Introduction To Quantative Technique - ITM University

I n t r o d u c t i o n to
Quantitative Techniques
. . .
--
--
I T M
UNIVERSITY
ONLINE
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I n t r o d u c t i o n to Q u a n t i t a t i v e T e c h n i q u e s
Table
eBook
of Content
1.
Business Mathematics and
Statistics
1.1
Introduction
1.2
Uses of Mathematics and
1.3
Applications of Statistics
1.4
Limitations of Statistics
10
1.5
Functions of Variables
11
1.6
Progression of Series
13
1. 7
Calculus
18
1.8
Chapter Summary
28
2.
Matrices and
7
Statistics
8
9
29
Its Application
2.1
Introduction
30
2.2
Definition of Matrices
31
2.3
Basic Types of Matrices
32
2.4
Basic Operations of Matrices
35
2.5
Main Operations of Matrices: Transpose of a Matrix
44
2.6
Main Operations of Matrices:
45
2. 7
Properties of Determinant
47
2.8
Applications of Determinant
49
2. 9
Inverse of a Matrix
56
2.10
Chapter Summary
61
3.
Determinant
Measures of Central Tendency
62
3.1
Introduction
63
3.2
Central Tendency or Average
64
3.3
Objectives of Averaging
64
3.4
Characteristics of a Good Average
65
3.5
Various Measures of Central Tendency
66
3.6
Arithmetic Mean
67
3.7
Geometric Mean
77
3.8
Harmonic Mean
80
3.9
Median
81
3.10
Mode
85
3.11
Chapter Summary
89
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Page 2
Introduction to Q u a n t i t a t i v e T e c h n i q u e s
Table
eBook
of Content
4.
Measures of Dispersion
90
4.1
Introduction
4.2
Meaning
4.3
Significance of Measures of Dispersion
92
4.4
Types of Dispersion
93
4.5
Choice of a Suitable Measure of Dispersion
114
4.6
Chapter Summary
115
5.
and
91
Definition
92
116
Correlation
117
5.1
Introduction
5.2
Correlation:
5.3
Significance of Correlation
5.4
Types of Correlation
5.5
Method of F i n d i n g
5.6
Karl
5.7
Chapter Summary
Meaning and
118
Definition
119
120
Correlation
using
123
Scatter Diagram
128
Pearson's Coefficient of Correlation
133
134
6.
Rank Correlation and
Regression Analysis
135
6.1
Introduction
6. 2
Spearman's Rank Correlation
6. 3
Regression Analysis
6.4
Applications of Regression Analysis
6. 5
Types of Regression
6. 6
Obtaining
6. 7
Assumptions of Linear Regression
6.8
Coefficient of Determination
6. 9
Properties of Coefficient of Determination
6.10
M u l t i p l e Regression
6.11
Chapter Summary
136
142
142
144
144
Regression
Lines
152
153
154
157
163
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Page 3
Table
eBook
of Content
7.
Business Forecasting and Time Series Analysis
164
7.1
Introduction
165
7.2
Time Series
166
7.3
Secular Trend
167
7.4
Seasonal Variation
169
7.5
Cyclical Variation
170
7.6
Random or Irregular Variation
171
7.7
Trend
172
7.8
Mathematical
7.9
Decomposition of a Time Series
174
7.10
Analysis of Time Series
184
7.11
Coding
189
7.12
Chapter Summary
193
Concept of Probability
194
8.
Measurement Methods
Model of Time Series
173
of Time Variable
8.1
Introduction
195
8.2
Basic Terminologies
196
8.3
Definitions of Probability
198
8.4
Basics of Probability
201
8. 5
Operations of Events
205
8.6
Probability
Laws
207
8. 7
Bayes' Theorem
221
8.8
Applications of Bayes' Theorem
225
8.9
Applications of Probability
228
8.10
Chapter Summary
229
9.
Probability Distribution:
230
Binomial
9.1
Introduction
231
9.2
Basic Terminologies
232
9.3
Probability
234
9.4
Expectation and
9.5
Binomial Distribution
237
9.6
Properties and Applications of B i n o m i a l Distribution
238
9.7
Mean and Variance of Binomial Distribution
239
9.8
Fitting
242
9.9
Chapter Summary
Functions
235
Variance
a Binomial
Distribution
248
Page 4
Table
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of Content
10. Probability Distribution:
Poisson and
Normal
249
10.1
Introduction
250
10.2
Poisson
251
10.3
Applications of Poisson
10.4
Normal Distribution
257
10.5
Applications of Normal Distribution
260
10.6
Graph of Normal
260
10. 7
How to
10.8
Chapter Summary
Distribution
Find
Distribution
253
Distribution
the Area u n d e r a Normal Curve
261
268
Page
Business Mathematics
a n d Statistics
I T M
01.
Business
Mathematics a n d
eBook
Statistics
1 . 1 Introduction
Every
organization
activities.
skills
to
to
This
collect
information
analyze
ultimately
and
form.
the
and
The
huge
amount
this
information,
organization's
making
manager to
graphical
In
this
is an
they
strive
to
transformation
integral
understand
decision-making.
you
You
managers
transform
process
while
requires
long-term
the techniques of gathering
will
learn
will
also
the
operating
the
make
qualitative
various
hence
useful
lot
methods
it
is
decisions
of
scope
information
decision-making
and
and
into
steps
important
will
basics
of
of
information,
data
that
tabulation,
quantitative
mathematics
techniques
for
in
business
better and
effective
statistics in
be able to:
List the uses of mathematics and
Identify the advantages of mathematics and
List the applications of statistics
List the limitations of statistics
Recognize various functions of variables and
Describe calculus and
statistics
statistics in
business
progression of series
its fundamental operations
for every
business.
you
to
problems.
interpretation of results. T h i s chapter introduces the role of mathematics and
After reading t h i s chapter,
daily
With the requisite

effective
have
its
their interpretations.
importance
study
can
Managers
that
part of management
representation, data analysis and
chapter,
information
efficiency.
help managers to deal with short-term and
Decision
of
is useful for various levels of management.
interpret
increase
information
quantitative
generates
Page 7
Introduction to Quantitative T e c h n i q u e s
01.
Business
M a t h e m a t i c s and
eBook
Statistics
1 . 2 Uses of Mathematics and Statistics

Mathematics
skills
and
of an
and
individual.
financial
mathematical
queuing
Businesses
based
of
take
play
an
company.
statistical
theories,
time
of
also
logical
series
in the field
principles.
analysis,
They first
and
important
Modern
such
linear
rational
present
model.
algorithms,
thinking,
reasoning,
role
in
the
probability
programming,
They
strategies,
decisions
their complex
then
and
use
using
decision
theory,
systematic, and
theory,
theories
are
scientific
problems
modelling
solve
applied
also
other sciences.
various
to
use
decision
These
making
methods
accounting,
immensely
etc.
mathematical
analytical
statistical techniques facilitate rational,
by
problem-solving
operational,
organizations
as
and
of economics, social science, e n g i n ee r i n g , and
meaningful
mathematical
numerical
and
and
enhance
They
decisions
theory,
widely used
statistics
research
in
the form
techniques
them.
like
Mathematical
scientific decisions.
Advantages of Mathematics and Statistics
Mathematical
knowledge
helps
to
record
and
analyze
accounting
transactions
and
also to make financial decisions.
Mathematics
and
such as h o l d i n g
Mathematical
compound
statistics
help
in
calculation
costs, work-in-progress costs,
formulae
interest,
help
to
simplify
amortization
associated
calculations
tax
Business statistics aids in decision m a k i n g .
Statistics is useful for regular and
repetitive data.
It
of
payable,
payroll calculation,
sales forecasting, financial analysis,
cost
with
inventories
sales, distribution costs, etc.
the
schedules,
accounts a u d i t i n g , discount calculation,
of
is
simple
credit
interest,
mortgages,
etc.
used
in marketing
research,
production and operations management,
trend
analysis, etc.
Statistical
tools
distributions,
like
correlation,
regression,
help in simplifying day-to-day
probability,
binomial
and
normal
problems of functional management.
Page 8
01.
Business
Mathematics a n d
eBook
Statistics
1 . 3 Applications of Statistics
Statistics
plays
an
decision-making.
requirements
and
It
in
lot of data and
important
is
order
role
important
to
achieve
in
to
various
use
the
techniques
to
obtain
optimal
to
appropriate
desired
take decisions accordingly,
fields
results.
they
solutions.
need
facilitate
statistical
As
analysis
of
data
methods
as
per
managers
have
to
deal
to apply various statistical
Below
are
some
basic
for
the
with
methods
applications
of
statistics in an array of fields.
Statistics and State
Almost
all
countries
educational
knowledge
tabulated
use
ministry
of
the
statistical
can
type
solve
of
statistical data
decisions
can
techniques.
research,
good
The
and
be
etc.
human
only
problem
of
illiteracy
law
child
rate,
and
welfare.
education,
social
For example,
if
they
implications,
have
etc.
the
prior
well
Management
through
be
the
applied
plays a vital
statistical
resource
maintain
helps governments in better decision-making.
can
Statistics
relevant
to
business depends majorly on
taken
Statistics
the
population,
Statistics in Business and
The success of every
tools
data
department
to
in
role
systematic
financial
in
uses
application
analysis,
marketing
position
also
effective managerial decisions;
and
sales
a product,
strategize the
statistical
of
statistical
to
in
the
manage
and
market
it fulfils the
product
information
tools
forecasting,
as
these
need
of
market.
employee
performance and a p p r a i sa l .
Statistics in Business Analytics
Business
analytics
is
type
of
insights into the understanding
business
process
that
of new and emerging
applies
statistics
to
develop
new
b u s i n e s s opportunities.
Statistics in Operations Research
The
operations
solutions
to
research
complex
statistical data.
by a nation and
field
uses
problems.
This data
All
mathematical
national
and
modelling
and
organizational
helps to get clarity on the
internal and
algorithms
affairs
external
rely
to
obtain
deeply
problems faced
this helps to reach a suitable solution.
on
Page 9
01.
Business
eBook
Statistics
1 . 4 L i m i t a t i o n s of Statistics
Statistics is useful
are
applied
statistical
with
Statistics
are
it
Data
is
example,
country
in
not
a
and
Sometimes,
cannot
be
the
conclusions
implemented.
For
drawn
this
from
reason,
one
be
directly
applied
on
the
to
terms
directly
in
that
the
can
study
be
measured
quantitatively.
of qualitative
characteristics
intelligence, etc.
is
not
basis
measured
quantitatively.
of marks obtained
by
However,
students
in
an
intelligence
examination
or
the degree of intelligence.
when
from
it
when
it
relates
relates
to
statistical
an
to
the
individual
point
of
view,
measurement
item
the
of
or event as
population
masses
a
is
not
separate entity.
For
figure
but
for
it
particular
in a given year is useless.
Statistical
are
applied
intelligence
statistical
statistical,
practical
efficiency,
be studied
for ranking
be
example,
may
not
cannot
like honesty,
For
understanding.
the limitations of statistics.
can
However,
many fields but statistical solutions are appropriate only when they
proper
analys i s
must understand
in
laws are true o n l y
universally true;
coin
tossing
on
an
average.
they are true only
experiment,
expect
The conclusions obtained
under certain
50/o
head
conditions.
and
50/o
statistically
For example,
tail,
only
if
the
experiment is carried out with a fair coin.
The
most
Misuse
of
significant
statistics
limitation
may
of statistics
arise
due
to
is
that
it
incomplete
can
be
best
information
used
or
by
experts.
inappropriate
application of the techniques.
Page
10
01.
Business
Mathematics a n d
eBook
Statistics
1 . 5 Functions of Variables
Functions are a convenient way of stating
in
finance
underlying
and
economics
are
studied
relationships among
by
constructing
variables.
mathematical
Many questions
models
of
the
phenomenon.
A function expresses the relationship of one variable or a group of variables with another
variable,
by
range.
representation
between
associating
"X",
relationship
every
of
this
representing
is
causal,
is
member
the
type,
"Y
cause,
termed
as
in
the
f(X)",
and
an
domain
where
"Y",
with
"f"
unique
represents
representing
independent
variable
its
and
member
the
is
as
the
relationship
effect.
Y
in
When
termed
the
as
3.
If
values
of
dependent variable.
For
example,
different
variable
variable
values
Y are
t a b u l a r and
of
is
variable
obtained.
By
related
X
are
to
substituted
obtaining
graphical form as in
Fig.
variable
these
and
in
the
values,
is
represented
function,
the
corresponding
function
can
be
SX
expressed
in
1.sa.
-1
-2
-2
-7
2
1
-2
-
-6
-
-12
Fig.
1.Sa:
Straight Line Equation
Functions of Many Variables
A function may be of many variables, where there may
be more than one independent
variable that determines the value of a dependent variable Y.

