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BUSINESS MATHEMATICS means Quantitative Techniques

Quantitative Techniques are divided into two parts 1. Statistical Techniques 1. 2. 2. Operations research Techniques.

Statistical Techniques
Measures of central tendency Measures of Dispersion Skewness and kurtosis Correlation and Regression Testing of hypotheses Probability and distributions Sample distributions Etc.

Statistics
The plural sense means some sort of statistical data.For ex. Statistics of students of a college include the no. of students,male and female, married and unmarried, undergraduate and graduate. The singular sense means the statistical method which includes collection,classification,analysis and interpretation of a numerical data.

Different types of data


Qualitative-measures the quality.ex. Beauty,Honesty,Intellegency etc. Quantitative- measures the quantity.Ex.Height,Weight,Marks,Rainf all etc. Discrete in the form of integers only.Ex. Size of shoes, No of accidents etc. Continuous- in the form of integers or nonintegers. Ex. Marks,Height, Weight etc.

Different types of data


Primary data- Original data collected specifically for a current research. This data can be collected by observation, or questionnaire method which can be conducted through personal interview, by mail or telephone. Secondary data- When the data was not collected by the investigator but is derived from other sources is a secondary data. Data which is primary in the hands of one become secondary in the hands of another.

Classification
Exclusive classes- Where upper limit is excluded from the class.Ex. 10-20,2030,30-40,etc. Inclusive classes- Where upper limit is included in the class. Ex. 10-19,20-39,4059.etc. Inclusive classes can be converted into exclusive by adding 0.5 in the upper limit and by subtracting 0.5 from the lower limit.

Classification
Size of the class is the difference between two consecutive upper or lower limits. Class mark means the midpoint of the class.or = (u.l. + l.l.)/2 Frequency of the class- is the number belonging in that class. L.T.C.F.- addition of frequencies from top to bottom. G.T.C.F.- addition of frequencies from bottom to top.

Requirments of good measure of central tendency.


It should be easy to calculate and understand. It should be based on all the observations It should be useful for further analysis. It should be present in the data. It should not be affected by extreme values.

Measures of central tendency


This is the tendency of the data values to gather at the central part . Different measures of central tendency are Mean Median Mode G.M. H.M. Weighted mean etc

Arithmetic mean
Calculation for Raw data- Mean = X /n where X are the data values and n are the no. of values.Ex. Sale of umbrella in rainy season in a shop for 4 months is 315, 400, 450, and 285. Then the average sale of umbrella in the season is 1450/4= 362.5 = 363 Can X take negative or zero value?

Arithmetic mean
Discrete data = xf / f where x are the data values having frequencies f. Ex. X: 1 2 3 4 5 6 7 f: 5 9 12 17 14 10 6 Here f = 73 xf = 299 Mean = 299/73 = 4.09 units Note : If no. of customers and sales is given ,which is x and which is f ?

Arithmetic mean
Continuous data Mean = xf / f where x are the midpoints of the classes and f are the frequencies.Ex. Marks 0-10 10-20 20-30 30-40 40-50 Students 16 22 31 21 10 Here x 5 15 25 35 45 Also xf = 2370 f = 100 Mean = 2370/100 = 23.70 marks.

Exceptiopnal cases
In continuous data If the classes are inclusive convert into exclusive. If the classification is of cumulative type convert into ordinary . If the classes are of unequal size keep as it is. If the classed are of open end type mean cannot be calculated directly without assumption.

Properties of mean
The sum of deviations of x values from the mean is always equal to zero. i.e. ( x- mean) = 0 The sum of the squares of the deviations of x values taken from its mean is always less than the deviations taken by any other value. i.e. (x- mean ) 2 < (x- A ) 2 where A is any other value.

Properties of mean
Mean is affected by change of origin and scale.i.e. data mean 1. 10,20,30,40,50(original) 30 . 2. 12,22,32,42,52 (+2) 32. 3. 8,18,28,38,48 ( -2) 28. 4. 30 60 90 120 150 (x 2) 90. 5. 5,10,15,20,25 (/2) 15

Combined Mean
If the data is divided into two groups as below Group 1 2 Number N1 N2 Mean X Y Combined mean=(N1*X)+(N2*Y)/ N1+N2

Combined Mean
If the data is divided into three groups as below Group 1 2 3 Number N1 N2 N3 Mean X Y Z Combined mean (N1*X)+(N2*Y)+(N3*Z)/N1+N2+N3

Combined Mean
Problem The average salary of male employees in a firm was Rs. 520 and that of females was 420. The mean salary of all the employees was Rs. 500. Find the percentage of male and female employees. Solution: Here x = 520, Y= 420 Combined mean = 500, N1 + N2= 100 % of Male= 80, % of female = 20.

