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Measures of variation

Course name: Business statistics


Course code: AIS-1202
Prahallad Chandra das (ACMA)
Assistant professor
Department of Accounting and Information systems

Group: 5
Name
Jannatul Fardous
Shurovi
Israt Jahan Mou
Momena Khatun
Md. Nahidul Hasan
Sadia Maliha Trisha
Md. Uzzal Miah
Md. Khairul islam
Md. Moin khan
Md. Nazmul Hasan

Date of submission: 02 February, 2016

Roll
15132537
15132538
15132539
15132540
15132541
15132542
15132543
15132544
15132545

Table of content
Measures of variation
Introduction
Significance of measures of variation
Properties of a good measure of variation
Measuring variation

Range
Definition of range
Example of range
Merits of range
Limitations of range
Uses of range

Quartile Deviation
Definition of quartile deviation
Example of quartile deviation
Merits of quartile deviation
Limitation of quartile deviation

Average deviation
Definition of average deviation
Example of average deviation
Merits of average deviation
Limitation of average deviation

Standard deviation
Definition of standard deviation
Example of standard deviation
Merits of standard deviation
Limitation of standard deviation
Mathematical properties of standard deviation

Lorenz curve
Which measure of variation to use

Introduction
The Measure of central tendency serve to locate the center of the distribution, but they
do not reveal how the items are spread out on either side of the center. This characteristic
of a frequency distribution is commonly referred to as variation. In a series all the items
are not equal. There is difference or variation among the values. The degree of variation
is evaluated by various measures of variation. Small variation indicates high uniformity
of the items, while large variation indicates less uniformity.

Significance of measures of variation


1.
2.
3.
4.

Determining the reliability of the central tendency.


Serving as a basis for the control of the variability.
Comparing two or more series with regard to their variability.
Facilitating the use of other statistical use. Such as correlation, regression etc.

Properties of a good measure of variation


1.
2.
3.
4.
5.
6.
7.

It should be simple to understand.


It should be easy to compute.
It should be rigidly defined.
It should be based on each and every observation of the distribution.
It should be amenable to further algebraic treatment.
It should have sampling stability.
It should not be unduly affected by extreme observation.

Measuring variation
The following are the important methods of studying variation.
1. Range,
2. The Inter-quartile range or Quartile deviation,
3. The Average deviation,
4. The Standard deviation,
5. The Lorenz curve.
Of these, the first four are mathematical methods and the last is a graphical one.

Range
Range is the simpliest and quickest measure of dispersion. Being a positional measure it
accounts only the difference between the highest and lowest observation in any data
series.
So, R = L-S
Here, R= Range
L= Largest value.
S= Smallest value.

Coefficient of range
The relative measure corresponding to the range, called coefficient of range.
Coefficient of range =

Example of range

LS
LS

Example 1: Find the value of range and its co-efficient for the following data.
7, 9, 6, 8, 11, 10, 4
Solution:
L=11, S = 4.
Range = L S = 11- 4 = 7
Coefficient of range =

LS
LS

11 4
11 4

7
15

= 0.467

Example 2 : Calculate range from the following distribution.


Size:
60-63 63-66 66-69 69-72 72-75
Number: 5
18
42
27
8
Solution
L = Upper boundary of the highest class = 75
S = Lower boundary of the lowest class = 60
Range = L S = 75 60 = 15
Coefficient of range =

LS
LS

75 60
75 60

15
135

= 0.11

Example 3 : The yields (kg per plot) of a cotton variety from five plots are 8, 9, 8, 10 and
11. Find the range and coefficient of range.
Solution
L=11, S = 8.
Range = L S = 11- 8 = 3
Coefficient of range =

LS
LS

11 8
3
=
11 8 19

= 0.158

Example 4 : the following are the prices of shares of a company from Monday to
Saturday,
Day
Price (Rs.)
Day
Price (Rs.)
Monday
200
Thursday
160
Tuesday
210
Friday
220
Wednesday
208
Saturday
250
Calculate range and coefficient of range.
Solution : Range = L S = 250 160 = 90

Coefficient of range =

LS
LS

250 160
250 160

90
410

= 0.22

Example 5 : Calculate coefficient of range the following data,


Profits (Rs. lakhs)
10-20
20-30
30-40

No. of cos.
8
10
12

Profits (Rs. lakhs)


40-50
50-60

No. of cos.
8
4

Solution : Range = L S = 60 10 = 50
Coefficient of range =

LS
LS

60 10
60 10

50
70

= 0.714

Merits of range
1. Simple to compute.
2. Easy to understand.
3. Quickly calculated.

