficient of mean deviation about median in the following series

Calculations have to be made correct to two places of decimals.

Solution: Calculation for median follows by the following table

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N/2 = 212 / 2 = =106. Class interval corresponding to cumulative frequency 106 is (30 – 40). So, the
corresponding values from the median class are L = 30, pcf = 77, f = 40 and c =10.

Median = 37.25 (corrected to two places of decimals)

Calculations proceeded for mean deviation about the median.

Then the mean deviation about median is to be computed by the following

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Merits of Mean Deviation

 It is easy to calculate
 It shows the variation of all the items of the distribution, hence it is superior than range and quartile
deviation.
 It would not be affected by the extreme values
 The fluctuations of samples would not affect the calculation of mean deviation.

Demerits of Mean Deviation

 It is not suitable for further statistical analysis

 It is a non – algebraic method since the positive and negative signs for the deviations are treated as
positive only.
 It is not a popular method for measuring the dispersion
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Standard Deviation for Continuous Series

A study of 100 engineering companies gives the following information

Calculate the standard of the profit earned.

Solution
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Properties of Regression Coefficients

(i) Correlation Coefficient is the geometric mean between the regression coefficients r =
(ii) If one of the regression coefficients is greater than unity, the other must be less than unity.
(iii) Both the regression coefficients are of same sign.

Calculate the regression coefficient and obtain the lines of regression for the following data

Solution
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(i) Regression equation of X on Y

(ii) Regression coefficient of Y on X

(iii) Regression equation of Y on X

Y = 0.929X – 3.761 + 11
= 0.929X + 7.284
The regression equation of Y on X is Y = 0.929X + 7.284

Calculate the two regression equations of X on Y and Y on X from the data given below, taking deviations
from an actual means of X and Y.

Estimate the likely demand when the price is Rs. 20.

Solution
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Regression equation on X on Y Regression equation on Y on X

When X is 20, Y will be = -0.25 (20) + 44.25 = -5 + 44.25 = 39.25

When the price is Rs. 20, the likely demand is 39.25

Obtain regression equation of Y on X and estimate Y when X=55 from the following

Solution
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Regression Coefficients of Y on X Regression equation of Y on X

Y - 51.57 = 0.942(X-48.29)

Y = 0.942X – 45.49 + 51.57

Y = 0.942X + 6.08

The regression equation of Y on X is Y = 0.942X

+ 6.08
Estimation of Y when X = 55

Y = 0.942(55) + 6.08 = 57.89

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The following table shows the sales and advertisement expenditure of a form

Coefficient of correlation r= 0.9. Estimate the likely sales for a proposed advertisement expenditure of Rs. 10
crores.

Solution:

When advertisement expenditure is 10 crores i.e., Y=10 then sales X=6(10) +4=64 which implies sales is 64.

Lorenz Curve: It is graphic method of measuring dispersion. This method was devised by Max 0. Lorenz, a
famous economic statistician. It can be drawn by converting the value into percentages. It gives a clear picture
about the dispersion of data from the central value.
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Unit IV Analysis of Time Series – Methods of Measuring Trend and Seasonal Variations – Index
Numbers – Consumer Price Index – And Cost of Living Indices. (18 Hours)

Time Series Meaning: Time Series analysis is one of the statistical methods used to determine the patterns
in data collected for a period of time. Generally, each of us should know about the past data to observe and
understand the changes that have taken place in the past and current time. One can also identify the regular or
irregular occurrence of any specific feature over a time period in a time series data. Most of the time series
data relates to fields like Economics, Business, Commerce, etc… For example Production of a product, Cost
of a product, Sales of a product, National income, Salary of an individual, etc.. By close observation of time
series data, one can predict and plan for future operations in industries and other fields.

Definition

A Time Series consists of data arranged chronologically – Croxton & Cowden.

When quantitative data are arranged in the order of their occurrence, the resulting series is called the Time
Series – Wessel & Wallet.

A time series consists of a set of observations arranged in chronological order (either ascending or
descending). Time Series has an important objective to identify the variations and try to eliminate the
variations and also helps us to estimate or predict the future values.

Why should we learn Time Series? / Importance of Time Series

 It helps in the analysis of the past behavior.

 It helps in forecasting and for future plans.
 It helps in the evaluation of current achievements.
 It helps in making comparative studies between one time period and others.