Weighted Mean
In calculating mean all values are equally important. But sometimes some values are more important than others and their importance can be measured in the form of weights. Marks(x) 35 45 55 60 25 Out of(w)50 50 75 100 50 Weighted mean = (XW) / W =47.31

Merits and Demerits of Mean


Merits It is easy to calculate and to understand It is useful for further analysis It is based on all the data values. Demerits It cannot be calculated for open end classes It is not present in the data. It is affected by extreme values.

Step deviation method


For large values this method is used. Find mean. Classes 0-8 8-16 16-24 24-32 F 8 7 16 24 Classes 32-40 40-48 F 15 7

Step deviation method


classes 0-8
8-16 16-24

f 8
7

x 4
12

U=(x-A)/h -2
-1

fu -16
-7 0

16 20 = A 0

24-32
32-40 40-48 total

24 28
15 36 7 77 44

1
2 3

24
30 21 52

Step deviation method


Mean = A + hx fu / f = 20 + 8 x 52/77 = 25.40 units By direct method Mean = xf / f = 1956/77 = 25.40 units

Exceptional cases
Find the average age . Age(yrs) Below 10 20 30 40 50 60 Persons 15 33 54 80 97 100 Note: Prepare ordinary table as Age 0-10 10-20 20-30 30-40 Persons 15 18 21 26 Age 40-50 50-60 Persons 17 3 Use the formula for mean.

Exceptional cases
Find the average no. of units produced in the factory Here the given units are in inclusive form to convert into exclusive as 49.5-99.5,99.5149.5 ,..etc. the frequencies remains the same.

No. of units factories 50-99 100-149 4 9

150-199
200-249 250-298

11
15 12

300-349
350-399

8
2

Median
Definition: This is the middle value of the arranged data.(either in ascending or descending) Raw data Ex. The marks of 7 students are as below 43,30,44,67,35,40,59 The median is not 67 but 43units How?

Median for raw data


What is the median marks of 16,19,27,10,5,7,12,15 ? Here the values are even so middle value is not a single but there are two middle values Hence median for arranged data 5,7,10,12,15,16,19,27 is the average of the two middle values = (12+15)/2 = 13.5 units

Median for discrete data


Steps 1. Find L.T.C.F. 2. Find f =N 3. Calculate N/2 if N is even 4. Calculate (N+1)/2 ..if N is odd 5. Observe the l.t.c.f. value which is just greater than N/2. 6. Corresponding value of X is the median.

Median for discrete data


Ex. Calculate the median of..> Here N= 112 (N is even) N/2 = 56 L.t.c.f which is just greater than 56 is 64 .see the table> Corresponding X is =30 Hence the median is 30

X 15 20 25 30 35 40 45 50

f 7 15 19 23 20 15 8 5

l.t.c.f. 7 22 41 64 84 99 107 112

Median for Continuous data


Steps: 1. Find L.T.C.F. 2. Find f =N 3. Calculate N/2 (strictly for N even or odd) 4. Observe the l.t.c.f. value which is just greater than N/2. 5. Corresponding class is the median class. 6. Use the formula Median = L1 + [ h x (n/2 c.f. )] / f Where L1 = Lower limit of the median class h = the size of the median class c.f. = the l.t.c.f before the median class f = the ordinary frequency of the median class.

Example
Find median age. Here N/2 = 50 C.f. > 50 is 70 Median class =50-65 Median =L1+ [ h(n/2 c.f.)] /f =50+[15(50-38)]/32 =50+180/32 = 55.625 yrs= 56 yrs.

Age(yrs) Below 35

Persons 20 l.t.c.f 20

35-50 50-65 65-80 Above 80

18 32 18 12

38 70 88 100

Partition values
Quartiles/Deciles/Percentiles If the data is divided into 4 equal parts each part is called a quartile. Three quartiles are denoted as Q1, Q2,and Q3.Q2 is nothing but the median. For continuous data Q1 and Q3 are Q1= L1 + [ h x (n/4 c.f. )] / f Q3 = L1 + [ h x (3n/4 c.f. )] / f where Quartile classes are different

Deciles
If the data is divided into 10 equal parts each part is called a decile. There are 9 deciles. For continuous data deciles are calculated as D1 =L1 + [ h x (n/10 c.f. )] / f D2 =L1 + [ h x (2n/10 c.f. )] / f D3=L1 + [ h x (3n/10 c.f. )] / f. D5 is nothing but the median

Percentile
If the data is divided into 100 equal parts each part is called a percentile. There are 99 percentiles. For continuous data percentiles are calculated as P1 =L1 + [ h x (n/100 c.f. )] / f P35 =L1 + [ h x (35n/100 c.f. )] / f P78=L1 + [ h x (78n/100 c.f. )] / f. P50 is nothing but the median.

