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Statistics for Business

and Economics
Anderson
Sweeney
Williams
Slides by

John Loucks
St. Edwards University
2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Chapter 3, Part A
Descriptive Statistics: Numerical
Measures

Measures of Location
Measures of Variability

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Measures of Location

Mean

Median
Mode

If the measures are computed


for data from a sample,
they are called sample statistics.
Percentiles
If the measures are computed
Quartiles
for data from a population,
they are called population parameters.
A sample statistic is referred to
as the point estimator of the
corresponding population parameter.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Mean

Perhaps the most important measure of


location is the mean.
The mean provides a measure of central
location.
The
mean of a data set is the average of all
the data values.
x
The sample mean
is the point estimator of
the population mean .

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Mean x

Sum of the values


of the n observations

n
Number of
observations
in the sample

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Population Mean

Sum of the values


of the N observations

N
Number of
observations in
the population

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Mean
Example: Apartment Rents
Seventy efficiency apartments were
randomly
sampled in a small college town. The
monthly rent
445 615 430 590 435 600 460 600 440 615
prices for these apartments are listed below.
440
465
450
600
570
510

440
450
470
485
515
575

440
525
490
580
450
490

525
450
472
470
445
435

425
450
475
490
525
600

445
460
475
500
535
435

575
435
500
549
475
445

445
460
480
500
550
435

450
465
570
500
480
430

450
480
465
480
510
440

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
7
or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Mean
Example: Apartment Rents
x

34,356

490.80
n
70
i

445
440
465
450
600
570
510

615
440
450
470
485
515
575

430
440
525
490
580
450
490

590
525
450
472
470
445
435

435
425
450
475
490
525
600

600
445
460
475
500
535
435

460
575
435
500
549
475
445

600
445
460
480
500
550
435

440
450
465
570
500
480
430

615
450
480
465
480
510
440

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
8
or duplicated, or posted to a publicly accessible website, in whole or in part.

Median
The median of a data set is the value in the middle
when the data items are arranged in ascending order.
Whenever a data set has extreme values, the median
is the preferred measure of central location.
The median is the measure of location most often
reported for annual income and property value data.
A few extremely large incomes or property values
can inflate the mean.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
9
or duplicated, or posted to a publicly accessible website, in whole or in part.

Median
For an odd number of observations:
26 18 27 12 14 27 19 7 observations
12 14 18 19 26 27 27 in ascending order
the median is the middle value.
Median = 19

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Median
For an even number of observations:
26 18 27 12 14 27 30 19 8 observations
12 14 18 19 26 27 27 30 in ascending order
the median is the average of the middle two values.
Median = (19 + 26)/2 = 22.5

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Median
Example: Apartment Rents
Averaging the 35th and 36th data values:
Median = (475 + 475)/2 = 475
425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

Note: Data is in ascending order.


2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
12
or duplicated, or posted to a publicly accessible website, in whole or in part.

Trimmed Mean
Another measure, sometimes used when extreme
values are present, is the trimmed mean.
It is obtained by deleting a percentage of the
smallest and largest values from a data set and then
computing the mean of the remaining values.
For example, the 5% trimmed mean is obtained by
removing the smallest 5% and the largest 5% of the
data values and then computing the mean of the
remaining values.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
13
or duplicated, or posted to a publicly accessible website, in whole or in part.

Mode
The mode of a data set is the value that occurs with
greatest frequency.
The greatest frequency can occur at two or more
different values.
If the data have exactly two modes, the data are
bimodal.
If the data have more than two modes, the data are
multimodal.
Caution: If the data are bimodal or multimodal,
Excels MODE function will incorrectly identify a
single mode.
2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Mode
Example: Apartment Rents
450 occurred most frequently (7 times)
Mode = 450
425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

Note: Data is in ascending order.


2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
15
or duplicated, or posted to a publicly accessible website, in whole or in part.

Percentiles
A percentile provides information about how the
data are spread over the interval from the smallest
value to the largest value.
Admission test scores for colleges and universities
are frequently reported in terms of percentiles.

The pth percentile of a data set is a value such


that at least p percent of the items take on this
value or less and at least (100 - p) percent of the
items take on this value or more.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
16
or duplicated, or posted to a publicly accessible website, in whole or in part.

Percentiles
Arrange the data in ascending order.
Compute index i, the position of the pth percentile.
i = (p/100)n
If i is not an integer, round up. The p th percentile
is the value in the i th position.
If i is an integer, the p th percentile is the average
of the values in positions i and i +1.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
17
or duplicated, or posted to a publicly accessible website, in whole or in part.