Therefore, time series helps us to study and analyze the time related data which involves in business fields,
economics, industries, etc…

Components of Time Series

(i) Secular Trend: It is a general tendency of time series to increase or decrease or stagnates during a long
period of time. An upward tendency is usually observed in population of a country, production, sales, prices
in industries, income of individuals etc., A downward tendency is observed in deaths, epidemics, prices of
electronic gadgets, water sources, mortality rate etc…. It is not necessarily that the increase or decrease should
be in the same direction throughout the given period of time.

(ii) Seasonal Variations: As the name suggests, tendency movements are due to nature which repeat
themselves periodically in every seasons. These variations repeat themselves in less than one year time. It is
measured in an interval of time. Seasonal variations may be influenced by natural force, social customs and
traditions. These variations are the results of such factors which uniformly and regularly rise and fall in the
magnitude. For example, selling of umbrellas and raincoat in the rainy season, sales of cool drinks in summer
season, crackers in Deepawali season, purchase of dresses in a festival season, sugarcane in Pongal season.

(iii) Cyclic Variations: These variations are not necessarily uniformly periodic in nature. That is, they may
or may not follow exactly similar patterns after equal intervals of time. Generally, one cyclic period ranges
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from 7 to 9 years and there is no hard and fast rule in the fixation of years for a cyclic period. For example,
every business cycle has a Start- Boom- Depression-Recover, maintenance during booms and depressions,
changes in government monetary policies, changes in interest rates.

(iv) Irregular Variations: These variations do not have particular pattern and there is no regular period of
time of their occurrences. These are accidently changes which are purely random or unpredictable. Normally
they are short-term variations, but its occurrence sometimes has its effect so intense that they may give rise to
new cyclic or other movements of variations. For example, floods, wars, earthquakes, Tsunami, strikes,
lockouts etc…

Mathematical Model for a Time Series

There are two common models used for decomposition of a time series into its components, namely additive
and multiplicative model.

(i) Additive Model: This model assumes that the observed value is the sum of all the four components of time
series. (i.e) Y= T+S+C+I where Y = Original value , T = Trend Value , S = Seasonal component C =
Cyclic component , I = Irregular component The additive model assumes that all the four components operate
independently. It also assumes that the behavior of components is of an additive character.

(ii) Multiplicative Model: This model assumes that the observed value is obtained by multiplying the trend(T)
by the rates of other three components. Y = T × S × C × I where Y = Original value , T = Trend Value ,
S = Seasonal component C = Cyclic component , I = Irregular component This model assumes that the
components due to different causes are not necessarily independent and they can affect one another. It also
assumes that the behavior of components is of a multiplicative character.

Measurements of Trends/ Measures of secular trend

(i) Freehand or Graphic Method: It is the simplest and most flexible method for estimating a trend. We will
see the working procedure of this method.

Procedure:

(a) Plot the time series data on a graph.

(b) Draw a freehand smooth curve joining the plotted points.

(c) Examine the direction of the trend based on the plotted points.

(d) Draw a straight line which will pass through the maximum number of plotted points.

Merits: It is the easiest method of measuring trend. It is more flexible than any other methods of measurement.
It also gives the picture of the movement of data, in addition to the straight line.

Demerits: This method is highly subjective in nature. Different trend lines can be drawn from the curve. The
trend line drawn by one person will not be the same, if drawn by another person. It won’t accurately project
the future. The accuracy depends upon the skill of the analyst.
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Fit a trend line by the method of freehand method for the given data.

Solution

(ii) Method of Semi-Averages: In this method, the semi-averages are calculated to find out the trend values.
Now, we will see the working procedure of this method.

Procedure:

(i) The data is divided into two equal parts. In case of odd number of data, two equal parts can be
made simply by omitting the middle year.
(ii) The average of each part is calculated; thus we get two points.\
(iii) Each point is plotted at the mid-point (year) of each half.
(iv) Join the two points by a straight line.
(v) The straight line can be extended on either side.
(vi) This line is the trend line by the methods of semi-averages

Merits: This method is a simple one to know the trend. This method is an objective method of measuring
trend. The trend line will be the same, though it is drawn by different people.

Demerits: This method assumes straight-line relationship whether such relationship exists or not. It won’t
accurately estimate the character of phenomenon in future. This method is subject to the limitation of
arithmetic mean.

Fit a trend line by the method of semi-averages for the given data.

Solution: Since the number of years is odd(seven), we will leave the middle year’s production value and
obtain the averages of first three years and last three years.
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Fit a trend line by the method of semi-averages for the given data.