Merits and Demerits of median


Merits 1. It is easy to understand and to calculate 2.It can be calculated for open end classes 3.It is always present in the data. 4.It is not affected by extreme values. Demerits 1. It is not based on all the values. 2 It is not useful for further analysis. 3. If the data is of unequal size it is not a good representative measure.

Mode
Definition It is the most frequent value of the data or the value which repeats maximum no. of times is called the mode. For raw ,and discrete data it can be calculated by inspection. For continuous data it can be calculated using steps. 1. Find maximum frequency. 2. The corresponding class is the modal class. 3 use the formula Mode = L1 + [ h x (f1-f0) / (2f1-f0-f2) Where f1= is the frequency of the modal class. f0 = is the frequency before the modal class f2= is the frequency after the modal class

Example
Calculate the model wage of the data Here maximum frequency = 36 Model class400-500 f1= 36,f0=26, f2=20,h=100,L1=400 Mode L1 + [ h x (f1-f0) / (2f1-f0-f2) =400+100(36-26)/26 =438.46 Rs.

Wages(Rs) 200-300 300-400 400-500 500-600

Employees 15 26 36 20

600-700
Total

10
107

Merits and Demerits of mode


Merits 1. It is easy to understand and to calculate 2.It can be calculated for open end classes 3.It is always present in the data. Demerits 1. It is not based on all the values. 2 It is not useful for further analysis. 3. If the data is having two maximum frequencies the regular method fails.

Problem
The net profits earned by 100 companies for one year are as under: Calculate Q1,median,D4 and P60 and interpret their values. Net Profit (Rs.in lakh) 20-30 30-40 40-50 50-60 60-70 70-80 80-90 90-100 No. of Companies 5 5 7 12 19 31 29 60 16 76 9 85 8 93 7 100

Solution
To find Q1 N/4=25,c.f.>25 is 31,Q1 class=40-50 Q1=L1 + [ h x (n/4 c.f. )] / f = 40+[10x(25-12)]/19=46.84 units To find Q2 N/2=50,c.f.>50 is 60,Q2class=50-60 Q2=L1 + [ h x (n/2 c.f. )] / f 50+[10x(50-31)]/29 =56.55 units

Solution
To calculate D4 4N/10=40,c.f.>40 is 60,D4class=50-60 D4 =L1 + [ h x (4N/10 c.f. )] / f =50+ [10x(40-31)]/29 = 53.10 units To calculate P60 60N/100= 60,c.f.>60 is 76, P60 class= 60-70 P60 =L1 + [ h x (60N/100 c.f. )] / f =60+[10x(60-60)]/56= 60 units

Empirical relationship between mean,median and mode


Sometimes either of the mean, median or mode cannot be calculated In such a case the relationship used is (mean-mode) = 3 (mean-median)

Practice problem
From the data below find 1)The wage limits for the middle 50% of the wage earners 2)The wage limits for the middle 60% of the wage earners Which are the required values?

Daily wages 20-40 40-60 60-80 80-100 100-120 120-140 140-160 160-180 180-200

employees 8 12 20 30 40 35 18 7 5

Measures of Dispersion
Dispersion is the difference or deviation. The measures which measures the difference are called measures of dispersion. These are of two typesof measures of dispersion 1.Absolute 2. Relative Absolute measures are with units ,relative measures are without units. Absolute measures are used for single type of data while relative measures are used for comparison.

Types of measures of dispersion


Absolute measures are 1) Range 2)Quartile deviatio(Q.D.) 3) Mean Deviation(M.D.) 4) Standard Deviation(S.D.) Relative measures are 1) Coefficient of Range(COR) 2)Coefficient of Quartile deviation(COQD) 3)Coefficient of Mean Deviation(COMD) 4)Coefficient of Standard Deviation(COSD)

Range
It is defined as r= XH XL Where XH = Highest value, XL= Lowest value

Coefficient of Range = (XH

XL)/ (XH + XL)

Range is the rough measure of dispersion It is not based on all the values It needs only two extreme values. Not a good representative of the data In problems like temperature, rainfall, price of gold, price of share particularly range is useful..