80th Percentile
Example: Apartment Rents
i = (p/100)n = (80/100)70 = 56
Averaging the 56th and 57th data values:
80th Percentile = (535 + 549)/2 = 542
425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

Note: Data is in ascending order.


2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
18
or duplicated, or posted to a publicly accessible website, in whole or in part.

80th Percentile
Example: Apartment Rents
At least 80% of the
items take on a
value of 542 or less.

At least 20% of the


items take on a
value of 542 or more.

56/70 = .8 or 80%

14/70 = .2 or 20%

425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
19
or duplicated, or posted to a publicly accessible website, in whole or in part.

Quartiles
Quartiles are specific percentiles.
First Quartile = 25th Percentile
Second Quartile = 50th Percentile = Median
Third Quartile = 75th Percentile

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Third Quartile
Example: Apartment Rents
Third quartile = 75th percentile
i = (p/100)n = (75/100)70 = 52.5 = 53
Third quartile = 525
425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

Note: Data is in ascending order.


2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
21
or duplicated, or posted to a publicly accessible website, in whole or in part.

Measures of Variability
It is often desirable to consider measures of variability
(dispersion), as well as measures of location.
For example, in choosing supplier A or supplier B we
might consider not only the average delivery time for
each, but also the variability in delivery time for each.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Measures of Variability
Range
Interquartile Range
Variance
Standard Deviation
Coefficient of Variation

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
23
or duplicated, or posted to a publicly accessible website, in whole or in part.

Range
The range of a data set is the difference between the
largest and smallest data values.
It is the simplest measure of variability.
It is very sensitive to the smallest and largest data
values.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Range
Example: Apartment Rents
Range = largest value - smallest value
Range = 615 - 425 = 190
425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

Note: Data is in ascending order.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
25
or duplicated, or posted to a publicly accessible website, in whole or in part.

Interquartile Range
The interquartile range of a data set is the difference
between the third quartile and the first quartile.
It is the range for the middle 50% of the data.
It overcomes the sensitivity to extreme data values.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Interquartile Range
Example: Apartment Rents
3rd Quartile (Q3) = 525
1st Quartile (Q1) = 445
Interquartile Range = Q3 - Q1 = 525 - 445 = 80
425
440
450
465
480
510
575

430
440
450
470
485
515
575

430
440
450
470
490
525
580

435
445
450
472
490
525
590

435
445
450
475
490
525
600

435
445
460
475
500
535
600

435
445
460
475
500
549
600

435
445
460
480
500
550
600

440
450
465
480
500
570
615

440
450
465
480
510
570
615

Note: Data is in ascending order.


2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
27
or duplicated, or posted to a publicly accessible website, in whole or in part.

Variance
The variance is a measure of variability that utilizes
all the data.
It is based on the difference between the value of
each observation (xi) and the meanx( for a sample,
for a population).
The variance is useful in comparing the variability
of two or more variables.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
28
or duplicated, or posted to a publicly accessible website, in whole or in part.

Variance
The variance is the average of the squared
differences between each data value and the mean.
The variance is computed as follows:
2
(
x

x
)

i
s2
n 1

for a
sample

( xi ) 2

N
2

for a
population

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
29
or duplicated, or posted to a publicly accessible website, in whole or in part.

Standard Deviation
The standard deviation of a data set is the positive
square root of the variance.
It is measured in the same units as the data, making
it more easily interpreted than the variance.

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Standard Deviation
The standard deviation is computed as follows:

s s2

for a
sample

for a
population

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
31
or duplicated, or posted to a publicly accessible website, in whole or in part.

Coefficient of Variation
The coefficient of variation indicates how large the
standard deviation is in relation to the mean.
The coefficient of variation is computed as follows:

100 %
x

100 %

for a
sample

for a
population

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

Sample Variance, Standard Deviation,


And Coefficient of Variation
Example: Apartment Rents

Variance

Standard Deviation

2
(
x

x
)
s2 i

n 1

2,996.16

s s2 2996.16

54.74

Coefficient of Variation
54.74
s

100
%

100
%

490.80

the
standard
deviation is
about 11%
of the
mean

11.15%

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.

End of Chapter 3, Part A

2011 Cengage Learning. All Rights Reserved. May not be scanned, copied Slide
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or duplicated, or posted to a publicly accessible website, in whole or in part.