Solution: Since the number of years is even(eight), we can equally divide the given data it two equal parts
and obtain the averages of first four years and last four years.

(iii) Method of Moving Averages: Moving Averages Method gives a trend with a fair degree of accuracy. In
this method, we take arithmetic mean of the values for a certain time span. The time span can be three-years,
four -years, five- years and so on depending on the data set and our interest. We will see the working procedure
of this method.

Procedure:

(i) Decide the period of moving averages (three- years, four -years).

(ii) In case of odd years, averages can be obtained by calculating,

(iii) If the moving average is an odd number, there is no problem of centering it, the average value will be
centered besides the second year for every three years.
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(iv) In case of even years, averages can be obtained by calculating,

(v) If the moving average is an even number, the average of first four values will be placed between 2 nd and
3rd year, similarly the average of the second four values will be placed between 3rd and 4th year. These two
averages will be again averaged and placed in the 3rd year. This continues for rest of the values in the problem.
This process is called as centering of the averages.

Merits: This method is the simplest method of measuring trend. This method is flexible in nature. Even though
few variables are added in the series the entire calculations are not changed. Cyclical fluctuations are
eliminated in this method due to overlapping of data for various period. The shape of the trend line is
determined by data rather than the statistician. This method is suitable even if the data of a series is very
irregular.

Demerits: In this method trend values cannot be calculated for all the years. For example, in 5 yearly moving
average, 4 years are left out i.e., 2 years in the beginning and 2 years at the end. There is no mathematical
formula for selecting the period for calculating moving averages. Moving average techniques for calculating
trend will not completely eliminate the cyclical fluctuation. This method is of little use in forecasting since it
is not represented by mathematical function.

Calculate three-yearly moving averages of number of students studying in a higher secondary school in a
particular village from the following data.

Solution: Computation of three- yearly moving averages.

Calculate four-yearly moving averages of number of students studying in a higher secondary school in a
particular city from the following data.
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Solution: Computation of four- yearly moving averages.

(iv) Method of Least Squares: The line of best fit is a line from which the sum of the deviations of various
points is zero. This is the best method for obtaining the trend values. It gives a convenient basis for calculating
the line of best fit for the time series. It is a mathematical method for measuring trend. Further the sum of the
squares of these deviations would be least when compared with other fitting methods. So, this method is
known as the Method of Least Squares and satisfies the following conditions: (i) The sum of the deviations of
the actual values of Y and Ŷ (estimated value of Y) is Zero. that is Σ(Y–Ŷ) = 0. (ii) The sum of squares of the
deviations of the actual values of Y and Ŷ (estimated value of Y) is least. that is Σ(Y–Ŷ)2 is least;

Procedure:

(i) The straight-line trend is represented by the equation Y = a + bX … (1)

where Y is the actual value, X is time, a, b are constants

(ii) The constants ‘a’ and ‘b’ are estimated by solving the following two normal

Equations ΣY = n a + b ΣX ... (2)

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ΣXY = a ΣX + b ΣX2 ... (3)

Where ‘n’ = number of years given in the data.

(iii) By taking the mid-point of the time as the origin, we get ΣX = 0

(iv) When ΣX = 0 , the two normal equations reduces to

The constant ‘a’ gives the mean of Y and ‘b’ gives the rate of change (slope).

(v) By substituting the values of ‘a’ and ‘b’ in the trend equation (1), we get the Line of Best Fit.

Given below are the data relating to the production of sugarcane in a district. Fit a straight line trend by the
method of least squares and tabulate the trend values.

Solution: Computation of trend values by the method of least squares (ODD Years).

Therefore, the required equation of the straight-line trend is given by

Y = a+bX;
 Business Statistics
Y = 45.143 + 1.036 (x-2003)

The trend values can be obtained by

When X = 2000, Yt = 45.143 + 1.036(2000–2003) = 42.035

When X = 2001, Yt = 45.143 + 1.036(2001–2003) = 43.071,

similarly other values can be obtained.

Given below are the data relating to the sales of a product in a district. Fit a straight-line trend by the method
of least squares and tabulate the trend values.

Solution: Computation of trend values by the method of least squares.

Similarly other values can be obtained.

 Business Statistics
Methods of measuring Seasonal Variations by Simple Averages:

Seasonal Variations can be measured by the method of simple average. The data should be available in season
wise likely weeks, months, quarters.

