Syllabus of Business Statistics

 Unit 1

Data Representation, Central Tendency, Dispersion, Kurtosis, Skewness

 Unit 2

Types of Probability – Independence, Dependence Events, Bayes’ Theorem

 Unit 3

Concept of Random Variable, Probability Distribution, Expected value and

Variance, Decision Theory, Decision Tree

 Unit 4

Types of Probability Distribution – Binomial, Poisson, Normal

 Unit 5

Sampling Distribution with Central Limit Theorem

 Unit 6

Estimation – Point & Interval

 Unit 7

Hypothesis Testing – students t, Chi Square, z test

 Unit 8

Analysis of Variance – one way, two way

 Unit 9

Correlation & Regression Analysis

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Measures of Dispersion

Dispersion is a spread of variability in a set of data. It determines dispersal or scatter of

individual items in a given distribution from a central value. It is a measure of variation
of items. A low degree of dispersion indicates high degree of uniformity.

Measures of dispersion – mathematical or computational, Graphical, positional

Mathematical or computational – mean deviation or average deviation, standard deviation

or root mean square deviation taken from AM

Graphical – Lorenz curve

Positional measures – Range, interquartile range, Quartile deviation or semi-interquartile

range

Measures of Dispersion – Range, Quartile Deviation, Variance, Standard Deviation,

Coefficient of Variation

Range :

In an arranged array of data the difference between the two extreme values, i.e., the
largest and the smallest values of the distribution is called the range.

Range for Ungrouped data

Range = L – S = Largest value – Smallest value

Ex: the marks obtained by 6 students were 6,8,16, 25, 30, 40. Find the rand the range

Solution

Range = L – S = 40 – 6 = 34

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Range for Grouped data/Continuous series

Find the range for the following data :

Weight (in Kg) 140 – 150 150 – 160 160 – 170 170 - 180

No. of bags 5 8 10 12

Range = L – S = Largest value – Smallest value

Range = L – S = 180 – 140 = 40

Applications of range

It can be used in stock market, money-rates, gold prices etc

It is used for quality control of the finished products using the control chart for the range
in industry

It is also used by the meteorological department for forecasting weather since it gives an
idea of the fluctuation of temperatures between maximum and minimum levels

Coefficient of range : for comparison purposes a related measure of range is computed by

using the formula given below :

Coefficient of Range (or relative range) = Absolute range / sum of two extreme values =
L – S/L + S

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Quartile Deviation

Quartile : median divides the series into two halves, whereas the quartile divides the
series into four halves

Quartile Deviation is an absolute measure of dispersion. It shows average difference

between the two quartiles (Q3- Q1)/2

Quartile Deviation for ungrouped data

Find the Q.D of the daily expenses(in rs.) of 7 persons

8,9,14, 16, 25, 30, 40

Here n = 7

1st quartile deviation (q1) = n +1/4 = 2

3rd quartile deviation(q3) = 3n+1/4 = 6

Q1 = 2nd term = 9

Q3 = 6th term = 30

Quartile deviation = Q3 – Q1/2 = 10.5

Coefficient of QD = Q3-Q1/Q3+Q1 = 30-9/30+9 = 0.539

Quartile Deviation for discrete series

Wages F Cumulative frequency

16 1 1

18 4 5(Q1)

21 6 11

28 9 20(Q3)

32 12 32

40 3 35

Q1 = value of N + ¼ th term = 9 th term = 21

Q3 = value of 3N+1/4 = 27th term = rs 32

Coeff of QD = Q3 – Q1/Q3+Q1 = 0.208

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 Quartile Deviation for Continuous Series

Calculate QD and its coefficient for the given series :