Limitations of range
1. It is very much affected by the extreme items.
2. It is based on only two extreme observations.
3. It cannot be calculated from open-end class intervals.
4. It is not suitable for mathematical treatment.
5. It is a very rarely used measure.

Uses of range
1. For quality control.
2. Fluctuation in the share price.
3. Weather forecast.

Quartile Deviation
Quartile Deviation is half of the difference between the first and third quartiles. Hence, it
is called Semi Inter Quartile Range. The interquartile range or the quartile deviation is a
better measure of variation in a distribution than the range.
Here, avoiding the 25 percent of the distribution at both the ends uses the middle 50
percent of the distribution. In other words, the interquartile range denotes the difference
between the third quartile and the first quartile.
Symbolically, interquartile range = Q3 -Q1
Many times the interquartile range is reduced in the form of semi-interquartile range or
quartile deviation as shown below:

Semi interquartile range or Quartile deviation = (Q3 -Q1)/2


Coefficient of quartile deviation
The relative measure corresponding to the quartile deviation, called coefficient of quartile
deviation.
It can be changed into a relative measure of dispersion as follows:
Q3 Q1
Coefficient of Q.D.=
Q3 Q1

Example of quartile deviation


Example 1: you are given the frequency distribution of 292 workers of a factory
according to their average weekly income. Calculate quartile deviation and its coefficient
from the following data:
Weekly income
No. of worker
Weekly income
No. of worker
Below 1350
8
1450-1470
22
1350-1370
16
1470-1490
15
1370-1390
39
1490-1510
15
1390-1410
58
1510-1530
9
1410-1430
60
1530 & above
10
1430-1450
40
Solution:
Weekly income
(Rs.)
Below 1350
1350-1370
1370-1390
1390-1410
1410-1430
1430-1450
1450-1470
1470-1490
1490-1510
1510-1530
1530 & above

Median = size of the

Calculation of Quartile Deviation


No. of worker
f
8
16
39
58
60
40
22
15
15
9
10
N= 292
N
292
th observation =
= 146th observation
2
2

Median lies in the class 1410-1430


Median L

N / 2 p.c. f
i
f

c.f
8
24
63
121
181
221
243
258
273
282
292

= 1410+
Q1 = size of the

146 121
20 = 1410 + 8.333 = 1418.333
60

N
292
th observation =
= 73th observation
4
4

Q1 lies in the class 1390-1410


Q1 L

N / 4 p.c. f
i
f

= 1390 +

73 63
20 = 1390 + 3.448 = 1393.448
58

Q3 = size of the

3N
3 292
th observation =
= 219th observation
4
4

Q3 lies in the class 1430-1450


Q3 L
=

3 N / 4 p.c. f
i
f

1430 +

219 181
20 = 1430+ 8.333 = 1449
40
Q3 Q1 1449 1393.448

Coefficient of Q.D.=

Q3 Q1

1449 1393.448

55552
2842.448

= 0.020

Example 2 : Based on the frequency distribution given below, compute the following
statistical measures to characterize the distribution.
Annual tax paid
No. of Managers
(Rs. thousand)
5-10
18
10-15
30
15-20
46
20-25
28
25-30
20
30-35
12
35-40
6
Calculate the inter-quartile range.
Solution:
calculation of semi inter-quartile range
Annual tax paid
No of managers
p.c.f
(Rs.thousand)
f
5-10
18
18
10-15
30
48
15-20
46
94
20-25
28
122
25-30
20
142
30-35
12
154
35-40
6
160

N=160
Semi inter-quartile range = Q3 -Q1
Q1 = size of the

N
160
th observation =
= 40th observation
4
4

Q1 lies in the class 10-15.


Q1 L

N / 4 p.c. f
i
f

= 10 +

40 18
5 = 10 + 3.67 = 13.67
30

Q3 = size of the

3N
3 160
th observation =
= 120th observation
4
4

Q3 lies in the class 20-25.