Method of Simple Averages:

This is the simplest and easiest method for studying Seasonal Variations. The procedure of simple average
method is outlined below.

Procedure:

(i) Arrange the data by months, quarters or years according to the data given.

(ii) Find the sum of each month, quarters or year.

(iii) Find the average of each month, quarters or year.

(iv) Find the average of averages, and it is called Grand Average (G)

(v) Compute Seasonal Index for every season (i.e) months, quarters or year is given by

(vi) If the data is given in months

Similarly, we can calculate SI for all other months.

(vii) If the data is given in quarter

Calculate the seasonal index for the monthly sales of a product using the method of simple averages.
 Business Statistics

Solution: Computation of seasonal Indices by method of simple averages.

Similarly other seasonal index values can be obtained.

Calculate the seasonal index for the quarterly production of a product using the method of simple averages.

Solution: Computation of Seasonal Index by the method of simple averages.

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Index Numbers

Meaning: Index numbers are first introduced in Italy in the year 1764. The first index was constructed to
compare the Italian price index in 1750 with price level of 1500. It spreaded to other countries later. At present
the index number techniques are used for the measure of various economic and business activities in addition
to the measure of prices.

Index number is a measure of studying the relationship between two variables. Taking one variable as a base,
the relationship of the other variables as percentage, basis is calculated. Hence, it shows whether the particular
variable is assuming an increasing trend or decreasing trend.

Definition of Index Number

According to Croxtan and Cowden, “Index numbers are devices for measuring difference in the magnitude of
a group of related variables”.

Clark and Schkode defines “an index number is a percentage relative that compares economic measures in a
given period with those same measures at a fixed period in the past”.

Maslow defines “Index Number is a numerical value characterising the change in complex economic
phenomena over a period of time or space”.

Characteristics of Index Numbers:

(1) Expressed in percentage: A change in terms of the absolute values may not be comparable. Index
numbers are expressed in percentage, so they remove this barrier. Although, we do not use the percentage
sign. It is possible to compare the agricultural production and industrial production and at the same time being
expressed in percentage, we can also compare the change in prices of different commodities.

(2) Relative measures or measures of net changes: Index numbers measure a net or relative change in a
variable or a group of variables. For example, if the price of a certain commodity rises from ₹10 in the year
2007 to ₹15 in the year 2017, the price index number will be 150 showing that there is a 50% increase in the
prices over this period.
 Business Statistics
(3) Measure change over a period of time or in two or more places: Index numbers measure the net change
among the related variables over a period of time or at two or more places. For example, change in prices,
production, and more, over the two periods or at two places.

(4) Specialised average: Simple averages like, mean, median, mode, and more can be used to compare the
variables having similar units. Index numbers are specialised average, expressed in percentage, and help in
measuring and comparing the change in those variables that are expressed in different units. For example, we
can compare the change in the production of industrial goods and agricultural goods.

(5) Measuring changes that are not directly measurable: Cost of living, business activity, and more are
complex things that are not directly measurable. With the help of index numbers, it is possible to study the
relative changes in such phenomena.

Classification of Index Numbers:

(i) Price Index Number: It measures the general changes in the retail or wholesale price level of a particular
or group of commodities.

(ii) Quantity Index Number: These are indices to measure the changes in the quantity of goods manufactured
or consumed in a factory.

(iii) Vale index numbers: Value index numbers are concerned with changes in the total value of products in
a specific year compare with a past year. Value of product can be ascertained by multiplying the quantity with
the price per unit.

Uses of Index Numbers:

(i) It is an important tool for the formulating decision and management policies.

(ii) It helps in studying the trends and tendencies.

(iii) It determines the inflation and deflation in an economy.

(iv) They are economic barometers.

(v) It helps in comparing the standard of living.

Merits of Index Numbers:

(1) Help in formulating policies: Most of the economic and business decisions and policies are guided by
the index numbers. Example: To increase DA, the government refers to the cost-of-living index. To make any
policy related to the industrial or agricultural production, the government refers to their respective index
numbers.

(2) Help in study of trends: Index numbers help in the study of trends in variables like, export-import,
industrial and agricultural production, share prices, and more.

(3) Helpful in forecasting: Index numbers not only help in the study of past and present behaviour; they are
also used for forecasting economic and business activities.
 Business Statistics
(4) Facilitates comparative study: To make comparisons with respect to time and place especially where
units are different, index numbers prove to be very useful. For example, change in ‘industrial production’ can
be compared with change in ‘agricultural production’ with the help of index numbers.