C.I : 10-20 20-30 30-40 40-50 50-60 60-70 70-80

F : 10 15 5 30 15 12 13

Solution

Formula(s) of Quartile Deviation

Q1(Lower or first Quartile) = l1 + N/4 – C * i

Q3(Upper or Third Quartile) = l3 + 3 N/4 – C *i

Quartile Deviation(QD) = Q3-Q1/2

Coefficient of QD = Q3-Q1

Q3 +Q1

Class Interval Frequency Cumulativ

e

Frequency

10 – 20 10 15

20 – 30 15 25(c)

l1 - 30 – 40 5(f) 30

40 – 50 30 60

50 – 60 15 75(c)

l3 - 60 – 70 12(f) 87

70 – 80 13 100

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 80 – 90 10 110

Total N =∑f = 110

Determine N/4 = 110/4 = 27.5

Determine 3N/4 = 330/4 = 82.5

Formula(s) of Quartile Deviation

Q1(Lower or first Quartile) = l1 + N/4 – C * i

Q1= 30 + (27.5 – 25) * 10

Q1 = 30 + 2.5 * 10

Q1 = 35

Q3(Upper or Third Quartile) = l3 + 3 N/4 – C *i

= 60 + (82.5-75) * 10

12

= 60 + 7.5 * 10

12

Q3 = 66.25

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Quartile Deviation(QD) = Q3-Q1/2

QD = 66.25 – 35/2

QD = 31.25/2 = 15.625

Coefficient of QD = Q3-Q1

Q3 +Q1

Coefficient of QD = 31.25/101.25 = 0.30

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  Formula for Quartile Deviation

 QD = Q3 – Q1 /2

 QD is also called the Semi-Interquartile range

 Formula for Inter-Quartile Range

 Q3 – Q1

 Formula for Coefficient of Quartile Deviation

 Coefficient of Quartile Deviation = Quartile Deviation/Median

(or) Q3 – Q1/Q3 + Q1

To know the percentage of variation = coefficient of quartile deviation * 100

Quartile Deviation is rarely used for practical purposes since it does not consider the
variability of all the values. It gives a fair measure of variability as 50% of the observations
lie between the two quartiles and is affected by fluctuations

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Standard Deviation, Variance

It denotes the total variation in the mean. Standard deviation is also called as the Root Mean
Square Deviation. The square of the standard deviation is called variance

The standard deviation is a frequently used measure of dispersion. It enables us to determine as

to how far individual items in a distribution deviate from its mean. It is symmetrical , bell shaped
curve

About 68% of values in the population fall within ± 1 standard deviation from the mean

About 95% of the values in the population fall within ± 2 standard deviation from the mean

About 99% of the values in the population fall within ± 3 standard deviation from the mean

µ-3𝛔 µ-2𝛔 µ- 𝛔 µ µ- 𝛔 µ 3𝛔 µ

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Formula(s) of Standard Deviation

For Ungrouped Data

𝛔 = √(x- X_ )2/n-1

X – individual observation

N – number of observations

Calculate the value of 𝛔 for the following series

d - deviation

9, 12, 10, 11, 8, 3, 11

x (x – x) (x – x )2

9 -0.14286 0.020408

12 2.857143 8.163265

10 0.857143 0.734694

11 1.857143 3.44898

8 -1.14286 1.306122

3 -6.14286 37.73469

11 1.857143 3.44898

Total 54.85714

𝛔 = √(x- X_ )2/n-1

𝛔 = √54.85714/7-1 = 3.02

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Formula(s)

Ungrouped data

Mean(Direct Method)

X = ∑X / n

Mean(Deviation Method)

X = A + {∑d / n}

(d = x – A)

Standard Deviation[Direct method]

𝛔 = √(x- X_ )2/n-1

Standard Deviation[Deviation Method]

𝛔 = √∑d2/n – {∑d/n}2

d is deviation = x - A

Variance = 𝛔2

Coefficient of Standard Deviation(CSD)