That is, Y = f(x1, x2
...
x,)
Page
11
01.
Business M a t h e m a t i c s and
eBook
Statistics
Linear Functions
It is represented a s :
aa +
a2x2 +
a1x1 +
variables.
...
+ anXn, where ao, a1, a2 . . . an are constants and x1, x2 ... Xn are
In a two-dimensional
space,
a linear function
represents a straight
line and
is
u s u a l l y written as, Y = a + mX.
Inverse Functions
It
is
function
functions,
be
that
expresses
variables
and
it is possible to express X in terms of Y,
uniquely
determined.
equal to f inverse of Y.
This
is
denoted
by
in
opposite
directions.
In
these
so that the given value of Y and X can

1
" X = f- (Y)",
The important aspect of an
which
can
inverse function
be
read
is that
as,
is
it gives back
the o r i g i n a l value of the variable.
For example,
there is a function,
y = f(x)
= x + 3,
if x =
2 then the value of "y" can
be
obtained as follows:
y = f(x = 2) = 2 + 3 = 5
1
The inverse function of the same will be,

x = r '( y = 5)
Exponential
s -
3 = 2. Thus, r'(y)
= f- (f(x = 2 ) )
if y = 5 then,
= 2.
Function
The exponential function
is defined
independent variable.
e has a fixed
function
determine
is
x = f- (y) = y - 3,
used
to
as y
e'.
Here,
"e" is the
base, whereas, x"
is an
value, approximately 2 . 7 1 8 2 8 1 8 2 8 . The exponential
the
relation,
such
that
constant
change
in
the
independent variable causes a proportionate c h a n g e in the dependent variable.
Logarithmic Function
It
is a function
(x=a' or x=e'),
(as y =
log, x or y =
In x)
that
is the
inverse of an
exponential
so that the independent variable appears in a logarithm.
is read as y is the logarithm of x to the base "b".
So, a log
If
function
y = log bx,
is simply the inverse function
of an exponential function.
it
Page 12
01.
B u s i n e s s Mathematics a n d
Some standard
eBook
Statistics
properties of logarithmic and exponential functions are:
Logarithmic Function
In e ;
log, a
log
Exponential Function
In e ' ;
exey
; 1
= ex+y
( e')'; e''
ax; x
0
log,(h x g)
Xe=
loq,
log, (h/g)
log
1.Sa:
log, h + log, g
loq,
ex/eY=exy
log, h - log, g
x ; logb x
logb a
Table
Standard
Properties of Logarithmic and
Exponential
Functions
1 . 6 Progression of Series
Two
special
progression
types
and
of
sequence
geometric
of
numbers
progression.
formulae in accounting and
finance.
These
used
in
mathematics
sequences
Sequence and
help
to
are
arithmetic
understand
series are also a p p l i ed
various
to commercial
problems.
Sequence
a, . . .
is an
ordered
is a sequence.
value
is called
the natural
the
collection
According
term
or
of numbers or objects.
to the definite
element of the
rule of law,
sequence,
...
nth
and
a1,
a2,
a3,
a, . . . ,
"a," has a definite value,

corresponding
to any
that
value of
number "n".
A finite sequence like a,, a,, a, . . . , a, is denoted

the
For example,
element of the sequence and
is denoted
by {ar},
For example, the sequence
i ;
1,
an
2 ... ,
{-n-}
by "{a,}", i ;
1,
2 . . . , n where "a," is
infinite sequence is given as a 1, a2, a3,
00
a, . . . an
or simply by {a.}.
is 1/2, 2/3, 3/4 . . .
n+l
Page 13
01.
While a series
sum
of the
eBook
Statistics
is an expression of the type a1 + a , + a3 + a, + . . .
elements
of a
sequence
{a,},
number of elements, it is called a finite series;
1,
else,
... ,
00 .
If a
+ an +
series
. . . which
is the
contains a
finite
it is called an infinite series.
Arithmetic Progression
A sequence like a,, a,, a3 . . . , an is called an arithmetic progression, when (a, - a,)
(a3 - a,)
= ...
= (an - an-1)
abbreviated as A . P .
= d T h i s means, an arithmetic progression, which is
is a sequence in which each term is obtained
by a d d i n g a constant
"d" to the preceding term. d is the common difference of arithmetic progression.

Therefore, the n" term of an arithmetic progression is given by tn = a , +
the sum of n terms of an arithmetic progression is given by
Sn=
n (first term
Sn
=;
(n
- l)d and
(2a1 + ( n - l)d) or
+ last term)/2.
Example 0 1 :
If the fifth and twelfth term of an arithmetic progression is 14 and
35, respectively.
Find
the arithmetic progression.
Solution O 1 :
Let "a" be the first term and "d" be the common difference of arithmetic
progression.
Therefore, we can write:

For fifth term,
n = 5,
For twelfth term,
(2)
- ( 1 ) gives,
n =
7d
t s = a + 4d
1 2 , 112 = a +
14
lld
(1)
= 35
(2)
= 21
That is, d = 3
Putting the value of d in ( 1 ) gives:

a =
14 - (4
x 3)
= 2
Therefore, the required arithmetic progression is 2,
5, 8,
11
...
Page 14
01.
Business
Mathematics a n d
eBook
Statistics
Example 0 2 :
Divide 69
into three parts, which are in Arithmetic Progression
(A.P.),
such that the
product of the first two parts is 483.
Solution
02:
Let the second
part of A . P i s represented
with the differenced

(a - d )
=>
3a
+ a +
(a+
are
d)
(a
- d) and
(a
by a, then the first part and
third
part of A . P
+ d).
= 69
= 69
=> a = 23
The three parts are 23
- d,
23,
23
+ d
Since the product of first two parts is 483,

23(23
- d)
then:
= 483
483
=>
23 - d =
= 21
23
=>
23
- d
=> d =
= 21
23
- 21
= 2
Therefore, the three parts in A . P .
are 2 1 ,
23, and
25
Example 0 3 :
The first and the last term of an A . P .

terms is 7 1 7 1 .
Find
are -4 and
146,
respectively. The sum of the
the number of terms.
Solution 0 3 :
Let "n" be the number of terms in a series.

The first term of the series is a,
S, =
=>
=>
n (first term
7171
n(-4
n = 7171x2
142
+
+
-4
and the last term
is T, =
146.
last term)/2
146)/2
= 14342
=lOl
142
The number of terms in a series is
101
Page
15
01.
Business
eBook
Statistics
Example 04:
Find
the last term of the A . P . ;
Solution
0.6,
1.2,
1.8 ...
to
13 terms.
04:
The first term
is a,
= O. 6
The number of terms is n =

The common difference=
The last term t13 = a,
= 0.6
13
1.2
- 0.6
= 0.6
12d
x 0.6
12
= 0 . 6 + 7 . 2
= 7.8
Geometric Progression
If each
term
multiplier,
in
the
a sequence
sequence
is obtained
is called
The constant multiplier is called
"r"
by
multiplying
a geometric
the common
the
progression,
the
common
ratio
0-
is given as, t,
If r =
If r
= arC
then,
sequence
Common
ratio
is
-6,
18,
a( 1 - rn )
-54
.
rs
Here,
term/first term
term/second term
the
ratio
is
ar"
is
as
if "a" is the first term

in
G.P.
and
the
nth
a( rn
is given as follows:
- 1)
...
constant;
1
...
9,
this
2 7 , 81
X'
series
is
known
as
geometric
se r i e s .
Page
G.P.
and
term
r - 1
,
3
Third
... ,
is abbreviated
(-;) = -3
Another example for G. P.
Here, second
ar
by a constant
Sn
1 - r
in 2,
ar,
term
na
For example,
a,
The sum of "n" terms in G . P .
J.
1, then S, =
1, then
the
which
ratio. Therefore,
2
is
preceding
16
tn
01.
Business
Mathematics a n d
eBook
Statistics
Example 0 5 :
Which term of the progression
Solution
The n" term of G. P.
8 ...
is 256?
2-
1,
r ; 4/2
; 2, and
t,
; 256
series ; t, ; ar""
n-1
n - 1 ;
Thus,
2, 4,
05:
In the given series, a ;
256
1,
n ;
9 implies that the ninth term of the geometric progression
is 256.
Example 0 6 :
Find the sum of n terms of the series 3,
33,
333 ... , n
Solution 0 6 :
The G . P .
series is 3,
Here, a ; 3 and
r ;
33,
333
... , n
11
rn - 1
The sum of n terms of G . P .
Sn
a(
r - 1
Example 0 7 :
Find three numbers in G . P .
Solution
whose sum
is 39 and
product is 7 2 9 .
07:
a
r
Let the three numbers be
a,
ar.
a
According
to the question,
=> a' ; 729
.-.
; 9
x a x ar;
729
9
So the numbers are
r ,
9, 9r
Again
+ 9 + 9 r ; 39
Page
17
01.
Business
eBook
Statistics
.2.
+ 9r = 39 - 9
=>
.2.
+ 9r = 30
=>
=>
9 + 9r
=>
9r
c>
9r
=>
9r(r - 3)
=>
(r - 3)
= 30r
30r + 9 = O
27r - 3r +
- 3(r - 3)
(9r - 3)
r = 3,
or
= 0
= O
3
:.
9 = 0
r =
3
9
So, the numbers are
r,
9 , 9r = 3,
9,
27.
1 . 7 Calculus
In
the
present
management
techniques
to
marketing,
information technology,
fundamental
and
solve
business
scenario,
operations
in
problems.
calculus.
etc.
there
is
growing
Calculus-based
Limits,
t ec h n i q u e s
derivatives, and
Their theories
need
primarily
for
are
quantitative
widely
used
in
integration are the most
depend
on
the
idea
of limit
continuity of function.
Calculus
calculus
has
two
creates
variable.
On
main
branches:
changes
the
other
in
differential
function,
hand,
integral
with
ca l c u l u s
respect
ca l c u l u s
is
and
to
integral
unit
calculus.
change
associated
with
in
its
finding
Differential
independent
the
function
when the rate of c h a n g e is given.
Limits
Limits
give
us
the
also
"L",
as,
as f(x)
comes
then
it
nearer
can
limf(x) = L ,
of
dependent
function
"f(x)"
approach a particular value say "a".
variable tends to
is defined
value
2x.
to
be
If x is
0.
said
If x
that
w h e r e x --, a
given
values that
approaches
the
is
to
limit
be
value
of f(x)
read
are
as
approaches
f(x)
L.
x approaches
an
For example,
nearer to
and
when
0,
then
independent
a function
the
approaches
value of f(x)
some
This
is
a.
x approaches
If
number
symbolically
written
a
x-ee
value,
it
is written
as,
lim f(x) = L
,_
f(x)
Page
18
larger
01.
eBook
Statistics
Rules of Limit of a Function:
The
is
l i m i t of a sum
equal
to
(or difference) of two functions with same independent variable
the
sum
(or
difference)
of
Mathematically for two functions f(x) and

lim
{f(x) g (x)}
x-a
lim f(x) lim g (x)

x-a
g(x)
limits
of
the
two
functions.
the above rule can be explained as:
x-a
The l i m i t of the product of two functions is equal to the product of their limits.
That is,
lim {f(x)
g (x)} = lim f(x)
x-a
the
The
x-a
limit of the
quotient
lim g (x)
x-a
of two functions
is equal
to
the quotient
of their
limits,
provided the limit of the divisor is not zero.
.
That
rs,
{ f(x)}
l i rn
!im
)
(
x-a
f(x)
I'
rm
lim g(x) t
x-+a
x-a
The l i m i t of a constant is equal to that constant.
The
limit of the
n"
power of any function
is equal to the
n"
power of the
l i m i t of
the function.
That is,
Jim {f(x)}"
x-a
= ( lim f(x))"
x-a
Example 0 8 :
Find
lim
M -+ - 2
Solution
Jim
lt-+
-2
4
,- x'
2X
)
3
08:
4-x'
2x2 + x3
=
)
Jim
[(2 - xX2 + x))
4-2
x'(2+x)
lim ((2 - x))

X--4-2
x2
((2 - (-2)))
(-2)'
Page 19
01.
Business
eBook
Statistics
Example 0 9 :
Find
the value of lim
x-o
e' - e - ) .
x
Solution 0 9 :
-1-
(e'
l i rn
e-x
lJ
by a d d i n g
and
subtracting
1 in the numerator
X -+ 0
.
((e'
=l1m
- 1) - ce-
xO
-1))
1
= l i m (<e'
xO
> J - l i m (ce-
xO
>J
= 0 - 0 = 0
In certain cases,
l i m i t may have some forms as infinity;
form. The infinite form
Example
Find
.
lirn
x -+ <0
infinite
in the next example.
1- x
1- x
+
2
... +
1- x
J.
x
2
1- x
10:
L = lim [
Let,
is called
10:
the value of:
Solution
is explained
such a form
x -e ec
1- x
1- x
. . . + _x-J
3
2
1- x
1 - x
1
L =
(1 + 2 + 3 . . . + x)
lim
X .-) <0 1 - X
Since,
1, 2, 3 ... , x forms arithmetic progression series, the sum of first x natural
numbers is given as follows:
x(x + 1)
s,
1 + 2 + 3 ... + x =
2
Putting
L =
lim
this value in
lim
it becomes:
x(x + 1)
X -----Jo co 1 - X 2
L =
L,
x -e so (1 + x)(l - x)
x x(x + l)
2
lim
,__, ( 1 - x)
x -"2
Page 20
01.
_!_ lim
.!. lim
'""' ( 1 - x)
_
l
_
'""'
eBook
Statistics
_!_ _ 1
.!.x_l_
2
= _ _!_
0 - 1
lim
'""' 1 - x
1- x
Example
...
= --
1- x
1- x
11:
2
.
Evaluate
(x
Sx + 6)
l l rn
X - 2
X -+ 2
Solution
11:
When x = 2 the function becomes undefined as 2 - 2 = 0. The division by zero is not

mathematically defined.
.
S o,I
(x
x-2
x -,i, 2
lim
.
1 rm
-Sx+6)
im
(x
,..,,
3)
(x-2)(x-3)
--
x - 2
x -+ 2
2 - 3
-1
Derivative
derivative
input.
In
is
defined
finance and
as,
the
economics,
rate
the
of
change
rate
in
of change
function
is
called
with
change
marginal
or
in
the
incremental
change.
For example, the rate of change of the total cost of capital gives the m a r g i n a l cost of the
capital.
in
the
change
This
value
is due to the
of a
function
per unit change in

is
useful
in y for a small change in
in
x is
the
studying
referred
new capital
the
raised.
behavior
of
The
rate of c h a n g e
function.
to as the derivative of y, with
Thus,
the
respect to
x.
The derivative of y = f(x)
with
respect to
x is u s u a l l y denoted
by
dx
of f(x)
or f'(x)
dy
dx
The derivative of a function f(x) at point a is defined as
lim f(x) - f(a)

--,.,
= f'(a)
x - a
Page 2 1
or
01.
eBook
Statistics
There are two basic rules of differentiation:
Polynomial
o
Functions
Derivative of a constant
Let y =
N, where "N" is a constant value, then
For example, if y = 2, then
is
always
= 0 ,
= = 0
it means that the derivative of a constant
zero.
Derivative of a power function
Let y =
Nx', where N and "a" are constants, t h e n :
dy = N x
dx
= Nx
dx
= Nax-
dx
For example, if y = 2x
3,
then
dy
= (2)(3)x
1
-
= 6x
dx
Derivative of a sum
(or difference) of two or more functions
The relation is shown a s :

d
du
dv
-(UV)=-dx
dx
dx
Algebraic Functions
o
Derivative of product of two functions
Let, y = uv
Where,
f(x)
and
g(x)
are
differentiable
functions
of
x,
then:
dy
dv
du
- = U - + V dx
dx
dx
Derivative of a quotient of two functions

u
Let, y = - , v
v
Where, u = f(x) and v = g(x) are differentiable functions of x, t h e n :
du
dy
dv
v dx - u dx
==
dx
v'
Derivative of the
Let,
y =
number,
u",
where
nth
power of a function
=
f(x)
is a differentiable function
of x and
"n" is
t h e n :
Page 22
any
01.
dy = un
dx
eBook
Statistics
= nun-l u = nf(x)n-l f(x)
dx
dx
dx
Higher Order Derivatives
Derivatives of a higher order can be taken by repeating
the process. The second and