Q3 L
=

3 N / 4 p.c. f
i
f

20 +

120 94
5 = 20.4.64 = 24.64
28

Semi inter-quartile range = Q3 -Q1 = 24.64 -13.67 = 10.97


Example 3: From the following frequency distribution of heights of 360 boys in the agegroups 15-20 years, calculate the quartile deviation.
Height(in cms)
No. of boys
126-130
31
131-135
44
136-140
48
141-145
51
146-150
60
151-155
55
156-160
43
161-165
28
Solution:
Calculation of quartile deviation
Height(in cms)
No of boys
p.c.f
f
126-130
31
31
131-135
44
75
136-140
48
123
141-145
51
174
146-150
60
234
151-155
55
289
156-160
43
332

161-165
Q1 = size of the

28
N=360

360

N
360
th observation =
= 90th observation
4
4

Q1 lies in the class 136-140. Actual limit of the class is 135.5-140.5


Q1 L

N / 4 p.c. f
i
f

= 135.5 +
Q3 = size of the

90 75
5 = 135.5+ 1.5625 = 137.06
48
3N
3 360
th observation =
= 270th observation
4
4

Q3 lies in the class 151-155. Actual limit of the class is 150.5-155.5


Q3 L

3 N / 4 p.c. f
i
f

270 234
5 = 150.5+3.27= 153.77
55
Q Q1
153.77 137.06
Quartile deviation = 3
=
=8.355
2
2
=

150.5 +

Example 4: a survey of domestic consumption of electricity gave the following


distribution of the no. of units consumed:
Number of units
Number of consumption
0-200
9
200-400
18
400-600
27
600-800
32
800-1000
45
1000-1500
38
1500-2000
20
2000 and above
2
Calculate the first quartile, third quartile and quartile deviation.
Solution:
Calculation of quartile deviation
Number of units
0-200
200-400
400-600

Number of
consumption ( f )
9
18
27

p.c.f
9
27
54

600-800
800-1000
1000-1500
1500-2000
2000 and above

Q1 = size of the

32
45
38
20
2
N=191

86
131
169
189
191

N
191
th observation =
= 47.75th observation
4
4

Q1 lies in the class 400-600.


Q1 L

N / 4 p.c. f
i
f

= 400 +

47.75
200 = 400+ 153.7= 553.70
27

Q3 = size of the

3N
3 191
th observation =
= 143.25th observation
4
4

Q3 lies in the class 1000-1500.


Q3 L

3 N / 4 p.c. f
i
f

143.25 131
500 = 1000+161.18= 1161.18
38
Q Q1
1161 .18 553.70
Quartile deviation = 3
=
= 303.74
2
2
=

1000 +

Example 5: You are given the data pertaining to kilowatt hours of electricity consumed
by 100 persons in Delhi.
Consumption(k.watt hours)
No. of users
0 but less than 10
6
10 but less than 20
25
20 but less than 30
36
30 but less than 40
20
40 but less than 50
13
Calculate the range within which middle 50% of the consumers fall.
Solution:
Calculation of range within which the middle 50% consumers fall
Consumption(k.watt
No. of users
p.c.f
hours)
0 but less than 10
6
6
10 but less than 20
25
31
20 but less than 30
36
67
30 but less than 40
20
87
40 but less than 50
13
100
N=100

Q1 = size of the

N
100
th observation =
= 25th observation
4
4

Q1 lies in the class 400-600.


Q1 L

N / 4 p.c. f
i
f

= 10 +

25 6
10 = 10+ 7.6= 17.6
25

Q3 = size of the

3N
3 100
th observation =
= 75th observation
4
4

Q3 lies in the class 1000-1500.


Q3 L
=

3 N / 4 p.c. f
i
f

30 +

75 67
10 = 30+4= 34
20

Range within which the middle 50% consumers fall= 34-17.6 = 16.4

Merits of Quartile Deviation:


1. It is Simple to understand and easy to calculate
2. It is not affected by extreme values.s
3. It can be calculated for data with open end classes also.

Limitations of Quartile Deviation:


1. It is not based on all the items. It is based on two positional values Q1 and Q3 and
ignores the extreme 50% of the items 149
2. It is not amenable to further mathematical treatment.
3. It is affected by sampling fluctuations.