CSD = 𝛔/ x

Coefficient of Variation

CV = 𝛔/ x * 100

For Discrete series

𝛔 = √∑fd’2/N – {fd’/N}2 * i

d’ = m – A/i

d’ - deviation

m – midpoint

A – Assumed Mean

i – width of the class interval

Standard Deviation[Deviation Method] for Continuous series

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𝛔 = [√∑fd’2/N – {∑fd’/N}2 ] * i

d’ is deviation = m - A / i

For continuous series

Weight : 44-46 46-48 48-50 50-52 52-54

f : 8 24 27 21 10

Weight f m d’ = m – 49/2 d’2 fd’ fd’2

44-46 8 45 -2 4 -16 32

46-48 24 47 -1 1 -24 24

48-50 27 49 0 0 0 0

50-52 21 51 1 1 21 21

52-54 10 53 2 4 20 40

90 Total 1 117

𝛔 = √∑fd’2/N – {∑fd’/N}2 * i

𝛔 = √117/90 – {1/90}2 * 2

𝛔 = 2.28

Important points on Standard Deviation

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  SD measures the absolute dispersion or variability of a distribution

 A small SD means a high degree of uniformity and homogeneity of the observations and
vice versa.

 If two or more comparable series have almost identical means, the distribution with
minimum SD has the most representative mean.

 The practical applicability of SD in the population samples is to determine the variability

in the income levels, education levels, wage levels etc. The determining of the variation
in the income and the education levels helps us to understand the standard of living of the
people. It is used to measure the inequalities in the distribution of income and wealth in a
country

Coefficient of Standard Deviation(CSD)

CSD = 𝛔/ x

Coefficient of Variation(CV)

Coefficient of Variation is the percentage of variation in the mean. It is used to compare the
percentage of variation of the mean for the two series

Formula of CV

CV = 𝛔 / x * 100

𝛔 is the standard deviation

x is the Arithmetic Mean

X_ = A + ∑fd’/N * i

Practice Problems

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Calculate Mean[Direct method, Deviation Method], Standard Deviation[Direct method,
Deviation Method], Variance & Coefficient of Variation for the following distribution:

Year Units Sold(‘00’)

2016 15

2017 10

2018 20

2019 30

2020 40

2021 25

Solution

Standard Deviation[Deviation Method]

Year Units Sold(‘00’) d = X - A d2

2016 15 -5 25

2017 10 -10 100

2018 20 = A 0 0

2019 30 10 100

2020 40 20 400

2021 25 5 25

∑d = 20 ∑ d2 = 650

Assumed mean = total number of observations/2 = 6/2 = 3 observation

Standard Deviation[Deviation Method]

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𝛔 = √∑d2/n – {∑d/n}2

d is deviation = x - A

𝛔 = √650/6 – {20/6}2

𝛔 = √108.33 – 11.11

𝛔 =√97.22 = 9.86

𝛔 =9.86

Variance = 𝛔2

Variance = (9.86)2

Variance = 97.22

Coefficient of Variation

CV = 𝛔/ x * 100

X = A + ∑d / n = 20 + {20 / 6} = 20 + 3.33 = 23.33

CV = 9.86 / 23.33 * 100 = 42.26%

Calculate Mean[Direct method, Deviation Method], Standard Deviation[Direct method,

Deviation Method], Variance & Coefficient of Variation for the following distribution:

Year Profit(Lakhs)

2016 5

2017 10

2018 18

2019 12

2020 16

2021 20

Calculate Mean[Direct method, Deviation Method], Standard Deviation[Direct method,

Deviation Method], Variance & Coefficient of Variation for the following distribution:
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 Year Overtime(hrs.)

2015 15

2016 20

2017 18

2018 22

2019 6

2020 9

2021 7

Calculate the percentage of variation of sales for the two quarters

Year I II

2008 68 63

2009 70 59

2010 60 55

2011 68 51

2012 65 43

Calculate Mean, Median, Mode, Standard deviation, Variance & Coefficient of Variation

Weight(g) Frequency

44-46 8

46-48 24

48-50 27

50-52 21

52-54 10

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Calculate Mean, Median, Mode, Standard deviation, Variance & Coefficient of Variation

Net Profit(Crores) No. of Companies

10-19 4

20-29 15

30-39 20

40-49 34

50-59 18

60-69 13

70-79 6

Calculate Mean, Median, Mode, Standard deviation, Variance & Coefficient of Variation

Productivity(units) No. of Workers

200 - 250 8

250 - 300 10

300 - 350 20

350 - 400 40

400 - 450 5

450 - 500 9

500 - 550 7

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