3
third derivatives are written as
f"(x)or
d ' ; , f'"(x)
or
dx
If f(x)
= l n x , then f(x)
dx
The derivatives of different functions are listed
below:
1
-
If f(x)
= e,c,>, then f'(x)
If f(x)
In g ( x ) ,
= g'(x)e'C,)
then f'(x)
g'(x)
g(x)
Some standard formulae used
For Logarithmic and
in derivative are:
Exponential
For Trigonometric Functions
Functions
d
1
-lnx = dx
x
d
- s i n x = cosx
dx
d
1
-log
x =
dx
a
xlna
-COSX=-SlnX
d
dx
.i..ex ::: ex
d t a n x = sec' x
dx
d
-ax
d
=
ax I n a
-cot x
dx
-cosec x
secx tanx
dx
d
_.!.._ eax = aeax
- se c x
dx
dx
d
-cosecx = - cosecx cotx
dx
Table
1.7a:
Standard
Formulae for Derivative
Page 23
01.
Business
Example
eBook
Statistics
12:
Find
the value of
Solution
2
+ 3xy + y = 0.
12:
Differentiating
[x' d
(y') +
with
v'
dy +2xy
respect to x :
d
(x'J] + [3x d
d
x (y) + 3y d
d
x (x)] + :
+3xdy + 3 y x l + d y
dx
(2yx
for the equation x y
+ 3xy + y = O
x y
2yx
dx
= O
= 0
dx
+ 3x + 1) dy + 2xy
+ 3y = 0
dx
dy
- (2xy
=
dx
2yx
+ 3y)
+ 3x + 1
Example 1 3 :
Find
d'y
the value of - when
Solution
Given,
13:
log [ ::
From Table
1. Sb,
Differentiating
dy
[x2J
y = log -
dx
log x
loge'
= 2 log
l o g . [ ) = log. h - log. g
both sides of y =
2 log
x - x loge
log. x'
x - x , with
= 2
log x - x
= clog. x ,
and
log. e'
= x log. e
respect to x:
= 2 - 1
dx
Again, differentiating
with
respect to x, we
have:
d y
dx
_.! ( d y )
dx
dx
_.! ( 2 x dx
)-
_.!(1)
dx
-2x-
= -
2
Page 24
01.
eBook
Statistics
Integral Calculus
The derivative of a function f(x)
That is,
ddx f(x)
by f'(x)
= f' (x)
Then, the integration of f'(x)
f f'(x)dx
is denoted
is:
= f(x) + C , where, "C" is a constant of integration and
the function f(x)
is called
the integral.
Definite Integral
If (x)
is an integral of f(x), then
( b ) - (a)
is called the definite integral of f(x),

b
between the limits "a" and "b".
It is denoted
by the symbol
f(x)dx, where, a is the
lower limit and
Some
Properties of Integration
Integration of sum or difference of functions
b is the upper limit of integral.
{f(x) g(x) )dx =
f f(x)dx
f g(x)dx
Integration by substitution
f f(g(x))g'
(x)dx =
By substituting
f f(u)du
the value of g(x)
= u,
g'(x)dx=du
the
integral can
be easily
solved.
o
Integration by parts
f f(x)g(x)dx
= f(x)f g ( x )d x -
f t'(x)(f
g(x)dx)dx
Page 25
01.
eBook
Statistics
Some standard formulae used
in integration are:
For Logarithmic and Exponential

For Trigonometric Functions
Functions
ff'
(x)dx = f(x) + C
xn+1
f x"dx
sin xdx = - cos x + C
[cos xdx , s i n x + C
=--+C
n + l
adx = a x
xn+l
f x-"dx
+ C
f tanxdx
= lsecxl + C
f secxdx
= ltanx + sec x i +
- n + l
exdx
ex +
Sin
d
x
X X = z -
sin2x
+ C
4
b'
f b" dx
Jtan
xdx
tanx- x + C
xdx
tanx + c
= In b + C
J sec
= In x + C
J cosec
J sec
Table
Example
Evaluate
, (x
xtanxdx
-cotx + C
secx + C
Formulae for Integration
3)
+
dx
+ 4x + 3
14:
3)
Standard
14:
Solution
1.7b:
xdx
(x +
x'+4x+3
dx
=J
3)
(x +
(x+l)(x+3)
dx
1-d
x
J-
= log(x + 1)
+ C
x + l
Page 26
01.
Example
15:
Evaluate
eBook
Statistics
dx
1 - sinx
Solution
15:
f
=
x 1 + sin x dx
(Multiply and divide by (1
1 - sin x
l+sinxdx
l-sin
((1
f[
f [sec'
(1
(cos
x = (1
- sin
sin x
X
+ cos
+ sinx))
x))
1,
xrx
x + sec x tan x}:lx
1
sinx
(secx = -- and t a n x = --)
cosx
- sinx)(l
cos2
- sin' x)
=fl+sinxdx
cos
+ sin x) term)
1 + sin x
cosx
secx + tanx + C
Page 27
01.
Business
eBook
Statistics
1 . 8 Chapter S u m m a r y
Mathematical and
statistical techniques facilitate
rational,
systematic, and
scientific
decisions.
Data
is statistical when
statistical when
it
relates to the measurement of masses.
it relates to an
Statistically obtained
individual
It is not
item or event as a separate entity.
conclusions are not universally true. They are only true u n d e r
certain conditions.
Statistics has many applications in the fields of business management, economics,

physical, and
natural sciences.
A function expresses the relationship of one variable or a group of variables with

another variable,
by associating
every member in the domain with a u n i q u e
member in the range.
An ordered
According
term
collection of numbers
like
a1, a , a3, a4 . . . , an
2
is a sequence.
to definite rule of law there is a definite value of a,, which
is called
the
or element of the sequence and corresponds to any value of the natural
number n.
A sequence like
a2 - a 1
a1, a2, a3, a4 . . . , an
a3 - a2
= ... =
an - an-1
is called an arithmetic progression,
d , where d
when
is the common difference of
arithmetic progression.
If each term
in a sequence is obtained
constant m u l t i p l i e r ,
abbreviated
the sequence is called
a geometric progression,
by a
which
is
as G. P.
Derivative is defined
as the rate of change in function with change in the i n p u t .
Thus, derivative of a function f(x)

gives f(x).
by multiplying the preceding term
is denoted
Therefore, derivative and
by f'(x), w h i l e by
integration are reversible
integrating
f'(x)
processes.
Page 28
Matrices a n d
Its A p p l i c a t i o n
I T M
02.
Matrices a n d
eBook
Its Application
2 . 1 Introduction
Knowledge
of
mathematics.
industrial
the total
matrices
It
is
has
used
management.
been
in
For
found
genetics,
example,
to
be
of
economics,
in
an
great
utility
sociology,
industrial
in
many
modern
scenario,
requirement of materials for a particular product and
psychology,
matrix
then,
branches
is
used
t
o
of
and
find
give a solution for
the best possible cost-effective option.
In
the
real
world,
problems
Mathematical operations and

using
the
matrix algebra.
can
be
more
results can
The
complex
and
be expressed
involve
more
in elegant and
use of matrices makes the solution
than
two
factors.
compact forms
of a system
of
by
linear
equations easier to find.
This
chapter
introduces
the
systematic
and
compact
arrangement
of
numerical
information in the form of matrices.
After reading this chapter, you will be able to:
Define
matrices
Identify types of matrices
Describe the basic operations of matrices
E x p l a i n main operations of matrices: Transpose and
State properties of determinant
State applications of determinant
Compute Inverse of a Matrix
www. itmu niversityonline.o rg
Determinant
Page 30
02.
M a t r i c e s and
eBook
2 . 2 Definition of Matrices
A matrix can
be defined
arrangement.
formation
along
presentation
as an ordered
matrix
"m"
is
rows
system
and
is called an "rn
by
"n"
set of numbers
of
"m
columns
n"
in
a predefined
numbers
bounded
by
arranged
a
bracket
two-dimensional
in
[].
rectangular
This
type
of
n" matrix, which is written as "rnx n" matrix.
a,2
A =
Here, the numbers in a matrix

element of subscript
compact
form,
2, . . . m and j
etc.
The
indicates a
the above
1,
2, ... n.
index
notation
shows
placed.
T h is
the
to
and
notation
is
amn
and
are called
the
second
represented
by
its entries or elements. The first
element
Am x n
indicates a column.
or A
by capital
[a,1];
where,
letters
like A,
is
designate
the
lower
used
in
ii'"
index
element
indicates
"Tensor
is
"a",
the
Analysis".
where
column
the
where
Sometimes,
super
A =
[8
1,
B,
C,
the
(upper)
element
braces
{}
parentheses () are also used to denote matrices.
For example,
In
s m a l l letters represent elements of the matrix.
used
row
matrix
row
. . . ,
Matrices as a whole, are denoted
while corresponding
other
a11,a12
3]
9 3]
Alternatively, it can be written as
A=[;
Page 3 1
is
and
02.
Matrices a n d
Example
eBook
01:
Construct a 3 x 4 matrix, whose elements are a,
= 2i
- j.
Solution O 1 :
The general 3 x 4
We have, a,1
a
a
11
12
matrix is g i v e n
2i
- j,
1,
2,
by
A=[::
::
a31
a32
1,
3, 4
3 and j
2,
= 2(1) - 1 = 1
= 2(1) - 2 = 0
a13
=2(1)-3=-1
a14
= 2(1) - 4 = -2
a21 = 2(2) - 1 = 3
a22
a23
= 2(2) - 3 = 1
2(2) - 2
a24 = 2(2) - 4 = 0
Similarly,
Therefore,
31
= 5, a
32
= 4, a
the required
33
= 3, a
matrix is:
= 2.
34
A=[
-l
-{]
2 . 3 Basic Types of Matrices

There are a number of different types of matrices.
the
matrix
classifies
them.
Classification
The
also depends
number of columns and

on
the entries.
rows
The following
in
are
the different kinds of matrices:
Row Matrix or Vector
A matrix
matrix
can
For
having
only one
is of the orderl x n .
be expressed
example,
[2
as:
row and
number of columns
It consists of a single row,
A = [a
11
6]
any
and
[3
12
13
4]
is called
a row
with elements along
matrix.
n columns.
It
14]
are
row
matrices
of
order
1x3
and
respectively.
A row
Page 32
1x4,
02.
M a t r i c e s and
Column
eBook
Matrix or Vector
A matrix having
any n u m b e r of rows and
order
matrix
of the
mx 1
and
only one column
consisting
of
single
is called
column,
a column matrix.
with
elements
It is
along
rows.
a11
a21
For example,
A column
as:
{a11
it can
matrix
be expressed as
A =
is usually expressed
a 21
by writing
the elements horizontally,
within
braces
amd
5
2
For example,
is a column matrix of order 4 x 1
4
6
Square
A matrix
mxn
Matrix or Vector
having
an equal
matrix, for which
number of rows and
m =
n,
that is,
columns
number of r o w s =
is
known as a square matrix.
number of c o l u m n s ,
An
is a square
matrix.
For example,
A=
Zero
A =
[!
is a square matrix of order 2 x 2
41
-2
- 7
is a square matrix of order 3 x 3
Matrix or Null
Matrix
If all the elements of a matrix are zero,
then such a matrix
is called
a zero matrix or n u l l
matrix.
For example,
A =
is a zero or n u l l matrix of order 3 x 2
Page 33
02.
Matrices a n d
Diagonal
In
Matrix
square
diagonal
eBook
matrix,
matrix.
This
[a,j].
matrix
If
all
the
consists
non-diagonal
of top-left to
elements
bottom-right
are
zero,
then
or top-right
to
it
is
bottom
left diagonals.
T h i s matrix is written as
o
ol
3
0
Scalar Matrix
If in a diagonal matrix,
equal,
then
all
non-diagonal elements are zero and
it is a scalar matrix. That
For example,
is,
11
= a
22
= . . . = am,
] i s a scalar matrix of order 3 x 3
all d i a g o n a l elements are
= b
and a,1
= 0, for all i
j.
1{
The
matrices
and
1:1
]are
scalar
matrices
of
order
one
and
2x2
and
3x3,
11
respectively.
Identity
square
Matrix or Unit Matrix
matrix,
in
elements are zero,
is termed
is a scalar quantity)
For example,
I,
upper
is called
= [
Upper Triangular
A square
which
matrix,
triangular
triangular matrix,
all
as an
diagonal
identity
matrix.
are
A scalar matrix
is denoted
all
with
non-diagonal
1 (where k
k =
by "I,".
Matrix
all of whose elements

matrix.
if a,1
A = [
elements
a u n i t or identity matrix and
Alternatively,
O for all
a13
For example,
the
:i:
a23
below the
a
square
leading
matrix
diagonal are zero,

A
[a,j]
is
is called
called
an
i > j.
l
is an upper t r i a n g u l a r matrix.
a,,
Page 34
an
upper
02.
M a t r i c e s and
Lower Triangular
A square
eBook
matrix,
Matrix
all
of whose elements above the
lower t r i a n g u l a r matrix.
Square
matrix
[a,i]
leading
is called
diagonal
are zero,
is called
lower t r i a n g u l a r matrix,
if a,1
= O f o r a l l i < j .
0
For example,
-5
] is a lower triangular matrix.
2.4 Basic Operations of Matrices

There
are
number
of
operations
that
can
be
applied
to
modify
matrices.
The
basic
operations are:
Addition of matrices
Subtraction of matrices
Multiplication of a matrix by a scalar
Multiplication of matrices
Addition of Matrices
If "A" and
"B" are two
matrices of the same order,
the matrix where each element
is the sum
mathematical terms,
[a,i]
for all
The
and
of the corresponding
B =
[b,1 1,
then A +
B",
is defined
elements of A and
B =
[a,1]
[b,i]
number
of
B.
[a,1 +
as
In
b,11,
i and j.
definition
That is,
Then,
when A =
then their s u m , "A
of
addition
of
matrices
can
if there are three matrices, A +
be
extended
to
finite
matrices.
B + C.
A + B + C = ( A + B ) + C
Familiar
[a11 +
b1Jl
[a, +
1
b,1 + c,i]
properties
commutative,
if,
Then, A +
[a,1 +
B =
=
of
=
[C11]
numbers
[a11]
and
extend
B
[b11]
to
these
are
operations
matrices
of
the
of
matrices.
same
order,
Addition
say,
b;j]
[b,1 + a,1]
= B + A
Page 35
is
mxn.
02.
Matrices a n d
For example,
eBook
Its Application
A = [:
and
B = [!
A+B=[:
]+[!
]=[:::
B + A = [ !
]+[:
]-[!::
:]=[190
:]-[ 1 9 0
!]
!]
. . A + B = B + A
Suppose for any three matrices A =