Quartile Deviation(Q.D)
It is defined as Q.D. = (Q3 Q1)/2 C.O.Q.D. = (Q3 Q1)/ (Q3 + Q1) Where Q1 is the first quartile Q3 is the third quartile. Q.D. is based on 50% values. Q.D. is better than range Q.D. neglects first 25% and last 25% values.

Problems
1.Following table gives the no. of articles produced per day bytwo groups of workers.Which of the two shows more variability? Use Q.D. Articles Work ers A B 40-44 44-48 48-52 30 40 50 25 35 70

52-56
56-60

40
40

40
30

Mean Deviation
The average difference of x values from any measure of central tendency is called the M.D. wrt that measure For raw data M.D.(mean)= (x-mean)/n M.D.(median)= (x-median)/n M.D.(mode)= (x-mode)/n Where n are the no. of values

Mean Deviation
For discrete data and continuous data M.D.(mean)= f(x-mean)/ f M.D.(median)= f(x-median)/ f M.D.(mode)= f(x-mode)/ f Where f are the no. of values Coefficient of M.D.=M.D./mean Or =M.D./median Or =M.D./mode Depends on which measure you have to use for calculation for continuous data x are the midpoints

Problem
Calculate mean deviation from mean,median and mode. Also interpret the values. Mean deviation from median is always less. Collections 10-12 12-14 14-16 16-18 Cinema houses 11 17 20 22

18-20
20-22

10
10

22-24

10

Merits and demerits of M.D.


M.D. is based on 100% values. Easy to calculate and to understand. Different measures of central tendencies according to need can be used for calculating M.D. It neglects the sign. When the data is sign sensitive M.D. cannot be useful.

Standard Deviation
For Raw data S.D.= (X-mean) 2 /n For discrete or continuous data S.D.= f(X-mean) 2 / f Where X are the midpoints of the classes for continuous data. Variance = (S.D.) 2 S.D. is denoted by Variance = 2

Additional formulaes
If the mean is not an integer For raw data S.D. = SQR[ x 2/n ( x /n ) 2 ] For discrete or continuous data S.D. = SQR[ fx 2/f (f x / f ) 2 ]

Merits and demerits of S.D.


It is based on all the values. It does not neglects the sign since squares are taken. It is useful for further analysis for finding combined s.d. It cannot be calculated for open end classes It is affected by extreme values.

Problems
Ex.-1 Calculate s.d. for the data below. Marks in a test of students (out of 20) 12,14,15,7,8,14,11,13,10,8 Ex.-2 X: 11 12 13 14 15 16 17 F: 2 4 8 12 9 8 7 Ex.-3 Classes:0-5 5-10 10-15 15-20 20-25 25-30 F: 3 5 10 12 7 3

Properties of S.D.
1. S.D. is independent on change of origin but depends on change of scale. Ex. Data s.d. 10,20,30,40,50 200 12,22,32,42,52 200 7,17,27,37,47 200 5, 10,15,20,25 50 = 200/4=1/2200

Properties of S.D.
Combined S.d. For two groups A,B N1= No. in the group A X1 = Mean of the group A 1 = s.d. of group A N2= No. in the group B X2 = Mean of the group B 2 = s.d. of group B Then the combined s.d. is 12 = SQR[N1(1 2+d1 2)+N2(2 2+d2 2)]/(N1+N2) Where d1= X1-mean d2 = X2 -mean

Relative measure of dispersion


The relative measure of s.d. is called as coefficient of variation.(c.v.) It is defined as c.v. = (s.d./mean) x 100 C.v. is mostly in percentage which is a measure used for comparison. The data with less c.v is more consistent and the data with more c.v. is more variable.

Problem
An analysis of monthly wages paid to the workers in two firms a and B gives the following results. A B No. of workers 550 650 Average monthly Wages Rs.5000 Rs. 4500 S.D. of wages Rs. 90 Rs. 120 Find 1.Which firm pays larger wage bill? 2.In which firm wages are showing more variability? 3.What is the combined mean and combined s.d. if all the workers are taken together?

Skewness and kurtosis


Skewness is asymmetry of the distribution. The distribution can be positively skewed or negatively skewed. Measures of skewness are Karl Pearsons coefficient =( Mean-Mode)/S.D. Bowleys coefficient = (Q3+Q1-2Q2)/(Q3-Q1) If mean>mode the distribution is positively skewed otherwise negatively skewed.

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