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BA 502

QUANTITATIVE METHODS IN BUSINESS

RHEAN T. URBIZTONDO
Student

Saturday 8:00am-2:00pm
CHAPTER 7
MEASURES OF DISPERSION

7.1 The Measures


7.2 Raw Data
7.3 Tabulated Data
7.4 Grouped Data
7.5 Relative Measures of Dispersion
7.6 Variability in sample data
7.7 Conclusions
MEASURES OF DISPERSION

OBJECTIVES

» Calculate the standard deviation for various type of data


» Determine the range and interquartile range for various
types of data
» Display variability graphically
» Understand the relative merits of the different measures
of dispersion
» Use the concept of variability to better understand survey
data
DEFINITION
Measures of location describe the central tendency of
the data. They include the mean, median and mode.
Measures of dispersion describe the spread of the data.
They include the range, interquartile range, standard
deviation and variance.
Whats the use of measures of dispersion?
In market research, for example we are interested not
only in the typical values but also in whether opinions or behaviours
are fairly consistent or vary considerably.In business processes there
exists variability: variability in service provided, quality of products
produced, delivery of time orders and so on. Most Managers would
agree that one key to success is to reduce process variability.
7.1 The Measures of Dispersion

Measures Type of Data

 Standard Deviation Raw Data


 Range Will Measure Tabulated Data
 Quartile Deviation Grouped Data
7.2 RAW DATA
Primary data that has not been processed for use

STANDARD DEVIATION
Measures the differences from the mean. It is directly
related to the mean, the two are usually quoted together.
So if you choose the mean as the most appropriate
measure of central location, then standard deviation
would be natural choice for a measure of dispersion.

Formula : √Σ( x - x )2
n
Where: x = value
x = Mean
n = total number of values
STANDARD DEVIATION
Example: First ten observations on the number of cars entering a car
park in ten minute intervals

10 22 31 9 24 27 29 9 23 12

How to compute the standard deviation:


Σx 196
1. Compute the mean x. Where x = n 10 = 19.6 cars

2. Calculate the differences from the mean ( x - x ). See next page

3. Square these differences ( x - x )2 .This will ensure that all differences


are positive. See next page

4. Sum the squared differences Σ( x - x )2


5. Average the squared differences to find the variance Σ( x - x )2 /n
6. Square root the variance to find standard deviation. √Σ( x - x )2
n
s = √Σ( x - x )2 = √ 684.40 = √ 68.44 = 8.27 cars
n 10
Example: 10 22 31 9 24 27 29 9 23 12

x ( x  x) ( x  x2)
10 -9.6 92.16
22 2.4 5.76
31 11.4 129.96
9 -10.6 112.36
24 4.4 19.36
27 7.4 54.76
29 9.4 88.36
9 -10.6 112.36
23 3.4 11.56
12 -7.6 57.76
196 684.40
RANGE
Simplest measure of spread of data. Defined as the
difference between the lowest and highest values.It
is more informative to quote the upper and lower
quartiles themselves.

Example: 10 22 31 9 24 27 29 9 23 12

The lowest value is 9 and the highest value is 31, so


the difference between them is 22.
The QUARTILE DEVIATION
also known as the semi-inter-quartile range. As a measure
of dispersion it is linked to the median. The Quartile
Deviation (QD) is: Q3 - Q1 26.25 - 9.75 16.5 = 8.25
QD = 2 2 2
Example: There are ten data value which can put
into order
Q1 = 9.75 Q2 = 22.50 Q3 = 26.25
2.75 5.5 7.75
( 9, 9, 10, 12, 22) (23, 24, 27, 29, 31 )

Q2 Median: (n+1)/2 = 10+1/2 = 5.5 = 22.50


Q1 : (n+1)/4 = 10+1/4 = 2.75 = 9.75
Q3 : (3n+1)/4 = 3(10)+1/4 = 30+1/4 = 7.75
24+(3x3/4) = 24+2.25 = 26.25
TABULATED DATA
Data that is classified into tabular form

STANDARD DEVIATION

Example: Table 7.2 The number of working days lost by


employees in the last quarter

Number of days (x) Number of Employees (f)

0 410

1 430

2 290

3 180

4 110

5 20
The Calculations are shown in Table 7.3

Table 7.3 Standard deviation from Tabulated discrete data


x f fx (x - x ) (x - x)2 f(x - x )2
0 410 0 -1.451 2.1059 863.214
1 430 430 -0.451 0.2034 87.462
2 290 580 0.549 0.3014 87.406
3 180 540 1.549 2.3994 431.892
4 110 440 2.549 6.4974 714.714
5 20 100 3.549 12.5954 251.908
Total 1440 2090 2436.596

