DEFINE CENTRAL TENDENCY

A measure of central tendency is a single value that attempts to describe a set of data by identifying the central
position within that set of data.

WHAT ARE REQUISITES (ESSENTIALS) OF A GOOD MEASURE OF CENTRAL TENDENCY:

1. It should be rigidly defined.
2. It should be simple to understand & easy to calculate.
3.It should be based upon all values of given data.
4.It should be capable of further mathematical treatment.
5.It should have sampling stability.
6.It should be not be unduly affected by extreme values.

EXPLAIN VARIOUS METHODS (measures) OF CENTRAL TENDENCY

1. Mean
2. Mode
3. Median

DEFINE MEAN? WHAT ARE THE MERITS & DEMERITS OF MEAN.

Arithmetic Mean: It is the most common type of measures of central tendency.
It is obtained by dividing the sum of all observation in a series by the total number of observation.
The mean is the arithmetic average of all the observations in the data.
Merits of Arithmetic Mean:
1. Easy to calculate
2. Based on all observations
3. Capable of further mathematical calculations.
4. It is rigidly defined.
5. It is easy to understand & easy to calculate.
6. It is based upon all values of the given data.
7. It is capable of further mathematical treatment.
8. It is not much affected by sampling fluctuations.

Demerits:
1. Affected by extreme values.
2. Cannot be calculated in open-end series.
3. Cannot be graphically determined.
4. Sometimes misleading or absurd result
5. It cannot be calculated if any observations are missing.
6. It cannot be calculated for the data with open end classes.
7. It may be number which is not present in the data.
8. It can be calculated for the data representing qualitative characteristic.

DEFINE MEDIAN:
The point or the value which divides the data into two equal parts., or when the data is arranged in
numerical order. The median is the middle value of an ordered set of data.
Merits of Median
1. It is rigidly defined.
2. It is easy to understand & easy to calculate.
3. It is not affected by extreme values.
4. Even if extreme values are not known median can be calculated.
5. It can be located just by inspection in many cases.
6. It can be located graphically.
7. It is not much affected by sampling fluctuations.
8. It can be calculated for data based on ordinal scale

Demerits:
1. Not based on all observations.
2. It requires arrangement of data.
3. Not capable o further algebraic treatment.

DEFINE MODE
The Mode is simply the most frequently occurring observation ( score )in a distribution. The Mode is the most
frequently occurring value in a set of values.

DEFINE QUARTILE:
The values of the variate which divide the total frequency into four equal parts are called quartiles.

DEFINE DECIBLES
The values of the variate which divide the total frequency into ten equal parts are called deciles.

DEFINE PERCENTILES
The values of the variate which divide the total frequency into hundred equal parts, arte called
percentiles

DEFINE S.D
Standard deviation is a measure of the dispersion of a set of data from its mean..
Standard deviation (or S.D.) is the positive square root of the arithmetic mean of the square
deviations of various values from their arithmetic mean M.

DEFINE VARIANCE
The average of the squared differences from the Mean.

Define probability
It refers to “the chances of occurrence of an event among a large number of possibilities”

Define Random Experiment:

If an experiment or trial is repeated under the same conditions for any number of times and it is possible to
know the number of outcomes is called as “Random Experiment”.

Define Sample Space:

The set of all possible outcomes of a random experiment is known as “Sample Space” and denoted by set S.

Define Event:
An ‘event’ is an outcome of a trial meeting a specified set of conditions

Define Exhaustive Events:

The total number of all possible elementary outcomes in a random experiment is known as‘exhaustive events’.

Define Mutually Exclusive Events:

Events are said to be ‘mutually exclusive’ if the occurrence of an event totally prevents occurrence of all other
events in a trial.

Define Equally likely or Equi-probable Events:

Outcomes are said to be ‘equally likely’ if there is no reason to expect one outcome to occur in preference to
another. i.e., among all exhaustive outcomes, each of them has equal chance of occurrence.

Define Independent Events:

Two or more events are said to be ‘independent’, in a series of a trials if the outcome of one event is does not
affect the outcome of the other event or vise versa.
Example: When a coin is tossed twice, the result of the second toss will in no way be affected by the
result of the first toss.

Explain Bayes’ theorem (alternatively Bayes’ law or Bayes' rule)

It describes the probability of an event, based on prior(before) knowledge of conditions that might be related
to the event. It can be seen as a way of understanding how the probability that a theory is true is affected by a
new piece of evidence
For example, if cancer is related to age, then, using Bayes’ theorem, a person’s age can be used to more
accurately assess the probability that they have cancer, compared to the assessment of the probability of
cancer made without knowledge of the person's age.

Definition: coorelation
Correlation is the degree of inter-relatedness(relationship) among the two or more variables.
Correlation analysis is a process to find out the degree of relationship between two or more variables by
applying various statistical tools and techniques
It defines how two variables are closely related with each other …
In a distribution if the change in one variable effects a change in the other variable, the variable are said to be
correlated(or there is a correlation between the variables)
Explain Types of Correlation:
The important ways of classifying the correlation are:
1. Positive and Negative
2. Simple , Partial and Multiple
3. Linear and non-Linear.