Then,
(A+
B) + C = [a,J + b1Jl
B = [b1Jl, and C=
[C1Jl, each of order m x n :
+ [c,j]
[a1J + b1J + C1J]
[a1J]
= A +
[a1Jl,
+ [ b1J + C1J]
(B
+ C)
From the above explanation, the addition is associative, that is, the matrix sum does not
depend on the order of the matrix.
Zero is the "additive identity" for matrix addition.
is the matrix of order m x n and O is an m x n zero matrix, then A +
Example
Add
A =
O = O + A.
01:
the following:
3
-2
6
5
-3
OJ
3
, B =
l-2
7
Solution O 1 :
Adding two matrices, A and
-2)
A + B =
6 + 1
0+4]
5 + 2
3+3
-3+(-4)
2 + 1
- 2 + 7
[3+(
3 + 4
A+B=l
_;7
Page 36
If A
02.
M a t r i c e s and
eBook
Subtraction of Matrices
If A =
[a,i]
and
B =
are two matrices of the same order,
m x n , then the difference of
D, where, D = [d1il-
A - B =
In other words,
That is,
[b,il
D = A - B = A +
(-1)
the sum of the matrix A and
B.
matrix - B .
Example 0 2 :
-1
I f A = 4
[1
2]
5 , B = S
- 1
Then, verify A +
(B - C)
- 3]
(A+
[4
, and
C ;
B)
- C
Solution 0 2 :
A +
(B
- C)
[;
3+(-3)
4 + 5
[
2+0
A + (B - C) = [
(A+
B)
:1
- 1
- C =
[[
Page 37
02.
Matrices a n d
eBook
Its Application
- 1 + 2
[[3 + 1
4 +S
2 + 1
1
2 + (-3)]]
[4
5+2
- 0
2 + 0
0+(-1)
3 + 1
3
-2
1 - 1
-1-2]
[4-4
9 - 0
2 - 3
7 - 2
3 - 1
-1-(-2)
4-3
0
(A+ B)- C
- 1
= [
-t] ..................................
(2)
Therefore, from equation ( 1 ) and
(2), A +
(B - C)
= (A+
B)
- C
Multiplication of a Matrix by a Scalar
If a
matrix
which
is
multiplied
is a real
number.
by
scalar
Therefore,
( n u l l matrix), the following
quantity,
kA =
[kaq],
then
each
element
is
multiplied
For conformable matrices A,
B,
by
C, and
laws of ordinary algebra are satisfied.
Commutative
Associative
Distributive
Identity
Law
Law
Law
Law
A + B = B + A
Example
Find x and
A +
(B+C)
= (A+B)
+ C
k(A + B) =
kA +
kB
A + Z = A
03:
v,
if,
x + y = [
and
x - y = [
Solution 0 3 :
We have,
x + y = [
and
x - y = [
A d d i n g two matrices
1;
2x = [
X = [
(Divide both the side by 2)
"k",
Page 38
02.
M a t r i c e s and
eBook
Putting the value of x in the first matrix
] + y = [;
y = [;
]-[
= [
] = [
= [
Multiplication of Matrices
Multiplication
of two
matrices
is defined
only
is the same as the number of rows of the
if the
number of columns
of the
left matrix
right matrix.
The multiplication of matrices follows the given steps

Step
1:
compatibility
Step
2:
operations of multiplication
Let there
B =
[b,1]
of B.
is,
be two matrices, A and

is defined
Therefore,
only
the
if the
number of columns of A are
matrices A and
if A is of the order m x p and
m x n matrix;
B. The product AB of the two matrices A = [a
where,
C =
[c,i]
B are
compatible,
B i s of the order
for i =
pxn,
equal to
with
the
respect
then the
to
j]
and
number of rows
product AB.
product A B =
C,
That
which
is
1, 2, 3, . . . m and j = 1, 2, 3, . . . n, and c,1 is given by:

p
c;i
a,1b1i
+ a; 2 b 2 i + . . . + a;pbpi
L a;kbki
k=l
So, to construct the element
row
of
with
the
c,,
of the matrix product AB,
multiply the elements of the i'"
of
the
i'"
running
the
left
right finger to
run
down the i" column of the matrix
corresponding
elements
column
of
B.
The
sum
of
these
products gives the elements of AB.
The
product can
A and,
Then,
be easily computed
simultaneously,
multiply
the
using
the
elements
in
by
the
corresponding
index finger across the
position
and
add
the
;'"
row of
successive
products.
For example,
if A = [a
11
a21
a,
a22
13]
a23
and
2x3
B =
b11
b,2
b21
b22
[b
b
31
32
B.
3x2
Page 39
eBook
02. Matrices a n d Its A p p l i c a t i o n
b12
b22
l
w i l l be a 2 x 2 matrix
b32
Let,
A B = [c,,
C21
c12]
C22
2x2
Where,
c11 =
(1'' row of AJ
x (1'' column of BJ
= a11b11 + a12b21 + a13b31
c12 =
( 1 " row of A)
x (2"' column of BJ
= au b12 + a12b22 + a13b32
c21 =
(2"' row of A)
x ( 1 " column of B)
c22 =
(2"'
x (2"' c o l u m n of B)
row of A)
= a 21 b 11 + a 22 b21 + a 23 b 31
= a 2 1 b 1 2 + a 22 b 22 + a
Matrix multiplication also satisfies the following
23b32
properties, where A,
B,
and
Care
matrices.
Associative
Distributive
Identity
Multiplicative
Law
Law
Law
Inverse
A (BC)
In general,
A ( B + C)
(AB)C
matrix multiplication
= AB
+ AC
A I =
IA
AA-
is not commutative, that is, A B *
= A- A = I
BA.
2
For example,
if A =
!] ::
and
B = [-\
-o
-1
Page 40
02.
M a t r i c e s and
eBook
[o
[o
21[-:1]
[1
AB=
21[:o:J
[1
3][-:1]
[2
3][o:J
[2
41[-:1]
4][o:J
[Oxl+lx(-1)+2x2
AB=
Ox(-2)+1x0+2x(-1)]
lx1+2x(-1)+3x2
lx(-2)+2x0+3x(-1)
2x1+3x(-1)+4x2
2x(-2)+3x0+4x(-1)
[3
=
- 2]
-5
-8
Another example for matrix multiplication
If,
A =
- 2
1
AB=
[3
1]
and
B =
114
2]
-2
-4
[4
2]
-4
3 x 4 + l x 3 + l x 2
3x6+lxO+lx(-4)
3 x 2 + l x l + l x 3
2x4+(-2)x3+4x2
2x6+(-2)x0+4x(-4)
2x2+(-2)xl+4x3
Sx6+2x0+7x(-4)
S x 2 + 2 x 1 + 7 x 3
[
S x 4 + 2 x 3 + 7 x 2
1 2 + 3 + 2
18+0+(-4)
6 + 1 + 3 ]
8+(-6)+8
12+0+(-16)
4+(-2)+12
30+0+(-28)
10+2+21
[17
14
10]
10
-4
14
40
33
[
20+6+14
Page 4 1
02.
Matrices a n d
Example
Its Application
eBook
04:
- 4
Find the value of x and
y,
if
Solution 04:
First, find the product of the
4
[-
2
3
- 3
left matrices.
312]
[- 4 x 2 + 2 x x + 3 x 5 ]
5 X =
5 x 2 + 3 x x + S x 5
1
2 x 2 + (-3) x x + 1 x 5
8+2x+15]
=
10+3x+25
[-
4 - 3x + 5
Equate the resultant matrix with the right matrix.
i: :: : !] = [;s]
[
4 - 3x + 5
-8+2x+15= 9
=> 2x = 9 - 7
=>
x = 1
4-3x+5= y
=> 4 - 3 x 1 + 5
[Substituting the value of x]
=> 9 - 3 = y
=> y = 6
:. x = 1 and
y = 6
Page 42
02.
M a t r i c e s and
eBook
Example 0 5 :
florist
wants
combination
flower used
of
to
roses
First bouquet
of
price
carnations
of
(CJ,
two
types
and
lilies
of
bouquets.
(LJ.
The
Each
numbers
bouquet
of each
type
SJ
each
rose
is
4,
each
carnation
is
2.50,
and
each
lily
is
5.
Use
a
of
matrix
multiplication to determine how much shall each bouquet cost.
Solution 0 5 :
The matrix for the cost of each flower
4 ]
Cost=
is
[6
Second b o u q u e t
cost
(RJ,
the
in the two bouquets are shown in the following matrix.

R
The
decide
Rose(RJ
2.5
Carnation(CJ
Lily (LJ
The flowers cost matrix is of ( 3 x t )
The matrix for the n u m b e r of flowers in each bouquet

R
First bouquet
[6
SJ
The above matrix is of ( 2 x 3 J
The cost for the two bouquets is calculated
4
First bouquet
Second b o u q u e t [ a
4J
2. 5
First bouquet
Rose (RJ
t(CJ
arna
ion
Lily (L)
First bouquet
by multiplication of matrices as follows:
[6x4 + 7 x 2 . 5 + SxSJ
8x4 + 6 x 2 . 5 + 4x5
[66.SJ
67
Thus, the cost of the first bouquet is 66. 5 and that of the second
bouquet is 67.
Page 43
02.
Matrices a n d
eBook
Its Application
2 . 5 M a i n Operations of M a t r i c e s :
A matrix obtained
matrix" and
Suppose,
Transpose of a Matrix
by the interchange of rows and columns is known as a "transpose of a
is denoted
by A'.
A=[::
::
::]
a31
a32
a 33
After interchanging the rows and columns,
it is represented as:
A'=[::
a13
For example,
Therefore,
A'
A=[
= [
Some Special
Matrices:
Symmetric Matrix
The
square
Therefore,
is,
[ a,il
matrix
A is a "symmetric matrix" if
interchanging
transpose
is the
same
matrix.
columns does not change the matrix form, that
[a,,].
For example,
A =
6]
rows and
its
[5
and
A'=
3 6]
are symmetric matrices.
Skew Symmetric Matrix
The matrix A is a "skew

is
the
[a,1]
same
+ [a1
,J
as
the
(j,
symmetric" if [a,
1]
i)'"
element
with
= -[a1,]
the
sign
where,
the (i, j)
changed.
From
1"
element of A
the
definition,
= O. The diagonal elements of skew symmetric matrix are zero.
- 4 3]
For example,
A = [
-3
-5
is a skew symmetric matrix.
Page 44
02.
M a t r i c e s and
eBook
2 . 6 M a i n Operations of M a t r i c e s :
The
value
then
of a
matrix
is
represented
its determinant is denoted
using
a determinant.
by "det A" or "IAI" and
If A
is
square
matrix,
is written as:
eaa
21
Also,
by
Determinant
det of A is
defined
represented
by the symbol "t, ",
Note that the determinant can only
be
for a square matrix.
Determinant of Second Order
If there are two equations in two variables, X and Y
a,x
+ b1Y;
(1)
a,x
+ b,Y;
(2)
Then,
the
:. det A ;
coefficient
matrix
(matrix
formed
by
the coefficient
of
variables)
is
given
by,
IAI;
The det A is called
"second order determinant."
Determinant of Third
Order
Suppose there are three equations having three u n k n o w n variables,
X, Y, and
Z, as:
a1X+b1Y+c1Z=0
a2X + b2 Y + c2Z ; 0
a3X + b
Y + c Z ; 0
3
From the above equations, the determinant of the third order can
a1
11 ; a,
a3
The
c1
c2
b3
C3
value
of
be written as:
the
determinant
of
the
third
order
can
be
found
by
expanding
determinant along the first row.
b2
c2
- b, a2
c2
a2
b2
a3
b3
+ C1
t,., = a1
b3
C3
a3
C3
Page 45
the
02.
Matrices a n d
eBook
Where, A 1, A2, and A3 are known as the cofactors of a . ,
Determinants are of the following
b 1, and
c1,
respectively.
types:
Ortho Symmetric Determinants
If every element of the

from
the
diagonal
leading
are
equal,
diagonal
then
is the same and
the
determinant
the e q u i d i s t a n t elements
is
said
to
be
an
"ortho
symmetric determinant."
For example,
Skew Symmetric Determinants
If the elements of a leading

to
its
conjugate
with
the
diagonal are all zero and
sign
changed,
the
every other element
determinant
is
said
to
be
is equal
a
"skew
symmetric determinant."
For example,
Singular and
Square
-h
-g
- f
Non-singular Matrices
matrix
A is
non-singular when
said
IAI
to
be
a "singular
matrix" when
IAJ
O and
it
is
known
as
;< 0 .
3
For example,
is singular as
= 6 - 6 = 0
In addition,
if
[!
is
non-singular as
I =
15 - 12 = 3 ,
which
equal t o o .
Page 46
is
not
02.
M a t r i c e s and
eBook
2 . 7 Properties of Determinant
If
rows
(or
columns)
are
interchanged
into
columns
(or
rows),
the
value
of
determinant remains the same.
For example,
a1
b1
c1
ll = a2
b2
c2
a3
b3
C3
After expanding along the first row:

ll = a 1 ( b
= a b2c
1
- b
) - b1(a
-a
) + c1(a
-a
- a b 3 c 2 - b1a2c
+ b a c2 + c a2b
1
3
1
3
1
3
= a1b2c3
a 1 b 3 c 2 + c1a2b3
b1a2c3 + b 1 a 3 c 2
c a
c1a3b2
b2
= ai(b2c3 - b 3 c 2 ) - a z ( b 1 c 3 - b 3 c , ) + a 3 ( b 1 c 2 - b 2 c 1 )
Interchanging
ll ' =
a1
a2
a3
b1
b
3
C1
C2
C3
Therefore,
rows into columns:
=a1(b
-b
)-a
(b1c
-b
c,J+a
(b1c
-b
c1)
ll = ll'
If two rows or columns are identical, the value of the determinant is zero.
For example,
ll = 2
After expanding along the first row
ll
= 2(18 - 2 0 ) - 3(12 - 4)
= -4 - 24
If
two
rows
+ 28
(or
+ 4(10 - 3)
= 2 x (-2)- 3(8)
+ 4(7)
= 0
columns)
of
determinant
are
interchanged,
the
sign
of
determinant changes as w e l l .
a1
a2
a3
If ll = b1
b2
b3
C1
C2
C3
= a1 (b 2 c 3
b3c2)
a2 (b1 c3
b 3 c , l + a3 (b, c2
b2c1)
Page 47
the
eBook
Interchanging
t,'
b1
b2
b3
a2
a
3
C2
C3
Ct
/', ' = b 1 a 2 c
/', ' = - b
2a1c3
If each
-b1a
b1 (a2c
second
rows
b2
b3
t,' = a1
a2
a3
Ct
C2
C3
- a c2) - b2 (a1 c
- a ci) + b3 (a1 c2 - a c1)
3
3
3
2
-b2a1c
+b
c1 +b
a1c
-b
- b 3 C 2 ) + 2 (b1 C3
element
For example,
of a
row
t,
= 3
(or column)
1(12 - 2 0 ) - 2(18 - 0) + 4(12 - 0)
After m u l t i p l y i n g
/',!
2 x 5
4 x 5
10
= 3
10
20
the second
c1
1a3
c2
- b 3 c i ) - a3 (b1 C2 - b2c1)
of a determinant
number then the determinant is a l so multiplied
" =
+b3a1c2 +b1a2c3 -b3a2c1 +b2a3c1 -b
/',' = -1 (b2C3
the first and
b1
column
is
m u l t i p l i ed
by
the
by that number.
-8 - 36 + 48
by 5 which w i l l give
= 1(60 - 1 0 0 ) - 10(18 - 0) + 4(60 - 0)

= 1(-40) - 1 0 ( 1 8 ) + 4(60)
= -40 - 1 8 0 + 240 = 20
Also
5 x t, = 5 x 4 = 20
Hence,
:::
5 x
Page 48
same
02.
M a t r i c e s and
2.8
eBook
Applications of Determinant
F i n d i n g the Area of a Triangle
One of the main

vertices at
(x,,
uses of determinants is to test for invertibility.

