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You are on page 1of 45

Chapter Three

McGraw-

3- 2

GOALS When you have completed this chapter, you will be able to: ONE

Chapter Three

Calculate the arithmetic mean, median, mode, weighted mean, and the geometric mean. TWO Explain the characteristics, uses, advantages, and disadvantages of each measure of location. THREE Identify the position of the arithmetic mean, median, and mode for both a symmetrical and a skewed distribution.

Goals

3- 3

Compute and interpret the range, the mean deviation, the variance, and the standard deviation of ungrouped data. FIVE Explain the characteristics, uses, advantages, and disadvantages of each measure of dispersion. SIX Understand Chebyshevs theorem and the Empirical Rule as they relate to a set of observations.

Goals

3- 4

The Arithmetic Mean is the most widely used measure of location and shows the central value of the data.

It

v e r a J o e

requires the interval scale. All values are used. It is unique. The sum of the deviations from the mean is 0.

Characteristics of the Mean

For ungrouped data, the Population Mean is the sum of all the population values divided by the total number of population values:

3- 5

X =

N

where is the population mean N is the total number of observations. X is a particular value. indicates the operation of adding.

Population Mean

A Parameter is a measurable characteristic of a population. The Kiers family owns four cars. The following is the current mileage on each of the four cars. 56,000 42,000 23,000 73,000

3- 6

X =

N

Example 1

3- 7

For ungrouped data, the sample mean is the sum of all the sample values divided by the number of sample values:

X X = n

where n is the total number of values in the sample.

Sample Mean

A sample of five executives received the following bonus last year ($000):

3- 8

Example 2

Every

3- 9

mean.

All A

The

The

arithmetic mean is the only measure of location where the sum of the deviations of each value from the mean is zero.

Properties of the Arithmetic Mean

3- 10

Consider the set of values: 3, 8, and 4. The mean is 5. Illustrating the fifth property

( X X ) = [ (3 5) + (8 5) + (4 5)] = 0

Example 3

3- 11

The Weighted Mean of a set of numbers X1, X2, ..., Xn, with corresponding weights w1, w2, ...,wn, is computed from the following formula:

( w1 X 1 + w2 X 2 + ... + wn X n ) Xw = ( w1 + w2 + ...wn )

Weighted Mean

3- 12

During a one hour period on a hot Saturday afternoon cabana boy Chris served fifty drinks. He sold five drinks for $0.50, fifteen for $0.75, fifteen for $0.90, and fifteen for $1.10. Compute the weighted mean of the price of the drinks.

Example 4

3- 13

The Median is the midpoint of the values after they have been ordered from the smallest to the largest.

There are as many values above the median as below it in the data array.

For an even set of values, the median will be the arithmetic average of the two middle numbers and is found at the (n+1)/2 ranked observation.

The Median

3- 14

The ages for a sample of five college students are: 21, 25, 19, 20, 22. Arranging the data in ascending order gives: 19, 20, 21, 22, 25. Thus the median is 21.

The median (continued)

3- 15

The heights of four basketball players, in inches, are: 76, 73, 80, 75. Arranging the data in ascending order gives:

Thus the median is 75.5.

Example 5

3- 16

There It

is not affected by extremely large or small values and is therefore a valuable measure of location when such values occur.

It

It

can be computed for an open-ended frequency distribution if the median does not lie in an open-ended class.

Properties of the Median

3- 17

The Mode is another measure of location and represents the value of the observation that appears most frequently.

93, 84, 75, 68, 87, 81, 75, 81, 87. Because the score of 81 occurs the most often, it is the mode. Data can have more than one mode. If it has two modes, it is referred to as bimodal, three modes, trimodal, and the like.

The Mode: Example 6

Symmetric distribution:

3- 18

Skewed distribution:

One whose shapes on either side of the center differ; a nonsymmetrical distribution.

The Relative Positions of the Mean, Median, and Mode

Zero skewness

3- 19

M M M

e a n e d o d i a n e

The Relative Positions of the Mean, Median, and Mode: Symmetric Distribution

Positively skewed: Mean and median are to the right of the mode. Mean>Median>Mode

3- 20

o d Me M e d

e a n i a n

The Relative Positions of the Mean, Median, and Mode: Right Skewed Distribution

3- 21

Negatively Skewed: Mean and Median are to the left of the Mode.