Positive correlation:If two related variables are such that when one increases (decreases), the other also
increases (decreases).
if one variable is increasing and with its impact on average other variable is also increasing that will be
positive correlation.

Negative correlatioIf two variables are such that when one increases (decreases), the other decreases
(increases) . if one variable is increasing and with its impact on average other variable is also decreasing

Simple correlation
Correlation is said to be simple when only two variables are analyzed.
For example :
Correlation is said to be simple when it is done between demand and supply or we can say income and
expenditure etc

Partial correlation :
When three or more variables are considered for analysis but only two influencing variables are studied and
rest influencing variables are kept constant.
For example :
Correlation analysis is done with demand, supply and income. Where income is kept constant.

Multiple correlation :
In case of multiple correlation three or more variables are studied simultaneously.
For example :
Rainfall, production of rice and price of rice are studied simultaneously will be known are multiple correlation

Linear correlation :
If the change in amount of one variable tends to make changes in amount of other variable bearing constant
changing ratio it is said to be linear correlation

Non linear correlation

If the change in amount of one variable tends to make changes in amount of other variable but not bearing
constant changing ratio it is said to be non - linear correlation.

Define decision making

Decision theory deals with methods for determining the optimal course of action when a number of
alternatives are available and their consequences cannot be forecast with certainty.
In general, the process of making decisions calls for (i) identifying the alternatives, (ii) gathering all the relevant
information about them, and (iii)selecting the best alternative on the basis of some criterion.
The decision theory, also called the decision analysis, is used to determine optimal strategies
where a decision-maker is faced with several decision alternatives and an uncertain, or
risky, pattern of future events. To recapitulate, all decision-making situations are characterized by the fact that
two or more alternative courses of action are available to the decision-maker to choose f r o m . F u r t h e r , a
d e c i s i o n m a y b e d e f i n e d a s t h e s e l e c t i o n b y t h e d e c i s i o n - m a k e r o f a n a c t , considered
to be best according to some pre -designated standard, from among the available options.

STEPS OF DECISION MAKING PROCESS

The decision making process involves the following steps:
1. Identify and define the problem.
2. Listing of all possible future events, called states of nature, which can occur in the context of the decision
problem. Such events are not under the control of decision-maker because these are erratic in nature.
3. Identification of all the courses of action (alternatives or decision choices) which are available to the
decision-maker. The decision-maker has control over these courses of action
4. Expressing the payoffs (Pij) resulting from each pair of course of action and state of nature. These payoffs are
normally expressed in a monetary value.
5. Apply an appropriate mathematical decision theory model to select best course of action from the given list
on the basis of some criterion (measure of effectiveness) that results in the optimal (desired) payoff

EXPLAIN VARIOUS TYPES OF DECISION-MAKING ENVIRONMENT

Type 1 Decision-Making under Certainty
Type 2 Decision-Making under Risk
TYPE 3 DECISION-MAKING UNDER UNCERTAINTY
Type 1 Decision-Making under Certainty
 The process of choosing an act or strategy when the state of nature is completely known, is called decision
making under certainty.
 The decision-maker has the complete knowledge (perfect information) of consequence of every decision
choice (course of action or alternative) with certainty.
 Obviously, he will select an alternative that yields the largest return (payoff) for the known future (state of
nature). In such situation, each act will only result in one event and the outcome of the act can be
predetermined with certainty. Hence, such situations are also termed as deterministic situations.
 For example, the decision to purchase either National Saving Certificate(NSC); Indira Vikas Patra, or deposit
in National Saving Scheme (NSS) is one in which it is reasonable to assume complete information about the
future because there is no doubt that the Indian government will pay the interest when it is due and the
principal at maturity. In this decision-model, only one possible state of nature (future) exists.

Type 2 Decision-Making under Risk

 In this case the decision-maker has less than complete knowledge with certainty of the consequence of
every decision choice (course of action) because it is not definitely known which outcome will occur.
 This means there is more than one state of nature (future) and for which he makes an assumption of the
probability with which each state of nature will occur.
 In many cases the decision-maker may, on the basis of his experience and judgement, be able to assign
subjective probabilities to the various outcomes. The problem can then be solved as decision problem
under risk. Under conditions of risk, the most popular decision criterions for evaluating the alternative is the
expected monetary value/expected opportunity loss of the expected payoff
 For example, probability of getting head in the toss of a coin is 0.5.
 Decision-making under risk is a probabilistic decision situation, in which more than one state of nature
exists and the decision-maker has sufficient information to assign probability values to the likely occurrence
of each of these states. The probabilities of various outcomes may be determined objectively from the past
data.
 Knowing the probability distribution of the states of nature, the best decision is to select that course of
action which has the largest expected payoff value.
 The expected (average) payoff of an alternative is the sum of all possible payoffs of that alternative
weighted by the probabilities of those payoffs occurring. However, past records may not be available to
arrive bathe objective probabilities.
TYPE 3 DECISION-MAKING UNDER UNCERTAINTY
 In such situations, the decision-maker has no idea at all as to which of the possible states of nature would
occur nor has he a reason to believe why a given state is more, or less, likely to occur as another. With
probabilities of the various outcomes unknown, the actual decisions are based on specific criteria
 In this case the decision-maker is unable to specify the probabilities with which the various states of nature
(futures) will occur.
 The decision situations where there is no way in which the decision-maker can assess the probabilities of
the various states of nature are called decisions under uncertainty.