(x2, vs),
vi),
and
(x,, v s ) .
will
be easy to compute the area
the
triangle
is
not
using
right-angled
Consider a triangle with
If the triangle is a right-angled
the formula
triangle,
then
; x
the
base
area
can
height.
also
be
triangle, then
However,
found
it
when
using
determinant.
If the
vertices are
(x.,
y,),
(x y,),
and
(x,,
y,),
then
the area
of the triangle
is given
by:
+ x
Yt
1]
Y2
Condition of Collinearity of Three
Points
If the area of a triangle is equal to zero, then the three points would
not form a triangle.
Therefore, the three points are collinear.
Let A(x 1,
y,),
B(x2,
y 2), and
C(x3,
y 3 ),
be three
points on a plane.
by these three points has an area equal to zero, then points A,
That is,
=>
x,
Y1
; x2
y2
X3
Y3
x,
Yt
x,
Y2
X3
Y,
If the triangle formed
B, and
C a r e collinear.
Page 49
02.
Matrices a n d
Example
For
the
eBook
06:
given
vertices
(-1,
-3),
(2,
4),
and
(3,
-1),
check
if
the
three
points
are
collinear.
Solution 0 6 :
If the area
of the triangle
formed
by the three
zero, then the three points are said
vertices
(-1,
-3),
(2,
4),
and
(3,
-1)
is
to be collinear.
The area of the given t r i a n g l e ; [ :
X3
YJ
;[-i:4:J
; .!. [ - 1 4
2
-1
1 - ( - 3 ) 2 1 + 1 2
1
4 ]
-1
; ; [-1(4 + 1 ) - (-3)(2 - 3) + 1(-2 - 1 2 ) ]
; ;[-5-3-14]
1
;
[ - 2 2 ] ; - 1 1 ,. 0
2
Therefore,
Example
the points are
not collinear.
07:
If the area of a triangle is 35 sq.
units with vertices
(2, - 6), (5, 4), and
(k, 4 ) , find
k.
Solution 0 7 :
Let
the
vertices
of
the
triangle ABC is 35 sq.
2
Therefore,
1
- 5
-6
triangle
be
(2,-6),(5,4),
and
(k,4).
Since
the
area
of
units:
1 ; 35
2
k
1
[2(4 - 4 ) - ( - 6 ) ( 5 - k) + 1(20 - 4 k ) ] ; 35
2
[6(5 - k) + 1(20 - 4k)]; 70
30 - 6k + 20 - 4k ; 70
Page 50
the
02.
M a t r i c e s and
eBook
- lOk = 70 - SO
lOk = S O 70
k =
12ork=-2
Cramer's Rule
Determinants are useful
rule in solving
in
finding
linear systems
the
inverse of a n o n - s i n g u l a r matrix.
is described
a,x + b,y
d,
(1)
a,x + b2y
= d2
(2)
Multiplying
(1)
by
b, and
(2)
by b, and
+ b1b,y = b2d1
(3)
a,b,x
+ b,b,y = b,d,
(4)
(4)
(a b
) x = (b
b 2 d 1 - b1d2
x =
a1b2 - a2b1
Now,
from
( 3 ) , you
d1
b1
d2
b2
b1
a2
b2
by m u l t i p l y i n g
(1)
= - (say)
by a, and
(2)
= a,d,
(5)
a,a,x + a,b,y
= a,d,
(6)
(4)
(a b1 - a1b )y
2
Thus,
This is called
( 3 ) , you
(a d1 - a 1 d
1
x = - and
from
you g e t :
2)
a,a,x + a,b1y
Now subtract
new equations,
D1
c--=-=-c
a1
the
get:
b d
For two equations consider the system:
subtracting
a,b,x
Now subtract
below.
Use of Cramer's
by a, and
subtracting,
you g e t :
get:
2
y = -
"Cramer's rule."
Page
51
eBook
02. Matrices a n d Its Application
The values of D,
0 1, and
D = determinant of A =
D,
is obtained
02 can be obtained as follows:
a,
bi
a2
b2
, that is, the coefficient of x and
y.
by replacing a,
a2
Dz is obtained
by replacing b,
b2
by
d,
d2
For example, consider the two equations
3x + 7y = 12
2x - 3y = 9
Let D be the determinant of the coefficient matrix.
-3
Let D,
-9 - 14
12
-3
o, =
matrix,
-99
be the determinant of the coefficient matrix,
12
where the column for the variable x
by the constants from the right hand side of the equation.
-36 - 63
has been replaced
D2
-23
be the determinant of the coeffi cient
has been replaced
Let D,
where the column for the variable y
by the constants from the right hand side of the equation.
The determinant of the coefficient matrix is not 0.
99
Then,
=D= -
o,
23
Then,
= D= -
D2
99
3
23
23
-3
23
Page 52
02.
M a t r i c e s and
eBook
Example 0 8 :
Solve the following
equations using
Cramer's rule.
2x + 3y = 13
x + 7y = 23
Solution 08:
The g i v e n equations are:
2x + 3y = 13
x +
7y
Here,
23
= 1 4 - 3 = 1 1 at 0
D =
The given system of equation
D1
13
23
= 9 1 - 69 = 22
2
D2
has a u n i q u e solution.
13
46 - 13
33
23
By Cramer's rule:
D1
y =
22
11
!2_
= 33 = 3
11
Cramer's Rule for Three
Equations
For three equations consider the system:
a1x + b1y + c1z = d 1
........................
(1)
= d,
......................
(2)
= d3
........................
(3)
a,x +
a3X
b,y
+ c,z
+ b3y +
Similar
to
C3Z
the
variables can
Cramer's
be obtained
d1
b1
C1
d2
b2
C2
D1
d3
b3
C3
a1
b1
CJ
a2
b2
C2
a,
b3
C3
rule
of
two
equations
with
two
variables,
the
value
for
as follows.
x -- -
Page
53
three
02.
Matrices a n d
S i m il a rl y ,
y =
eBook
Its Application
o,
a1
d1
C1
a,
b,
d,
a2
d2
C2
a2
b2
d2
a3
d3
C3
a3
b3
d3
a,
b,
c,
D
3
z=- =
D
and
a,
b,
c,
a,
b,
c,
a,
b,
c,
a3
b3
C3
a3
b3
C3
For example, considering the simultaneous equations

3x - 2y + 4 z = 5
x + y + 3z = 2
- x + 2y- z = 1
By Cramer's rule:
-2
- 1
D =
4j
3
1
= 321
- (-2)
- 1
+ 4
- 1 - 1
1
-
= 3 ( - 1 - 6 ) - ( - 2 ) ( - 1 - (-3)) + 4(2 - (-1))

=-21+4+12
=
o,
-5
-2
-1
= 51
2
_ (-2) 2
-1
3
-
= 5 (-1-6)-(-2)(-2-3)+4 (4-1)
= -33
-1
- 1
o,
- 5
= 3
1
-1
- 1
+4
-1
-1
= 3(-2 - 3 ) - 5 [ - 1 - (-3)] + 4 [1- (-2)]

=-15-10+12
= -13
-2
- 1
5
2
D3 =
1
- (-2)
2 = 31
1
-1
2
5
1 +
-1
Page 54
02.
M a t r i c e s and
eBook
= 3 ( 1 - 4) + 2 [ 1 - (-2)] + 5[2 - (-1)]

=-9+6+15
= 12
x = D1
D
33
= - 13
- 5 '
13
Y = S
X =
y = D2
= - 33
and
= D3
- 5 '
12
-5
12
and
Z = -
5,
Example 9 :
Solve the following
2x1-x2+3x
X2
- X3
system of equation
by using
Cramer's rule.
= 9
-1
X1 + X 2 - X 3
= 0
Solution 9 :
The given equation
2X1-X2+3X3
Ox
+ x
- x
3
X1 + X2 - X3
D =
Here,
D =
is rewritten as:
= 9
-1
= 0
-1
-1
-1
2(-1+1)-(-1)(0+1)+3(0-1)
= -2
''
3
And
I_\
l
=
9 (-1
= 0
-/
1
1)
+ 1 - 3
- 11
-1
- (=
1)(1
+ 0)
+ 3(-
1 - 0)
-2
Page
SS
02.
Matrices a n d
= 2 (1
eBook
- 0) - 9(0 +
1)
+ 3(0 +
1)
= 2 - 9 + 3 = -4
03
1]
- i
2 (0 + 1 ) - (-1)(0 + 1) + 9(0 - 1 )
= 2 + 1 - 9
= -6
By Cramer's rule:
o,
X1
-2
;::: - : - :; ! ,
-2
2 . 9 Inverse of a Matrix
If A and
called
an
B a r e two square matrices of the same order,
the
inverse of A and
inverse of a matrix,
an element are given

Minor of an
It
is defined
1)
The m i n o r of an element a,1
is for a matrix of order,
nxn,
the
minors
of
the
defined
by deleting
So, determinant of a matrix of order 3 x 3
a,,
I,
then,
by "A-1." To understand
cofactor of
elements
is
a11,
the 1th
by omitting
is represented
row and
by
column
M12
= (a21a33
M n =
(a22a33
(a21a32
a 12
a13
a 21
a22
a23
a31
a32
a33
and
a,,
a22
a23
a21
a23
a32
a33
a31
a33
are
and
- a23a32)
- a23a3i)
- a22a31)
1)
row and i'h column of I A I .
, respectively.
in
M,1. The minor of
as the determinant of the (n
a 11
aaa.
the
a32
Mu
B is
below:
sub-matrix of IAI, formed
Therefore,
is denoted
as the value of the determinant obtained
and
Element
element a,
(n
inverse of B,
BA
the concept of minor of an element, determinant, and
which the element exists.

an
A is the
such that, AB =
Page
56
02.
M a t r i c e s and
Cofactor of an
Element
Cofactor of an element a,
The cofactor of element
If
A =
all
a12
a13
21
eBook
22
is denoted
a11
is
by C11 and
is given
by:
C1;
= (-1jiM;;
1 1
= (- 1) M l l
ell
l
then the cofactor values of the elements are obtained as follows:
23
[
a31
a33
C 11
C21
= -1 (2'1Jca12a33 - a13a32)
C
31
-1<
a32
-1
)(a 22a33
- a23a32)
(3+1)(
)
a12a23
C12
-1<1+2J(a21a33
- a23a31)
C13
Czz
-1 (2+2\a11a33 - a 1 3 a 3 1 )
C23
(3+2)(
32
- a13a22
= -1
Table 2 . 9a:
For example,
suppose,
A=[;]=
The minor of the element a11
And
- a13a21
33
-1 (2+3Jcalla32 - a12a31)
= -1
(3+3\
a11a22 - a12a21
Cofactor Values of Elements
1]
-1
)
a11a23
-1 (1+3l(a21a32 - a 2 2 a 3 1 )
3 is,
M11
= 2
x 7 - 5 x 6 = -16
its cofactor is
1Mll
Cll
= (-1)1+
= (-1)2 x (-16) = - 1 6
The minor of the element a23 = 5 is,
And
its cofactor is
C23
Adjoint of a Square
= ( - 1 )2 + 3 M 2 3
M23 =
= (-1)
If
A =
12
a13
a21
a2 2
a 23
a31
a32
a33
18
x (18) = -18
Matrix
Let the determinant of a square matrix A be
all
3 x 6 - 0 x 4
l
, then
IAI =
IAI.
a11
a12
a13
21
22
a23
C11
If the matrix formed
by the cofactors of the elements
in A is
C21
[
C31
Page
57
eBook
Then, the transpose of the matrix of cofactors is given
by
C11
C21
C12
C22
C13
C23
T h i s is called
the adjoint of the matrix A and
The property of adjoint matrix
A(Adj A)
= IAI
=>
A(Adj
is written as Adj A.
is:
A) = I
IAI
1
AA= I
And,
Then,
A-
Steps to
(Adj A)
Find the Inverse Matrix
Step
1:
find
the value of the determinant of g i v e n square matrix (say A ) .
Step
2:
construct a matrix of cofactors,
that is,
replace the values with cofactor values.
Step 3 :
take a transpose of the matrix of cofactors,
Step 4 :
compute the inverse matrix using
to obtain adjoint of given matrix.
For example,
IA I =
if
x s - c2)
C-3)
- 1
A = [-
the formula,
A-
l!I (Adj A ) .
] , then the inverse of A can be obtained as follows.
c-1)
-1s
+ 2
-13
The cofactor of the elements in the given matrix is obtained a s :