Σfx 2090
x=
Σf x = 1440 = 1.451 days lost

s = √Σf (x- x)2 = √ 2436.596 = 1.301 days lost


n 1440
RANGE
Looking at the data in Table 7.2 it is easy to see that the
range is five with a lowest value of zero and a highest value
of five.
THE QUARTILE DEVIATION
Cumulative
x f
frequency With 1440 items of data, the lower quartile will
be the (n/4)th item, (1440/4) = 360th item. The
0 410 410
upper quartile will be the (3n/4)th item,
1 430 840 = 410 + 430
(3(1440)/4)here 1080th item. ( Note that with
grouped data we just use (n/4) rather than
2 290 1130 = 840+ 290 (n+1)/4). This Q1 = 0 and Q3 = 2.

3 180 1310=1130+180
Q3 - Q1
QD = 2
4 110 1420=1310+110

5 20 1440=1420+20 2-0
QD = 2 =1
1440
GROUPED DATA
are data that has been bundled together in categories.Histograms and frequency tables
can be used to show this type of data.

STANDARD DEVIATION
When data is presented as a grouped frequency distribution we must determine whether
it is discrete or continuous ( as this will affect the way we view the range of values) and
determine the mid-points(see Section 6.3) Once the mid-points have been determined
we proceed as before using mid-point values for x and frequencies , as shown in Table
7.4)

Number of
Midpoint: 5/2 = 2.50
Expenditure Midpoint
on food
respondents fx (x - x ) (x - x )2 f(x - x )2 10 - 2.50 = 7.50
(f) (x)

0 *but under 5 2 2.50 5.00 -16.59 275.228 550.456


5 but under 10 6 7.50 45.00 -11.59 134.328 805.968
Σfx 840
10 but under
x = n = 44 = 19.09
15
8 12.50 100.00 -6.59 43.428 347.424

15 but under
20
12 17.50 210.00 -1.59 2.528 30.336 = √Σf (x-x)2
20 but under
10 25 250.00 5.91 34.928 349.280
n
30
= 4438.632
30 but under
40
4 35 140.00 15.91 253.128 1012.512 44
40 but under = 10.04
50
2 45 90.00 25.91 671.328 1342.656

Total 44 840 4438.632


Table 7.5 The estimation of standard deviation using alternate formula

X f fx x2 fx2
2.50 2 5.00 6.25 12.50
7.50 6 45.00 56.25 337.50
12.50 8 100.00 156.25 1250.00
17.50 12 210.00 306.25 3675.00
25.00 10 250.00 625.00 6250.00
35.00 4 140.00 1225.00 4900.00
45.00 2 90.00 2025.00 4050.00
44 840.00 20,475.00

s = Σfx2 - Σfx 2 = 20475- 840 2 = 10.04


Σf Σf 44 44
RANGE
Theres a problem when using Range for grouped data. By the nature
of grouping,most data is left with open ended groups as the first and
last. This makes the range a much less useful measure of spread for
THE QUARTILE DEVIATION
Table 6.7 The determination of the median

Number of Cumulative Frequency


Expenditure on food
respondents (f) (F)
Under 5 2 2
5 but under 10 6 8
10 but under 15 8 16
22nd observation
15 but under 20
12 28
5 intervals
20 but under 30 10 38
30 but under 40 4 42
40 or more 2 44
44

Q2= n/2 = 44/2 = 22nd observation.


n/2 - F 44/2 - 16
median = l + i f = 15 + 5 12 = 17.50
Expenditure on Number of Cumulative
food respondents (f) Frequency (F)
Under 5 2 2
5 but under 10 6 8
10 but under 15 8 16 11th observation
15 but under 20 12 28
20 but under 30 10 38 33rd observation
30 but under 40 4 42
40 or more 2 44
44
Quartile range:
Q3 - Q1
Q1 (n x 1/4) = 44 x 1/4 =11th observation. 25 - 11.88 = 13.12
Q3 (n x 3/4) = 44 x 3/4 = 33rd observation.
To calculate the quartiles we adapt the median formula: Quartile Deviation:
i ( n/4 - F) 44/4 - 8 3 = 13.12
Q1 = l + f = 10 + 5 8 = 10+5 8 = 11.8 2

i ( n x 3/4 - F) 44 x 3/4 - 28 5 = 6.26


Q3 = l + f = 20 +10 10 = 20+10 10 = 25
End of the Report

THANK YOU!!!!!
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