Average Deviation:
The range and quartile deviation are not based on all observations. They are positional
measures of dispersion. They do not show any scatter of the observations from an
average. The average deviation is measure of dispersion based on all items in a
distribution.
Average deviation is the average amount scatter of the items in a distribution from either
the mean or the median, ignoring the signs of the deviations.
Mathematically following formula represents the concept of A.D.
Case 1: Ungrouped data series; A.D=

X Med
N

Case 2: Grouped data series; A.D.=

X X
N

Coefficient of average deviation


The relative measure corresponding to the average deviation, called coefficient of
average deviation.
If average deviation has been computed from median, the coefficient of average deviation
shall be obtained by dividing average deviation by the median.
Coefficient of average deviation =

A.D
Median

If average deviation has been computed from mean, the coefficient of average deviation
shall be obtained by dividing average deviation by the mean.
Coefficient of average deviation =

A.D
Mean

Example of average deviation from ungrouped data


Example 1 : Calculate the average deviation and coefficient of average deviation of the
two income group of five and seven workers working in two different branches of a firm.
Branch 1 (income RS)
Branch 2 (income RS)
4000
3000
4200
4000
4400
4200
4600
4400
4800
4600
4800
5800

Soluation:
Calculation of average deviation
Branch 1
Income(RS)

Branch 1

Branch 2
Income(RS)

X Med

4000
4200
4400
4600
4800

med=4400
400
200
0
200
400

N=5

X Med =120

3000
4000
4200
4400
4600
4800
5800
N=7

0
Branch 1:

A.D=

X Med
N

Branch 2
X Med

med=4400
1400
400
200
0
200
400
1400

X Med =400

0
=

1200
=240
5

A.D
240
=
=0.054
Median 4400
X Med 4000
A.D=
=
=571.43
7
N
A.D
571.43
Coff. Of A.D=
=
=0.13
4400
Median

Coff. Of A.D=
Branch 2:

Example of average deviation from grouped data


Example 1 : Calculate average deviation from mean and the following data.

Sales (In Thousand)


10-20
20-30
30-40
40-50
50-60

No. of day
3
6
11
3
2

Solution:
Sales (In
Thousand)
10-20
20-30
30-40
40-50
50-60

m.p.
X
15
25
35
45
65

(X-35)/10 fd

3
6
11
3
2
N=25

-2
-1
0
1
2

-6
-6
0
3
4

fd 5`

Calculation of average deviation


f
A.D.=

204
25

X A

X X
N

=5.16

fd i
N

X X

18
8
2
12
22

X X

54
48
22
36
44
f
4

X X

=20

=35- 25 10 =33
Example 3: Calculate mean deviation for the following frequency distribution.
No. of colds
No of persons
experienced in 12
month
0
15
1
46
2
91
3
162
4
110
5
95
6
82
7
26
8
13
9
2
Solution:
X X
No. of colds
No of
d = X-A
fd
f X X
experienced
persons
in 12 month
(X)
f
0
15
-5
3.78
56.70
-75
1
46
-4
2.78
127.88
-184
2
91
-3
1.78
161.98
-273
3
162
-2
0.78
126.36
-324
4
110
-1
0.22
24.20
-110
5
95
0
1.22
115.90
0
6
82
1
2.22
182.04
82
7
26
2
3.22
83.72
52
8
13
3
4.22
54.86
39
9
2
4
5.22
10.44
8
N=642
f X X =941.3 fd=-783
0

Calculation of average deviation


f
A.D.=

X X
N

941.30
= 642 =1.47

X A

fd i
N

=5+

( 785)
1=
642

3.78

MERITS OF AVERAGE DEVIATION


1. A major advantages of average deviation is that it is simple to understand and
easy to calculate.
2. It takes into consideration each and every items item in the distribution. As
a result, a change in the value of any item will have its effect on
the magnitude of mean deviation.
3. The values of extreme items have less effect on the value of the
mean deviation.
4. As deviations are taken from a central value, it is possible to
have meaningful comparisons of the formation of different
distributions.

LIMITATIONS OF AVERAGE DEVIATION


1. It is not capable of further algebraic treatment.
2. At times it may fail to give accurate results. The mean deviation gives best results
when deviations are taken from the median instead of from the mean. But in a
series, which has wide variations in the items, median is not a satisfactory
measure.
3. Strictly on mathematical considerations, the method is wrong as
it ignores the algebraic signs when the deviations are taken from
the mean.
In view of these limitations, it is seldom used in business studies. A
better measure known as the standard deviation is more frequently
used.

STANDARD DEVIATION
It is a measure of spread or variability in the sample. It is defined on the square root of
the arithmetic mean of the squared deviations of individual values around the mean.
Mathematically following formula represents the concept of S.D.
Case 1: Ungrouped data series;
It has two formula; 1) Deviation taking from actual mean and
2) Deviation taken from assumed mean.
1) Actual mean:

2) Assumed mean:

d
N

d )

Case 2: Grouped data series;


It has two formula; 1) Deviation taking from actual mean and

2) Deviation taken from assumed mean.