1
A11
= (-1)1 +
A12
A21
=(-1)2
A22
(-1) +
(-1)
2
+
x 5 = 5
x (-1)
x2=-2
x (-3) = -3
The cofactor matrix
-2
-3
= [
On transposition of cofactor matrix,
Adj
A = [ A11
A12
A 2 1 ] = [5
-2]
A22
- 3
the adjoint of matrix A is obtained
as follows.
Page 58
02.
M a t r i c e s and
A-
eBook
_!_ (Adj A)
JAJ
[5
= -13
-2J
-3
Therefore, the inverse of the given matrix
is
_ 3 [
- 2]
-3
Verification:
AA- 1 -
[-3
- -13
AA-
-1
2] 5 - 2
5
-3
[- 3 x 5 + 2 x 1
= - 13
[- 15 + 2
= -13
- 5 + 5
- 3 x -2 + 2 x -3J
- 1 x 5+ 5 x 1
[- 13
= -13
- 1 x -2 + 5 x -3
6 - 6]
2-15
-13
= [ ] = I
Since A A-
3
= I,
then the inverse of matrix
A = [-
-1
Example
is
qrven
as:
A-1
= -
1 [5
1 3
2]
_
10:
Find A-
2] .
for matrix
A=
-11
5
3
Solution
10:
The elements of the cofactor matrix are:
C11
= (-1)
= (-1)
12
+
1
[5 x 7 - 6 x (-3)] = (35 + 18) = 53
(3 x 7 - 6 x 1) = - ( 2 1 - 6) = - 1 5
+
1
C13
= (-1)
C21
= (-1)
C22
= (-1)
C23
=(-1)
[3 x (-3) - 5 x 1] = (-9 - 5) = -14
[7x4-(-3)x(-1)]=-(28-3)=-25
+
2
[2 x 7 - (-1) x 1] = 14 + 1 = 15
3
(2x-3-4xl)=-(-6-4)=10
Page
59
02.
Matrices a n d
eBook
(-1)
[4 x 6 - (-l)x 5]
29
C32
3 2
(-1) + [2 x 6 - 3 x (-1)]
-15
C33
= (-1)3 +
31
(2 x 5 - 3 x 4) = -2
Matrix of cofactor =
53
-15
- 25
15
-14]
10
[
29
On transposition,
IAI
Adj
-15
-2
53
- 25
29
-15
15
-15
[
-14
10
-2
A=
2[35 - ( - 1 8 ) ] - 4 ( 2 1 - 6 ) - 1(-9 -
SJ=
106 - 60 + 14
60
..A-'=i!i(AdjA)
=> A-
= _!__
53
-25
-15
15
60 [- 1 4
After m u l t i p l y i n g
=, AA - I = _!__
2 9 ]
-15
10
-2
the above matrices
2]
106 - 60 + 14
- 50 + 60 - 1 0
159-75-84
-75+75+60
87 - 75 - 12
53+45-98
-25-45+70
29+45-14
58 - 60 +
60 [
6
1
0
60
60
0 ]
0
60
OJ
[0
= I
Page 60
02.
M a t r i c e s and
eBook
2 . 1 0 Chapter Summary
system
of
numbers
columns and
bound
arranged
by
the
in
bracket
rectangular
[]
is
called
formation
an
by
along
matrix.
m
It
rows
is
and
written
n
as
m x n matrix.
a11
a12
a1n
a21
a22
a2n
am!
am2
amn
A =
A matrix obtained
by
mxn
interchanging
rows and
columns is known as a transpose of a
matrix.
The
square
matrix
is
symmetric
matrix
if
its
transpose
is
interchange of rows and columns does not change the matrix form,
[a,1]
Basic operations are addition of matrices,

by a scalar, and
Multiplication
matrix
of two
A determinant
If the elements
subtraction of matrices,
that is,
multiplication of
multiplication of matrices.
matrices
is
possible
only
if the
is a value of matrix.
of any
row
It is denoted
number of columns of the
or column
of a determinant are each
multiplied
by the
by that number.
Cramer's rule for two equations:

a,x + b,y
= d,
a,x + b,y
= d2
Therefore,
d1
b1
a1
d1
d2
b2
D
a2
1
= - and y = -
d2
=
a1
b1
a2
b2
D2
=
a1
b1
a2
b2
1
To find
left
by det A or IAI.
same number, the determinant is also m u l t i p l i ed
The
is the same as the number of rows in the right matrix.
same.
[a11].
a matrix
the
the inverse of a matrix, you can use
A-
= l!I (Adj A).
Page 6 1
M e a s u r e s of
Central Tendency
I T M
03.
eBook
3 . 1 Introduction
A measure
average
of central
value
or
central
average is used and
For
example,
the
tendency
total
region.
This
then that can

Thus,
chapter
the
value
implemented
production
difficult to remember but

known,
is
analysis
that
of
sugar
from
the
data
entire
factories
production
as a representative of the total
different
by
set
life of every
20
if the value of the average
be used
on
describes
in the day-to-day
value of central tendency
focuses
of statistical
calculating
of
data.
a single
The
individual.
in
particular
of sugar for the
region
region
you
will
is
helps to represent a set of data.
methods
of
calculating
average
or
different
types
be able to:
Define the measures of central tendency
Calculate arithmetic, geometric,
Calculate median and
Identify the relation
and
harmonic mean
mode
between mean,
is
production of sugar in the
measures of central tendency.
After reading this chapter,
word
median, and
mode
Page 63
of
03.
Measures
3.2
eBook
of Central Tendency
Central Tendency or Average
Central tendency
typical
value
better way,
is a single value which
around
which
other
is used
values
to represent an entire set of data.
cluster.
To
the concept of averages are discussed
understand
central
It is a
tendency
in
in this chapter.
Some important definitions of average are:

According
to A.
L.
Bowley,
Averages are
statistical
constants which
enable
us to
comprehend in a single effort the significance of the whole.
According
values to
to A.
E. Waugh,
represent them
An
average
in
some
is a single
way,
a value
the whole group of which it is part, as typical
According
to
Clark
and
Sekkade,
An
value
which
selected
from
is supposed
a group
to
stand
of
for
of all values in a group.
average
is
an
attempt
to
find
one
single
figure to describe the whole of figures.
From
the
dataset
value.
3.3
above
that
definitions,
describes
the
it
can
be
tendency
concluded
of
that
group
For this reason, an average is referred
of
average
values
is
to
the
central
concentrate
value
on
of a
single
to as a measure of central tendency.
Objectives of Averaging
Some of the important objectives of averaging are listed
below.
To find out a single value that describes the characteristic of a whole group
A measure of central
value.
This value
be used
is
it
a value
enables us to get an
to represent thousands,
For example,
country.
tendency
idea
mean
solves
this
represents the
of the entire data.
m i l l i o n s , and
is difficult to calculate and
Average
which
mass
data
Therefore,
in
one
single
one value can
billions of values.
remember the incomes of every i n d i v i d u a l
problem
by
giving
one
single
figure
in
the
in a
form
of
average income.
To facilitate comparison
By
reducing
of data
can
the entire data

be
done
easily.
into
For
one
single value,
example,
the comparison
manager
can
between
compare
the
various
production
Page 64
sets
of a
03.
eBook
company for different

is improving
To aid
periods.
or deteriorating.
This comparison
helps to
identify whether the
production
Accordingly, the manager can take corrective measures.
in decision making
Averages act as a b e n c h m a r k or standard

production
manager may
production
targets
averages
act
as
rely
for the
on
the
individual
benchmarks
for
for managerial control and
average
and
productivity
of an
the organization,
performance
decision-making.
employee
as a whole.
appraisals
and
to
set
future
Therefore,
decision-making
these
in
the
future.
3.4 Characteristics of a Good Average

An
ideal average should
The
average
observation
satisfy the following characteristics:
should
be
should
based
affect
on
the
all
the
observations.
average,
only
then
The
will
absence
it
be
of
called
single
true
representative of the entire distribution.
Average
small or
make
Average
It
should
affected
in the
much
by
extreme
observations.
An
extremely
series of observations may distort the average and
be
rigidly
defined
through
some
algebraic
people compute the average of the same data,

be
suitable
collected
then
be
large value
should
has
not
can
it useless.
different
should
that
data
average
for further algebraic treatment.
on
the
average
should
be
sales
able
to
of
various
form
formula,
that
if
they get the same value.
For example,
firms
base
so
to
of a
if a
researcher
particular
calculate
the
industry,
combined
average sales of all the firms.
It should
of
have stability
population
research
average
each
should
scholar
population,
each
income
other.
sampling
in
get
collects
sample
value
The
sampling.
approximately
the
ten
difference
fluctuation.
income
consists
of
It
of
between
can
be
the
data
100
samples
fluctuation are less are considered
Different samples collected

same
of
adults
should
the
be
ten
of
average.
ages.
approximately
that
the
the same
For
of
averages
samples
Individually,
same
samples
set
example,
homogenous
mixed
averages
concluded
from
or
is
whose
of
the
close
known
to
as
sampling
effective.
Page 65
03.
Measures
eBook
of Central Tendency
3 . 5 Various M e a s u r e s of Central Tendency

The different types of measures of central tendency used
Mean
Median
Mode
Mean can
be further classified
business and
industries are
into
Arithmetic Mean
o
Simple Arithmetic Mean
Weighted Arithmetic Mean
Geometric Mean
Harmonic Mean
Graphical
Fig.
in
representation of Classification of Measures of Central Tendency is depicted
3.Sa.
Measures of
Central Tendency
Arithmetic Mean
Mean
Median
Geometric Mean
Harmonic Mean
Mode
Simple
Arithmetic Mean
Weighted
Arithmetic Mean
Fig. 3 . S a :
Classification of Measures of Central Tendency
Page 66
in
03.
eBook
3 . 6 Arithmetic M e a n
For a given set of observations, the Arithmetic Mean
the observations d i v i d e d
(A.M.)
by the number of observations.
It
is obtained
as the sum of all
is denoted
by " X " and
read
as x-bar.
S i m p l e Arithmetic Mean
S i m p l e arithmetic mean is calculated differently for ungrouped and grouped data.
For Ungrouped
Data
Ungrouped
is a
data
observations.
simple
series
Arithmetic mean
of discrete
for ungrouped
data.
data
It
can
does
not
include
be calculated
frequency
by a p p l y i n g
for
direct
and short-cut methods.
Direct Method
In direct method, mean is calculated
by d i v i d i n g the total value of the observations
by the total number of observations.
If the variable "X" takes "n" values
of the given values is obtained
x 1 , x 2 , x3 . . . X n , then the arithmetic mean,
X,
by using the formula:
Where,
n = Number of observations
n
L x,
= The s u m of v a l u e s of a l l observations
I :::1
Short-cut Method
In the short-cut method, A . M .

arbitrary basis, using
can be calculated
by taking an assumed
mean on an
the following formula:
"" d
X=A+-L,n
Where,
= (X - A)
A = Assumed mean
Page 67
03.
Measures
eBook
of Central Tendency
Example 0 1 :
The
monthly
savings
of
employees
in
an
office
are
mentioned
below.
Calculate
5000
4000
the
average savings per employee per month.
Saving
2000
5000
1000
2500
6000
3000
2000
1000
(In")
Table 3 . 6 a :
Monthly Savings of Employees
Solution O 1 :
By
Direct Method
The average monthly savings of employees in an office
is calculated
using
the following
formula:
)( =
X1
+ X2 + X3
+ , .. +
Xn
2000 + 5000 + 1000 + 2500 + 6000 + 3000 + 2 0 0 0 + 5000 + 4000 + 1000

=10
= 31500
= 3150
10
The average saving
Using
the
the
above
observations
per employee per month
method,
are
one
vast,
can
then
calculate
the
i s 3150.
the
average
frequency
for
limited
distribution
is
values.
more
However,
helpful
to
manager.
Page 68
if
the
03.
eBook
By Short-cut Method
Calculation of average monthly savings is calculated as follows:
d= x - A (A = 3000)
X = x
2000
-1000
5000
2000
1000
-2000
2500
-500
6000
3000
3000
2000
-1000
5000
2000
4000
1000
1000
-2000
Id=
1500
Table 3 . 6 b :
Ld
X = A +
Monthly Savings of Employees
1500
= 3000 +
= 3150
10
The average saving
per employee per month
For Grouped
Data (Discrete Series)
Grouped
data
has
grouped
data
can
frequency
include
arithmetic mean can
discrete,
be calculated
both the methods are given
distribution
as
i s 3150.
for
every
well
as,
observation.
continuous
through direct and
indirect
Unlike
series.
ungrouped
In
methods;
grouped
data,
data,
the formulae of
below.
Direct Method
In
case
of
simple
frequency
"f;" times, the arithmetic mean
distribution,
is given
assuming
the
observation
" x , " occurs
by:
)( = f1X1 + f2X2 + f3X3 + . . . + fnXn

f1
+ f2 + . . , + fn
Where,
x
M id- p oi nt of
ith
class in continuous series or the
ith
observation
in discrete
series
Page 69
03.
eBook
M e a s u r e s of Central Tendency
f;
Frequency of i'" class
N = Total frequency
Short-cut Method
n
I;f,d,
1;;
Where,
d
_ X; - A
i
. _
I
1, 2 . . .
X = Mean
A = Assumed
mean
h = Size of the equal class intervals

N = Total number of observations
Note:
Short-cut
method
frequencies
are
for grouped
large
and
it
and
ungrouped
becomes
data
difficult
to
is a p p l i e d
calculate
only when the values and

them
through
arithmetic
means.
Example 0 2 :
The monthly electricity consumption of households residing

provided
all
in the table below.
in a residential complex is
calculate the average monthly electricity consumption for
households.
No. of
Energy
Households
Consumption
Frequency
(X)
(f)
Table 3 . 6 c :
Frequency
150
25
200
21
250
30
300
42
350
so
400
12
Distribution of Electricity Consumption of Households
Page 70
03.
eBook
Solution
02:
By Direct Method
Following
table is computed
to calculate mean.
No. of
Energy
Households
Consumption
fiXi
Frequency
(x,)
(f,)
150
25
3750
200
21
4200
250
30
7500
300
42
12600
350
50
17500
400
12
4800
Table 3 . 6 d :
Frequency
180
Ix,=
50350
Distribution of Electricity Consumption of Households
The mean electricity consumption at the residential complex is:
x = I f;x, =
N
50350
279. 72
180
By Short-cut Method
The arithmetic mean can
= A+
be calculated
using:
If,d,
N
Where,
A = Assumed
d;
= x, - A
N = Total
mean
Deviation of
;th
observations from the assumed
mean "A"
number of observations
Page 7 1
03.
eBook
The previous example can be so lved
using the short-cut method as follows:
Assumed mean "A" = 250