Mean<Median<Mode

e a Mn M e d

o d e i a n

The Relative Positions of the Mean, Median, and Mode: Left Skewed Distribution

3- 22

The Geometric Mean (GM) of a set of n numbers is defined as the nth root of the product of the n numbers. The formula is:

GM = n ( X 1)( X 2 )( X 3)...( Xn )

The geometric mean is used to average percents, indexes, and relatives.

Geometric Mean

3- 23

The interest rate on three bonds were 5, 21, and 4 percent. The arithmetic mean is (5+21+4)/3 =10.0. The geometric mean is

GM = 3 (5)( 21 )( 4) = 7.49

The GM gives a more conservative profit figure because it is not heavily weighted by the rate of 21percent.

Example 7

3- 24

Another use of the geometric mean is to determine the percent increase in sales, production or other business or economic series from one time period to another.

GM =

n

Grow th in Sales 1999-2004 50 Sales in Millions($) 40 30 20 10 0 1999 2000 2001 2002 2003 2004 Year

3- 25

The total number of females enrolled in American colleges increased from 755,000 in 1992 to 835,000 in 2000. That is, the geometric mean rate of increase is 1.27%.

Example 8

3- 26

Dispersion

refers to the spread or variability in the data.

30 25 20 15 10 5 0 0 2 4 6 8 10 12

Measures of dispersion include the following:

Measures of Dispersion

3- 27

The following represents the current years Return on Equity of the 25 companies in an investors portfolio.

-8.1 -5.1 -3.1 -1.4 1.2 3.2 4.1 4.6 4.8 5.7 5.9 6.3 7.9 7.9 8.0 8.1 9.2 9.5 9.7 10.3 12.3 13.3 14.0 15.0 22.1

Example 9

3- 28

Mean Deviation

The arithmetic mean of the absolute values of the deviations from the arithmetic mean.

All

values are used in the calculation. It is not unduly influenced by large or small values. The absolute values are difficult to manipulate.

=X

X

Mean Deviation

3- 29

The weights of a sample of crates containing books for the bookstore (in pounds ) are: 103, 97, 101, 106, 103 Find the mean deviation. X = 102 The mean deviation is:

MD =

X X

n 1+ 5 +1+ 4 + 5 = = 2 .4 5

Example 10

3- 30

Variance:

3- 31

Not influenced by extreme values. The units are awkward, the square of the original units. All values are used in the calculation.

Population Variance

3- 32

( X )2 N

X is the value of an observation in the population m is the arithmetic mean of the population N is the number of observations in the population

3- 33

( - 8

= . 1

2

( X )2 N - +6 . ( 6 - 2 5 )2 . + 1 2 5 - . 6. . . 6+ 2 ( ) 2 2 2

=

2

. 2

==

. 4

8

Example 9 continued

3- 34

( X n - 1

2-

s= s

3- 35

The hourly wages earned by a sample of five students are: $7, $5, $11, $8, $6. Find the sample variance and standard deviation.

X 37 X = = = 7.40 n 5

2 2

s=

= 5.30 = 2.30

Example 11

3- 36

observations, the minimum proportion of the values that lie within k standard deviations of the mean is at least:

1

where

1 k

2

Chebyshevs theorem

3- 37

distribution:

About

mean

About

Virtually

mean

Interpretation and Uses of the Standard Deviation

3- 38

3 2 1 + 1 + 2 + 3

3- 39

The

Xf X = n

3- 40

A sample of ten movie theaters in a large metropolitan area tallied the total number of movies showing last week. Compute the mean number of movies showing.

frequency f 1 2 3 1 3 10

class midpoint X 2 4 6 8 10 66

(f)(X) 2 8 18 8 30

X 66 X = = = 6.6 n 10

Example 12

3- 41

n CF Median = L + 2 (i ) f

where L is the lower limit of the median class, CF is the cumulative frequency preceding the median class, f is the frequency of the median class, and i is the median class interval.

The Median of Grouped Data

3- 42

Construct a cumulative frequency distribution. Divide the total number of data values by 2. Determine which class will contain this value. For example, if n=50, 50/2 = 25, then determine which class will contain the 25th value.

3- 43

Movies showing 1 up to 3 3 up to 5 5 up to 7 7 up to 9 9 up to 11

Frequency 1 2 3 1 3

Cumulative Frequency 1 3 6 7 10

Example 12 continued

3- 44

Example 12 continued

3- 45

The Mode for grouped data is approximated by the midpoint of the class with the largest class frequency.

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