1) Actual mean:

fX

2) Assumed mean:

fd

fd )

Coefficient of variation
The standard deviation discussed so far is an absolute measure of variation. The
corresponding relative measures is known as the coefficient of variation.
C.V. =

100

Variance: the square of the standard deviation is called variance.


Symbolically, variance = ( S .D.) 2
= 2

Example of standard deviation and coefficient of variation from


ungrouped data:
Example 1 : Find out the standard deviation from the weekly wages of ten workers
working in a factory.
Worker
Weekly wages
A
1320
B
1310
C
1315
D
1322
E
1326
F
1340
G
1325
H
1321
I
1320
J
1331

Solution:

Calculation of Standard deviation


Workers
A
B
C
D
E

Weekly wages
X
1320
1310
1315
1322
1326

(X-A)=d

d2

0
-10
-5
2
6

0
100
25
4
36

F
G
H
I
J
N=10

1340
1325
1321
1320
1331

20
5
1
0
11

d 30

d )

400
25
1
0
121

712

N
N
712
30
( ) 2 =7.89
10
10

Example 2: The following table gives the fluctuations in the prices of shares a company.
Price(in price)
318
322
325
312
324
315
308
318
Calculate the mean, standard deviation and coefficient of variation.
Solution: Calculation of mean, standard deviation and coefficient of variation.
X
(X-A)=d
d2
318
-6
36
322
-2
4
325
1
1
312
-12
144
324
0
0
315
-9
81
308
-16
256
318
-6
36
2
X= 2542
d 30
d 712
Solution: X

N
2542
8

= 317.75

d )

N
N
558
50 2
(
) = 5.54
=
8
8

5.54
100
C.V. = 100 =
x
317.75

= 1.74%
Example 3: Prices of shares a company.
Price(in price)
2542
2522
2534
2532
2542
2530
2556
2530
Calculate the mean, standard deviation and coefficient of variation.
Solution: Calculation of mean, standard deviation and coefficient of variation.
X
(X-A)=d
d2
2542
0
0
2522
-20
400
2534
-6
36
2532
-10
100
2542
0
0
2530
-12
144
2556
14
196
2530
-12
144
2
X= 20292
d 46 d 1020
Solution: X

N
20292
8

= 2536.5

d )

N
N
1020
46 2
(
) = 9.72
=
8
8

9.72
100
C.V. = 100 =
x
2536.5

= 38%
Example 4: blood serum cholesterol levels of 10 persons are as under:
240, 260, 290, 245, 255, 288, 272, 263, 277, 250
Calculate standard deviation with the help of assumed mean.
Solution:
Calculate standard deviation
X
(X-A)=d
d2
240
-15
225
260
5
25
290
35
1225
245
-10
100

255
288
272
263
277
250
X=2640
Solution: X

0
33
17
8
22
-5

d 90

N
2640
10

0
1089
289
64
484
25

3526

= 264

d )

N
N
4360
136 2
(
) = 15.84
=
10
10

15.84
100
C.V. = 100 =
x
264

= 6%
Example 5: The index number of price of cotton in April 2008 was as under:
Month Jan.
Fe. March April May June
July Aug. Sep.
Cotton 188
178
173
164
172
184
184
185
211
Solution:
Calculate standard deviation
X
(X-A)=d
d2
188
16
256
178
6
36
173
1
1
164
-8
64
172
0
0
184
12
144
184
12
144
185
13
169
211
39
1521
217
45
2025
X=1856
d 136
d 2 4360

d )

N
N
4360
136 2
(
)
10
10

= 15.84

Example of standard deviation and coefficient of variation from


grouped data:

Oct.
217

Example 1 : An analysis of production rejects resulted in the following data.