DEFINE DECISION TREE

 Basically, it is a picture of all the possible courses of action and the consequent possible outcomes. A box is
used to indicate the point at which a decision must be made, and the branches going out from the box
indicate the alternatives under consideration.
 A decision tree is a decision support tool that uses a tree-like graph or model of decisions and their
possible consequences, including chance event outcomes, resource costs, and utility. it is one way to
display an algorithm.
 A schematic graphical representation of the available alternatives and their possible consequences.
 In some cases, the choice of the optimal act is not made in one stage, and the decision problem involves a
sequence (not necessarily in time) of acts, events, acts, events, etc. There may be a number of basic
alternatives, each leading to one of a number of situations depending on the outcome of a certain
random process. At each such situation, a number of other alternatives may be available which also lead to
a new set of situations depending on another set of events...and so on, with acts followed by events,
followed by acts, events, etc. The sequence of acts and events may be depicted in the form of a decision
tree.
 Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a
strategy most likely to reach a goal. Another use of decision trees is as a descriptive means for calculating
conditional probabilities.
 Decision tree is a very effective device in making decisions in various diversified problems relating to
personnel, investment, portfolios, project management, new project strategies, etc.

WHAT ARE ADVANTAGES & DISADVANTAGES OF DECISION THEORY

ADVANTAGES
 It structures the decision process
 will make understanding easier.
 It’s a planning tool
 it helps in various field & sectors
 it helps to examine all possible outcome
 it easy to make decision by seeing decision tree
 we can predict initial decision & outcomes
DISADVANTAGES
 If more alternatives/choices it becomes difficult
 Inconsistency to apply probabilities
 Complicated when interdependent & dependent variables
 Real time problem.
 Reliability of the data

Define Linear Programming

Mathematical programming or modeling technique which is used to find the best or optimal solution to a
problem that requires a decision or set of decisions about how best to use a set of limited resources to achieve
a state goal of objectives
It is a mathematical modeling technique used to determine a level of operational activity in order to achieve an
objective.

What are ESSENTIALS OF LINEAR PROGRAMMING MODEL( read more)

1. limited resources
2. objective
3. linearity
4. homogeneity
5. divisibility

1. Limited resources : limited number of labour, material equipment and finance

2. Objective : refers to the aim to optimize (maximize the profits or minimize the costs).
3. Linearity : increase in labour input will have a proportionate increase in output.
4. Homogeneity : the products, workers' efficiency, and machines are assumed to be identical.
5. Divisibility :it is assumed that resources and products can be divided into fractions. (in case the fractions are
not possible, like production of one-third of a computer, a modification of linear programming called integer
programming can be used).

Explain the steps in formulation of LPP

Steps in Formulation of LP
• Identify the decision variables;
• Formulate the objective function; and
• Identify and formulate the constraints.

Objective function:
The objective of the problem is identified and converted into a suitable objective function. The objective
function represents the aim or goal of the system (i.e., decision variables) which has to be determined from the
problem. Generally, the objective in most cases will be either to maximize resources or profits or, to minimize
the cost or time.

Constraints:
When the availability of resources are in surplus, there will be no problem in making decisions. But in real life,
organizations normally have scarce resources within which the job has to be performed in the most effective
way. Therefore, problem situations are within confined limits in which the optimal solution to the problem must
be found.

Non-negativity constraint
Negative values of physical quantities are impossible, like producing negative number of chairs, tables, etc., so
it is necessary to include the element of non-negativity as a constraint.

What are the Advantages & disadvantages LP

 It helps decision - makers to use their productive resource effectively.
 The decision-making approach of the user becomes more objective and less subjective.
 In a production process, bottle necks may occur.

Disadvantages of LP
1. Linear programming deals with only single objective, whereas in real life situations may have
multiple and conflicting objectives
2. Not used for more decision variables or factors
3. LP is used only when constraints and objective function are linear i.e., where they can be
expressed as equations which represent straight lines.
4. Constraints or objective functions are not linear, this technique cannot be used.
5. Factors such as uncertainty and time are not taken into consideration.
6. Parameters in the model are assumed to be constant but in real life situations they are not
constants.