(5) Measurement of purchasing power: Index numbers, such as cost inflation index help in measuring the
of money to maintain standard of living purchasing power of money at different times between different
regions. Such analysis helps the government to frame suitable policies for maintaining or raising the standard
of living of the people.

(6) Act as economic barometer: Index numbers are very useful in knowing the level of economic and
business activities of a country. So, these are rightly known as economic barometers.

Demerits of Index Numbers:

Difficulty in construction of index numbers: The decision of objective, selection of base period, selection
of commodities, selection of sources of data, selection of ‘weights’, selection of formula, and more are the
several difficulties in the construction of index numbers.

Based on sample items, so only approximate indicators: Index numbers are generally based on a few
sample items. So, the results derived are approximate and not perfect.

Ignores quality of commodities: These days the quality changes occur very fast and the index numbers
ignore this aspect. So, the results shown by these may not be appropriate.

Limited use: There is no ‘master index number’ or ‘all in one index number’. Use of each index number is
restricted to its specific object.

Useful only for short-term comparison: Over a period of time, rapid changes occur in habits, tastes,
preferences, and more. So, the index number constructed in the present may not be comparable with the one
constructed a few years back.

Problems in the construction of Index numbers:

 The purpose of the index numbers: Many different types of index numbers are constructed with
different objectives. Example: Price index, quantity index, consumer price index, wholesale price
index, and more. So, the first important issue/problem is to define the objective for which the index
number is to be constructed.
 Availability of data
 Selection of items: All the items cannot be included in the construction of an index number. Nature
and number of items to be included in an index number depends upon the type of index to be
constructed. For example, to construct a ‘consumer price index’ those commodities should be
considered that are generally consumed and the number should be neither too small nor too big.
 Selection of base period (types of bases: Fixed base, chain base and average base): Base period is
the period against which the comparisons are made. Selection of a suitable base period is a very crucial
step. It should be of reasonable length and normal one, i.e., it should not be affected by any
abnormalities like, natural calamities, war, extreme business cycle situations. It should neither be too
close nor too far.
 Selection of average
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 Selection of weights: The term ‘weight’ refers to the relative importance of different items in the
construction of index numbers. All the items do not have the same importance. So, it is necessary to
adopt some suitable measures to assign weight.
 Implicit weight
 Explicit weight
 Selection of appropriate sources of data: Depending upon the type of index numbers, the correct
source should be selected for data. Like, to construct CPI, we need retail prices and to construct the
wholesale price index, we need wholesale prices. Accordingly, the right and reliable source should be
selected.
 Selection of suitable formula: There are various formulas for construction of index numbers like
Laspeyres’ method, Paasche’s method, Fisher’s method, and more. No single formula is appropriate
for all types of index numbers. The choice of formula depends upon the purpose of the available data.

Method of Construction of Index Numbers

Methods of
Calculating Index
Numbers

Unweighted
Weighted
(Simple)

Weighted
Simple Aggregate
Aggregate

Simple average of Weighted average

price relatives of price relatives

Weighted Index Number: In general, all the commodities cannot be given equal importance, so we can
assign weights to each commodity according to their importance and the index number computed from these
weights are called as weighted index number. The weights can be production, consumption values. If ‘w’ is
the weight attached to a commodity, then the price index is given by,

Let us consider the following notations,

p1 - current year price

p0 - base year price

q1 - current year quantity

 Business Statistics
q0 - base year quantity

where suffix ‘0’ represents base year and ‘1’ represents current year.

Calculate the Laspeyre’s, Paasche’s and Fisher’s price index number for the following data. Interpret on the
data.

Solution

Laspeyre’s price index number

On an average, there is an increase of 16.60 % in the price of the commodities when the year 2000 compared
with the year 2010.

Paasche’s price index number

On an average, there is an increase of 18.12 % in the price of the commodities when the year 2000 compared
with the year 2010.

Fisher’s price index number

 Business Statistics
On an average, there is an increase of 17.36 % in the price of the commodities when the year 2000 compared
with the year 2010.

Construct the Laspeyre’s , Paasche’s and Fisher’s price index number for the following data. Comment on
the result.

Solution

On an average, there is an increase of 29.52 %, 25.48% and 27.48% in the price of the commodities by
Laspeyre’s, Paasche’s, Fisher’s price index number respectively, when the base year compared with the
current year.