No. of
Energy Consumption
Households
(x;)
Frequency
d;
X;
250
fidi
(f;)
150
25
-100
-2500
200
21
-so
-1050
250
30
300
42
so
2100
350
so
100
5000
400
12
150
1800
I;t;d;
.
Table 3 . 6 e :
Frequency
= 5350
D1stribut1on of Electricity Consumption at a Residential

Complex
X = A + Lf;d;
= 250 +
s so =
250 + 2 9 . 7 2
279.72
180
The mean electricity consumption at the residential complex is 2 7 9 . 72
For Grouped
Data (Continuous Series)
Direct Method
In a continuous series,
where the data
arithmetic mean can be computed

Step 0 1 :
Step
02:
by applying
in
the form
of class
intervals,
the
the following steps:
Obtain the mid-point of each class interval and denote it by " rn , ",
Multiply
these
mid-points
interval and obtain the total
Step 0 3 :
is given
the
respective
frequency
of
each
L f;m;
Divide the total obtained
by
by the sum of frequency.
Page 72
class
03.
eBook
Example 0 3 :
For the following
data,
obtain the arithmetic mean
0 - 10
Marks
by direct method.
20 - 30
10 - 20
30 - 40
40 - 50
No. of
15
25
45
35
Students
Table 3.6f:
Solution
Frequency Distribution of Marks of Students
03
Marks
Mid-point
No. of Students
(X)
(m.)
(f;)
fimi
0 - 10
20
100
10 - 20
15
25
375
20 - 30
25
30
750
3 0 - 40
35
175
so
45
10
450
40 -
N
Table 3 . 6 g :
I: f,m,
1aso
If;m;
90
1850
Frequency Distribution of Marks of Students
20_5
90
Short-cut Method
In a continuous series, the arithmetic mean may

following
be computed
steps:
Step 0 1 :
Take an assumed
Step 0 2 :
From
mean.
the m i d - p o i n t of each class interval, deduct the assumed
and divide the difference by size of class intervals.

given
by applying the
The deviation
mean
is calculated as
below:
K - A
d,
'
"h" is class interval
Step 0 3 :
find
'
M u l t i p l y the respective frequencies of each class by these deviations and
the total
Step 04:
L f;d;.
Apply the formula:
Page 73
03.
Measures
eBook
of Central Tendency
Consider Table 3.6f and obtain the arithmetic mean

Assumed
by short-cut method.
mean "A" = 25
Mid-points
Marks
No. of Students
d,
I
-A
fidi
(f;)
(x;)
0 - 10
20
-2
-40
10 - 20
15
25
-1
-25
20 - 30
25
30
30 - 40
35
40 - 50
45
10
20
N
.
Table 3 . 6 h :
If;d;
90
-40
Frequency D1stnbut1on of Marks of Students
Z:f,d,
-40
X = A +
Therefore,
= 25+
10 = 2 0 . 5 6
90
Properties of Arithmetic Mean
The mathematical
properties of the arithmetic mean are:
The sum of the deviations of the
items obtained
by subtracting
mean from the value of observations is always zero, that is,
the arithmetic
L (x
- X)
It is clear from the following example:
Z: x
x - X
-10
10
-5
15
20
25
10
75
L (x-
X)
= 0
Table 3 . 6 , :
Here
'
"x
75
_
L,
_
= - =
Ungrouped
Data
15
Page 74
03.
eBook
The sum of the squared deviations of the observations from the arithmetic mean is
m i n i m u m , compared
If
each
item
in
substitutions w i l l
X =
Lx
or
nX
to any other central tendency.
the
series
is
replaced
by
the
mean,
be equal to the sum of the i n d i v i d u a l
then
the
sum
of
these
item.
Lx
For example,
if
Lx
= 100
and
the arithmetic mean
by 20,
you get the same total 20
When
the
related
as X 12
number
groups
is
of
items
given,
the
is
20.
If each
item
is
replaced
+ 20 + 20 + 20 + 20 = 1 0 0 .
and
the
arithmetic
combined
average
mean
of
of these
two
or
groups
more
can
be
than
two
calculated
N1X1 + N,X,
N1 + N2
Where,
X1, X, = Arithmetic mean for two groups

N
1,
= S a m p l e size of the g r o u p s
X12 = Combined average of the two means
Weighted Arithmetic Mean
The weighted
value,
with
mean
is calculated
respect
to
the
by
total
taking
value.
into account
The
term
the
relative
weight
importance of each
stands
for
the
relative
importance of the different observations.

It is calculated
using
the formula:
Lwixi
Xw
=
=
i
l
Lwi
Where,
X. = Weighted
x, =
w,
;th
arithmetic mean
value of variable X
= Weig ht assigned
to the
;th
variable value
x,
Page 75
03.
Measures
eBook
of Central Tendency
In the case of frequency distribution
if f,, f, . . . f,
are the frequencies of the variable

n
I:w,(f,x,)
values x.,
x2 . . . Xn, then weighted
arithmetic mean
Xw =
=
L.,
w,
Example 04:
The data
related to the
bonus of people is given
in the following
table.
Find the weighted
arithmetic mean.
Bonus(')
so
60
70
80
90
100
110
(x,)
No. of People
(w,)
Table 3 . 6 j :
Frequency
Distribution of Bonus Paid to People
Solution 0 4 :
The average bonus paid
per member is:
Bonus(')
so
60
70
80
90
100
110
350
560
540
200
110
(x,)
No. of People
(w,)
so
WiXi
180
.
Table 3 . 6 k :
Frequency D1stnbut1on of Bonus Paid to
People
'
_
I: w , x ,
I=
I:
w
,
1990
25
79. 60
Page 76
03.
eBook
3 . 7 Geometric Mean
Geometric
time.
It
Mean
(G.M.)
plays a vital
is used
role
If
the
number
of
managerial
"n" items. So,
root of the product of
t h e i r geometric mean
in
to evaluate the average
is given
by:
observations
decision-making
if
X1,
X2
G.M. = x .x
1
is
more
Xn
rate of change over a period

and
can
are the given
be defined
as the
of
n'"
"n" observations then
x,
than
three,
then
to
simplify
calculations,
logarithms are used.
og
G M
.
.
G.M.
_ logx 1 + logx 2 + . . . + l o g
N
= antilog(Ilg
X;
Xn
In a discrete series, G . M .
.
(I log x;
= antllog
N
G M . = anti log [If; lg m ; ]
where "m," is the mid-point of i'" class
interval.
Discrete Series
Example 0 5 :
The d a i l y production ( i n tonnes) of four companies is given below.
Calculate the average
daily production of the given data using the geometric mean formula.
Daily
Production
500
250
1462
1275
(in tonnes)
(X)
Table 3 . 7 a :
Daily Production
(in tonnes) of Four Companies
Page 77
03.
Measures
eBook
of Central Tendency
Solution O 5 :
.
G.M.
Find
= antlloq
[2::log
N
the logarithm of the g i v e n values and
add
them to get:
Production
log x,
(x,)
500
2.6990
250
2.3979
1462
3.1650
1275
3.1055
Ilog x,
Table 3 . 7 b :
G.M.
= anti log(
Daily Production
11.3674
(in tonnes) of Four Companies
2:: l o g x
N
')
= antilog(11.!674)
= anti log
2. 8418
= 694. 7
Note:
Use scientific calculator to compute log and
antilog of given values.
Page 78
03.
eBook
Continuous Series
Example 0 6 :
From
the following d i s t r i b u t i o n , find
the average increment ( i n
percentage) of the
employees.
Increment
0 - 10
10 - 20
20 - 30
30 - 40
40 - 50
15
25
to
No.Of
Employees
.
Table 3.7c:
Solution
Increment ( i n percentage) of the Employees
06:
Mid-point
Increment O/o
f;
log mi
fi
x log mi
m;
00 - 10
0.6990
3.4950
10 - 20
15
1.1761
8.2327
20 - 30
25
15
1.3979
20.9685
30 - 40
35
25
1.5441
38.6025
40 - 50
45
1.6532
13.2256
Table 3 . 7 d :
G.M.
Lf
= antilog
log m J
N
'
60
L f,
log m,
= 84.5243
Increment of the Employees
= antilog
(84.5243)
60
= antilog
1.40874 = 2 5 . 6 4
Page 79
03.
Measures
eBook
of Central Tendency
3.8 Harmonic Mean

Harmonic
Mean
the
reciprocal
X2 . . .
Xn
(H.M.)
of the
is
based
on
arithmetic
the
mean
reciprocals of numbers averaged.

of the
is a given set o f " n " observations,
reciprocal
observations,
H.M.
individual
= -1-1---1
n
=--
- + - + ..... +
I]_
X1
is defined
observations.
as
If x,,
then the harmonic mean is given as follows:
n
In ungrouped
of
It
X2
X;
Xn
N
In grouped
observations or discrete series,
H.M.
, N ; Lf,
=
1
I;(f, x - )
x,
N
In
continuous
series,
H.M.
= --
I(f,
where "mi" is
the
m i d - p o i n t of
ith
class
interval
x ,)
a n d N = I; f ;
Harmonic Mean for Individual Observations

For example,
if the following data
x
1/X
is given, then
H.M.
be:
10
13
20
28
25
63
0.100
0.077
0.050
0.036
0.040
0.1250
0.0159
Table 3.Sa:
Therefore,
harmonic mean will
= -=
0.4439
Ungrouped
Data
= 15.77
I ,Yx ;
Page 80
03.
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Harmonic Mean for Discrete Observations

Example 0 7 :
Calculate
harmonic mean for the following:
:
:
Table 3 . S b :
Discrete Series
Solution 0 7 :
If the following
data
is given,
then the harmonic mean will be:
X;
10
15
20
30
35
40
f;
20
30
25
40
so
SS
2.0
2.0
1.25
1.33
1.43
1.375
f;/x;
Table
N
=
L
/
f
_
; X
_
; =
H. M.
3.Sc:
Discrete Series
220
9.385
23.441
3.9 M e d i a n
Median
is the middle value of a series,
the arithmetic mean,

a
positional
median
average.
In
the
is
not
case
when arranged
based
of
on every observation
median,
series are less than the median value and
in any order of m a g n i t u d e .
50%
of
50% are above
the
in
the
series.
observations
It
Unlike
is called
of the
entire
it.
For Individual Observations
For
individual
observations,
the
median
may
be
computed
by
applying
the
following
steps:
Step
1:
Step 2:
Step
Arrange the data
in ascending
or descending
Identify the m i d d l e value of the dataset.

In
3:
a group
and d i v i d e by 2.
of "N"
It can
odd
number
be expressed
order of magnitude.
This is the m ed i a n value.
of values,
add
to
the
total
number of values
in the form of a formula as:

1)
Median
Step 4 :
Observation
located
at
In a group of " N " even
(N;
'" position.
number of values,
the median
is the arithmetic
mean of
the two values in the middle.
Page 8 1
03.
Measures
eBook
of Central Tendency
th
th
Median=
A.M.
of two values located
at
()
( +
and
1)
position.
Example 08:
Find
the median of the following
data:
2, 6, 9, 3,
7, 4, and
12.
order:
2, 3, 4, 6,
7, 9, and
12.
Solution 0 8 :
Arrange the series in ascending
N
= 7
Median
= Observation
located at
(N;
)th
position
7; 1
=
)"'
The observation
position
4th
located
at the
4th
position
is 6,
so the median of the given dataset is 6.
Example 09:
The
and
income
24300.
(in
Find
of
six
employees
the median
is
given
as:
25000,
20000,
20600,
27000,
25400,
25000, 25400, and
27000.
income.
Solution 0 9 :
Arrange the series
in ascending
order:
20000, 20600, 24300,
Since the
number of observations is 6,
by taking
the arithmetic mean of two m i d d l e position values.
Median= A.M.
of two values located at
A.M.
of
(24300; 25000)
3rd
and
which
()th
is an even
and
number,
( + 1)"'
the median
is obtained
position
position values
4th
= 24650
For a Discrete Series
After arranging
the data
in
ascending
or descending
order, find
the cumulative frequency
(c.f.), then a p p l y :
N
Median
= Value corresponding
to c. f.
> -
- 2
Page 82
03.
eBook
Example
10:
Find the median of the following
data:
Income
10000
15000
25000
35000
40000
45000
15
25
30
15
10
(In')
No. of
People
Table 3.9a:
Solution
Distribution of Income of People
10:
The given data
is already in ascending
order.
Income
10000
15000
25000
35000
40000
45000
15
25
30
15
10
40
70
76
91
101
(In')
No. of People
Cumulative Frequency
15
.
Table 3 . 9 b :
Median=
D1stnbut1on of Income of People
to c.f. just greater than
N = 1 0 1 =
Here,
c.f.
Value corresponding
5 0 _ 5
2
= 7 0 ;,
50.5
The value corresponding

Therefore,
median
to c.f.
(=
70)
is 25000
= 25000
For a Continuous Series
In a continuous series, the following
median.
calculate median
L +
is used
to
to determine the exact value of the
locate the median class.
The formula to
is:
%-f
Median
formula is used
Where,
L =
Lower limit of the median class
f0 = Cumulative frequency of the class preceding

fm
i =
the median class
Frequency of the median class
Class interval of the median class
Page 83
03.
Measures
Example
Find
eBook
of Central Tendency
11:
the median salary of the employees of a factory.