No. of Rejects operator
No. of Operator
21-25
5
26-30
15
31-35
28
36-40
42
41-45
15
46-50
12
51-55
3

Solution:
Calculation of Mean and Standard deviation
No. of
Rejects
operator
20.5-25.5
25.5-30.5
30.5-35.5
35.5-40.5
40.5-45.5
45.5-50.5
50.5-55.5

m.p
X
23
28
33
38
43
48
53

Let

No. of
Operator
f
5
15
28
42
15
12
3
N=120

d=

fX

(X-38)/5
d

fd

fd2

-3
-2
-1
0
1
2
3

-15
-30
-28
0
15
24
9

45
60
28
0
15
48
27

N
X A
X A id
i

X X
fd

Substituting the value of

Mean:
X A

fd )

fd i

N
25
=38- 120 5 =36.96

Standard deviation:

fd

fd )

i
N
N
223
25 2
(
) 5 =6.375
120
120
2

fd 25 fd

223

Example 2: the breaking strength of 80 test pieces of a certain alloy is given in the
following table, the unit being given to the nearest thousand pounds per square inch.
Breaking strength
No. of pieces
44-46
3
46-48
24
48-50
27
50-52
21
52-54
5
Calculate the average breaking strength of the alloy and the standard deviation.
Solution:
Calculation of mean and standard deviation
Breaking
strength
44-46
46-48
48-50
50-52
52-54

No. of
pieces
3
24
27
21
5
N=80

X A

Mid point
X
45
47
49
51
53

fd i

N
1
49+ 81 2 =

fd

d= X-A/i

fd

fd2

-2
-1
0
1
2

-6
-24
0
21
10

12
24
0
21
20

fd 1

fd

77

49.025

fd )

N
N
77
1
( )2 2 =
80
80

676.5

Thus the average breaking strength of the alloy 49.025 and standard deviation 676.5
Example 3 : An association doing charity work decided to give old age pensions to
people over sixty years to age.
The scales of pensions were fixed as follows :
Age group 60 to 65---Rs. 2500 per month
Age group 65 to 70---Rs. 3000 per month
Age group 70 to 75---Rs. 3500 per month
Age group 75 to 80---Rs. 4000 per month
Age group 80 to 85---Rs. 4500 per month
The age of 25 persons who secured the pensions benefits are given bellow
75
62
84
72
83
72
81
64
71
63
61
60
61
67
74
64
79
73
75
76
69
78
66
67
68

Solution :

Calculation of Monthly average pensions and Standard deviation


Pensions
X
2500
3000
3500
4000
4500

(X-3500)/500
d
-2
-1
0
1
2

X A

fd

Fd2

7
5
6
4
3

-14
-5
0
4
6

28
5
0
4
12

fd i

N
9
=3500- 25 500 =3320

fd

fd )

i2

N
N
49
9 2
(
) 500 =676.5
25
25

Thus the monthly average pensions is Rs. 3320 and standard deviation 676.5
Example 4: Suppose that samples of polythene bags from a manufacturers are tested by a
prospective buyer for bursting pressure, with the following results:
Bursting pressure(lbs)
Number of begs
5.0-9.9
2
10.0-14.9
9
15.9-19.9
29
20.0-24.9
54
25.0-29.9
11
30.0-34.9
5
Solution:
Calculation of mean and standard deviation and C.V.
Bursting
pressure(lbs)
5.0-9.9
10.0-14.9
15.9-19.9
20.0-24.9
25.0-29.9
30.0-34.9

Number of
begs
f
2
9
29
54
11
5
N=110

Mid point

d= X-A/i

fd

fd2

X
7.45
12.45
17.45
22.45
27.45
32.45

-2
-1
0
1
2
3

-4
-9
0
54
22
15

8
9
0
54
44
45

fd 78

fd

160

X A

fd i
N

78

= 17.45+ 110 5 = 21

fd

fd )

2
i2
N
N
160
78 2
(
) 5 = 4.879
=
110
110

4.879
100
C.V. = 100 =
x
21

= 23.23%
Example 5: A purchasing agent obtained samples of 60 watt bulbs from a company. He
had the samples tested in his laboratory for length of life with the following results.
Length of life(in hours)
Samples
1700 and under 1900
10
1900 and under 2100
16
2100 and under 2300
20
2300 and under 2500
8
2500 and under 2700
6
Calculate the mean and standard deviation.

Solution:

Calculation of mean and standard deviation

Length of
life(in
hours)
1700-1900
1900-2100
2100-2300
2300-2500
2500-2700

Samples
f

Mid point
X

d= X-A/i

fd

fd2

10
16
20
8
6
N=60

1800
2000
2200
2400
2600

-2
-1
0
1
2

-20
-16
0
8
12

40
16
0
8
24

X A

fd i
N

(16)
200 = 2146.67
60
fd 2

fd ) 2 i 2

(
N
N
88
( 16) 2
(
) 200 = 236.3
=
60
60

236.3
100
C.V. = 100 =
x
2146.67

= 2200+

fd

16

fd

88

= 11%

Mathematical properties of standard deviation:


Standard deviation has some very important mathematical properties in statistical work.
1. We also can compute combined standard deviation of two or more groups.
2

N1 1 N 2 2 N 3 3 N1d1 N 2 d 2 N 3 d 3
N1 N 2 N 3

123

2. Standard deviation of natural number: The standard deviation of the natural number
can be obtained by the following formula.

1
( N 2 1)
12

3. It enables us to determine as to how far individual items in a distribution deviates from


its mean. In a symmetrical bell- shaped curve.
Mean 1 covers 68.27 observation,
Mean 2 covers 95.45 observation,
Mean 3 covers 99.73 observation.

Example of combined standard deviation


Example 1 : The number of workers employed. The mean wage per week and the S.D. in
each branch of a company are given bellow. Calculate mean wages and standerd
deviation of all the workers taken together for company.

Branch
A
B
C
Solution:

No. of worker
50
60
90
X 123

Weekly wages
1413
1420
1415

S.D.
60
70
80

N1 X 1 N 2 X 2 N 3 X 3
N1 N 2 N 3
(50 1413) (60 1420) (90 1415)
=
50 60 90
70650 85200 127350
=
200

=1416
Combined standard deviation of three branches
2

N1 1 N 2 2 N 3 3 N1d1 N 2 d 2 N 3 d 3
123
N1 N 2 N 3

d1=
d2=

X 1 X 123
X

X 123

= 1413 1416 =3
= 1420 1416 =4

d3=
123

X 123

= 1415 1416 = 1

50(60) 2 60(70) 2 90(80) 2 50(3) 2 60(4) 2 90(1) 2


50 60 70
1051500
200

=72.51

Merits of standard deviation


1. The standard deviation is the best measure of variation of its mathematical
characteristics. Because it is based on every items of the distribution.
2. It is possible to calculate the combined standard deviation of two or more
groups. This is not possible with any other measure.
3. For comparing the variability of two or more distributions coefficient of
variation is considered to be most appropriate and this measure is based on
mean and standard deviation.
4. Standard deviation is most prominently used in further statistical work.

Limitations
1. As compared to other measures it is difficult to compute.
2. It gives more weight to extreme values and less to those which are near the
mean. it is because of the fact the squares of the deviation which are big in
size would be proportionately greater than the squares of those deviations
which are comparatively small.

LORENZ CURVE
This measure of dispersion is graphical. It is known as the Lorenz curve named after Dr.
Max Lorenz. It is generally used to show the extent of concentration of income and
wealth. The steps involved in plotting the Lorenz curve are:
1. Convert a frequency distribution into a cumulative frequency table.
2. Calculate percentage for each item taking the total equal to 100.
3. Choose a suitable scale and plot the cumulative percentages of the persons and income.
Use the horizontal axis of X to depict percentages of persons and the vertical axis of Y to
depict percent ages of income.
4. Show the line of equal distribution, which will join 0 of X-axis with 100 of Yaxis.
5. The curve obtained in (3) above can now be compared with the straight line of equal
distribution obtained in (4) above. If the Lorenz curve is close to the line of equal
distribution, then it implies that the dispersion is much less. If, on the contrary, the
Lorenz curve is farther away from the line of equal distribution, it implies that the
dispersion is considerable.
The Lorenz curve is a simple graphical device to show the disparities of distribution
in any phenomenon. It is, used in business and economics to represent inequalities in
income, wealth, production, savings, and so on.
Figure 1: shows two Lorenz curves by way of illustration. The straight line AB is a
line of equal distribution, whereas AEB shows complete inequality. Curve ACB and

curve ADB are the Lorenz curves.

F
Figure 1: Lorenz Curve

Which measure of variation to use


Unlike the measures of central tendency, in case of measures of variation also the
question arises which measures to use. The choice of a suitable measure depends on the
following factors:
1. The types of data available. If observation are few in numbers, or contain extreme
values, avoid the standard deviation. If they are generally skewed, avoid the mean
deviation as well. If they are gaps around the quartiles, the quartiles deviation
should be avoided. If there are open-end classes, the quartiles measures of
variation should be preferred.
2. the purpose of investigation. In an elementary treatment of statistical series in
which a measures of variability is desired only for itself, any of the three
measures, namely. Range, quartile deviation, and average deviation, would be
acceptable. Probably the average deviation would be superior.