Salary
No. of
(Int)
Employees
10 - 20
10
20 - 30
15
30 - 40
20
so
30
40 Table 3.9c:
Solution
Distribution of Salary of Employees
11:
Salary
No. of
(Int)
Employees
10 - 20
10
10
20 - 30
15
25
30 - 40
20
45
so
30
75
c.r.
40 Table 3 . 9 d :
Distribution of Salary of Employees
N = 7 5 = 3 7 . 5
Here,
Median class = Class corresponding
to c. f.
N
75
,, _ = - = 3 7 . 5
2
c.f.
;, 3 7 . 5
Therefore,
Median
is 45, which corresponds to the class interval 30 - 40

median class is 30 - 40
= L +
%
-f0
2
x i
fm
= 30 + 3 7 . 5 - 25
10
20
= 36.25
Therefore,
the median salary of the employees of a factory is t36.25
Advantages of Median
The median
is simple to understand and
It is not affected
by extreme values and
easy to calculate.
it can
be computed
by using
open-ended
class intervals too.
Page 84
03.
eBook
Disadvantages of Median
In the case of an even

may not necessarily
n u m b e r of observations for ungrouped
be the value contained
To calculate the median,

descending
it
data,
the median
in the dataset.
is necessary to arrange the data
in ascending
or
order of magnitude.
It is difficult to compute the median for a dataset containing
large amounts of
data.
3 . 1 0 Mode
Mode
is
often
therefore,
said
the
to
value
be
the
that
value
occurs
which
most
has occurred
discrete
be
observation
mode
can
most
frequently.
mode is an observation that

series,
occurs
located
In
maximum
through
often
an
in
the
ungrouped
data.
The
discrete
mode
series,
is,
the
number of times, while in a grouped
highlighting
the
maximum
frequency
in the series.
For Discrete Series
The following
76, 65,
The
78,
79,
weight
mode
data shows the weight of 15 workers:

80 and
value
here
is
78
78.
60,
78, 67,
80,
57,
79,
60,
78,
59,
75.
occurs
In
maximum
discrete
number
ungrouped
of
times,
serie s,
the
that
is,
mode
can
times.
be
Hence,
determined
the
by
inspection o n l y .
For Continuous Series
When
the
the data
following
frequency.
is grouped
formula
to
in
find
a continuous frequency
the
mode,
It is given by the following
which
is
distribution,
located
in
the
a manager can
class
with
the
highest
formula:
11,
L +
::::
0
x
f,, 1
MO
::::
+ 62
f1
L +
fo
.
x
2f
Where,
L =
Lower limit of the modal class
f1 =
Frequency of the modal class
fa=
Frequency of the class preceding
apply
the modal class
Page 85
03.
eBook
f2 = Frequency of the class succeeding the modal class

61
i=
= f1 - fo, 62
= f1 - f2
Class interval of the modal class
Example
12:
The monthly sa v i n g s of 100 employees per month are given.
Saving
Table 3 . l O a :
Solution
per Month
Find the mode.
No. of
(In')
Employees
2000 - 3000
20
3000 - 4000
18
4000 - 5000
30
5000 - 6000
12
6000 - 7000
20
Distribution of Savings per Month of Employees
12:
Since the m ax i mu m frequency is 30, which corresponds to the modal class 4000-5000.
Therefore,
L +
.6.
.6.1 + l:i. 2
Here,
6,
= f
-f, = 3 0 - 1 8 = 12
= f, -f,
12
+
M o = 4000 +
12
= 4000
= 4000
= 3 0 - 1 2 = 18
x 1000
18
12
+ 30 x 1000
+ 400 = 4400
Page 86
03.
eBook
Example
13:
Find the value of mode from the data given
below:
Weight
93-97
98-102
103-107
108-112
113-117
118-122
123-127
128-132
12
17
14
(In kg)
No. of
People
Table 3. l O b :
Solution
Distribution of Weight (in kg) of people
13:
First, convert the classes into class boundaries.

Lower limit of class b o u n d a r y = Lower l i m i t of the corresponding c l a s s ('ower l i m i t of second clas - upper limit of first class)
Upper limit of class b o u n d a r y = Upper l i m i t of the corresponding class+

cower limit of second clas - upper limit of first class)
Weight
No. of
Class Boundaries
People
(In kg)
93 - 97
92.5-97.5
98 - 102
97.5 - 102.5
103 - 107
102.5 - 107.5
12
108 - 1 1 2
107.5 - 1 1 2 . 5
17
113 - 117
112.5 - 117.5
14
1 1 8 - 122
117.5 - 122.5
123-127
122.5-127.5
128-132
127.5-132.5
Table 3 . l O c :
D1stnbut1on of Weight (on
kg) of people
Here, the maximum frequency is 1 7 . The corresponding class 1 0 7 . 5 - 1 1 2 . 5 is the

mod a I class.
111
Therefore,
M0
= L +
til + b..2
Here,
11
= f
ti,
f, - f,
L +
f0 = 17 - 12 = 5
17 - 14 = 3
61
l:i.1 + /::J.2
Page 87
03.
Measures
eBook
of Central Tendency
5
=
107.5+--x5
5 + 3
25
= 107.5+
= 1 0 7 . 5 + 3 . 1 2 5 = 110.625
Advantages of Mode
Mode
can
be
used
to
describe
qualitative
phenomenon,
for
example,
when
manager wants to compare consumer preferences for different types of products.
The value of the mode can
It is not affected
be determined
graphically.
by extreme values.
Disadvantages of Mode
The
value of the
mode
is
not
two or more modes, making
Relation between
A distribution
distribution.
asymmetrical.
following
in
Mean,
which
When
relation
on
these
to
mean,
Solution
values
Karl
median are 27,
=,, 2 7
- 2Mean
Mean
series.
Some datasets contain
Pearson,
and
not
if
median
coincide
equal,
the
the
3Median
called
distribution
distribution
median, and
is
is
a
is
symmetrical
known
asymmetrical,
then
mode.
- 2Mean
21.6,
respectively.
Find the mean of the distribution.
14:
- 2Mean
..
are
h o l d s between the mean,
Mode = 3 M e d i a n
3 x 21.6
=,, 2Mean
of the
14:
The mode and
item
Median
mode,
Mode
Example
every
it difficult to interpret the result.
Mode, and
the
According
based
= 64.8
- 27
18. 9
Page 88
as
the
03.
eBook
3 . 1 1 Chapter S u m m a r y
One
of
the
most
important
objectives
of
statistical
value that describes the entire data. This is called
An
ideal average should
The
important
mean,
harmonic
different
grouped
series
of
mean,
of
mathematical
median,
and
observations
mode.
which
are
to
get
one
single
the central value or an average.
and
averages
is
calculate.
are
arithmetic
These averages
broadly
divided
can
mean,
be
into
geometric
calculated
ungrouped
for
and
data.
Arithmetic mean
and
types
be easy to understand
analysis
ungrouped
Weighted
can
by direct and
short-cut
methods for both,
grouped
data.
average
each value with
Geometric mean
H a r m o n i c mean
Median
is the
be solved
is
calculated
by
taking
into
account
the
relative
importance
of
respect to the total value.

is the average rate of c h a n g e over a period of time.
is based
middle
on the reciprocals of numbers averaged.
value of a series arranged
either in
ascending
or descending
order.
Mode
is
value
in
the
data
that
the observation corresponding
The
relation
between
mean,
occurs
most
frequently
for ungrouped
to the maximum frequency for grouped
mode and
median
is,
Mode=
3Median
data
data.
- 2Mean.
Page 89
or
is
M e a s u r e s of D i s p e r s i o n
I T M
04.
M e a s u r e s of Dispersion
eBook
4 . 1 Introduction
The measures of central tendency studied
in the earlier chapter provide values to which
observations are assumed to concentrate on a s i n g l e point.
However, central tendency is
unable to point the degree of variability among observations. Thus,

to
study
the degree of dispersion
distribution of observations.
that
provides
Different data
may
it becomes essential
higher understanding
have the same mean
to
the
pattern
of
but with different
variability.
Measures
the
of dispersion
expected
value.
convey
The
the
degree
measures
of
to
which
dispersion
values
that
are
in
a distribution differ
used
most
often
from
are inter
quartile range and standard d e v i a t io n .
After reading t h is chapter, you w i l l
be able to:
Explain the measures of dispersion
Define range, quartile deviation, absolute mean deviation,
standard
deviation,
and
coefficient of variation
Calculate
range,
q u a rt i l e
deviation,
absolute
mean
deviation,
standard
deviation,
and coefficient of variation
List the merits and demerits of important measures of dispersion
Page 9 1
04.
Measures of D i s p e r s i o n
4 . 2 M e a n i n g and
Dispersion,
observed
eBook
Definition
which means scatter,
values
vary
from
the
spread,
central
or variation,
value.
It
measures the extent to which the
helps
to
compare
two
or
more
sets
of
observations in terms of variability.
Some common definitions of dispersion are:

According
to
A.
L.
Bowley,
Dispersion
is
the
measure
of
the
variation
of
the
items.
In another definition,
according
to
B. C.
Brooks,
Dispersion
or spread
of the scatter or variation of the variables about a central
4.3
which data
To
is most useful.
test
the
average
in different ways and
in different scenarios to determine
Some important aspects of measures of dispersion are:
reliability
of the
average:
it
helps
to
determine the extent to
represents the characteristic of a statistical data.
the average is h i g h l y
No variation
value.
Significance of Measures of Dispersion
Measures of dispersion are used
is the degree
reliable and
if the variation
of
data,
with
dispersion or variation
has
respect
would
mean
to
It
correlation,
or
helps to compare two or

consistency.
greater
as compared
less degree of dispersion.
It is useful for further statistical analysis.

as
homogeneity
it
lack of consistency or uniformity,
serves
is small,
indicates uniformity of data.
series
to data that
If the variation
an
is large, an average is unrealistic.
To compare the variability of two or more sets of data:

more
which
basis
to
regression,
calculate
and
testing
other
statistical
measures
which
are
used
of hypothesis.
Page 92
in
04.
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4.4 Types of Dispersion

Measures of dispersion can
of dispersion and
be
broadly classified
into two categories,
absolute measures
relative measure of dispersion.
Measures of
Dispersion
Absolute
Relative
Measures
Measures
Quartile
Mean
Standard
Deviation
Deviation
Deviation
Coefficient
Coefficient
Coefficient
of Range
of Quartile
of Mean
Deviation
Deviation
Fig. 4.4a:
Absolute
of Variation
Types of Dispersion
Absolute dispersion
are
Coefficient
given.
Thus,
is expressed
they
are
in the same u n i t in which the original data series
suitable
to
compare
the
variability
of
two
or
more
distributions where units of measurement are the same.
Relative
They are expressed
in the form of ratios or percentages, or coefficient of absolute
measures of dispersion. Thus,
Methods of Studying
relative measures of dispersion are free from
units.
Dispersion
There are various methods to study dispersion.
Range
Quartile deviations
Absolute mean deviation
Standard deviation
Coefficient of variation
The most important methods are:
Page 93
04.
Range and
of
the
and
quartile deviations are
variable
standard
4.4.1
eBook
at
particular
positional
positions
deviation are called
in
measures,
the
since they
distribution.
The
depend
absolute
on the values
mean
deviation
mathematical measures of deviation.
Range
Range
is
between
the
simplest
the
value
method
of
the
studying
smallest
d i s t r i b u t i o n . " Mathematically,
Range=
of
it can
dispersion.
and
the
It
is
largest
be represented
defined
as
observation
"The
difference
included
in
the
as:
L - S
Where,
L =
Largest observation
S =
Smallest observation
If the
units
measure
to
of various data
a
distributions
measure
called
manager
given
that
is
in
for
sets are
different,
comparison.
different
independent
units
of
the
of
then
However,
the
to
measurement,
units
of
range
calculated
compare
a
the
manager
measurement.
This
is
not
variability
can
use
relative
useful
of
the
relative
measure
is
the coefficient of range.
Coefficient of range
5
L L+S
The coefficient of range
is the
ratio of the difference
between
two extreme observations
of the distribution to t h e i r sum.
Example 0 1 :
The daily wages of the workers, as given, are:
Daily Wages of the

Workers
50 - 100
100
- 150
150
- 200
200
- 250
(inf)
No. of Workers
Table 4 . 4 . l a :
10
18
15
21
Distribution of Daily Wages of the Workers
Page 94
04.
eBook
Calculate the range and coefficient of range for the given data.
Solution
Range=
01:
L -
= 250 -
50
Range = 200
.
L - S
250 - 50
200
Coefficient of range= L +
=
+
=
= 0.67
5
250
50
300
Example 0 2 :
The following table gives the age distribution of a group of 95 i n d i v i d u a l s :
Age
6 - 10
11 - 15
16 - 20
21 - 25
26 - 30
36 - 4 0
31 - 35
(In Years)
No. of
15
35
18
Individuals
Table 4.4. l b :
Distribution of Age of Individuals
Calculate the range and the coefficient of range for the given data.
Solution 0 2 :
This
is
an
respective
inclusive
class);
series
for
the
(value
equal
calculation
of
to
the
range,
upper
it
must
limit
be
of
the
class
converted
into
is
i n c l u d ed
a continuous
series, as shown in the following table.
Inclusive
Continuous
Classes
Classes
Frequency
6 - 10
5.5 - 10.5
1 1 - 15
10.5 - 1 5 . 5
16 - 20
15.5-20.5
15
21 - 25
20.5 - 25.5
35
26 - 30
25.5 - 30.5
18
31 - 35
30.5 - 35.5
36 - 40
36.5 - 40.5
Table 4.4.lc:
5
.
in
D1strobut1on of Age of Ind1v1duals
Page 95
04.
L = 40. 5,
Range=
eBook
S = 5. 5
L - S
= 4 0 . 5 - 5 . 5 = 3 5
Range=
35
5
L-
Coefficient of range=
= 40.5-5.5 =0.76
40.5+5.5
L + S
Applications of Range
It
is
used
in
industries
manufactured
It is useful
The
to
prepare
control
charts
for
statistical
quality
control
of
products.
in studying
meteorological
variation
in stock prices.
department
also
uses
range
to
determine
the
difference
between temperatures.
It
is
also
used
in
day-to-day
departmental store, determining
life.
For
example,
determining
daily
sales
in
monthly wages of workers in a factory, etc.
Merits of Range
It is the simplest method
It can
It is r i g i d l y defined, that is,
It is widely used
be used
to
understand
when the data
and the easiest to compute.
is of a qualitative nature.
it is subject to fluctuations, from sample-to-sample.
for quality control measures and
stock market fluctuations.
Demerits of Range
It is not based
It
is
highly
on every observation of d i s t r i b u t i o n .
affected
by
fluctuations
of sa m p l i n g .
It
does
not
give
any
information
about the character of distribution.
It cannot be used
4.4.2 Quartile
in case of open-ended cases, that is, open class intervals.
Deviation
Range as a measure of dispersion

the
observations
observation
is
are
within
discarded
the
the
has many
range.
limited
limitations.
Therefore,
range
when
It fails to explain
the
established
dispersion
is
more
how
of
the
scattered
extreme
instructive
and
representative of the entire data.
This
range,
range.
To
which
obtain
approximately the
includes the m i d d l e
this
range,
same size,
the
that
is,
50/o of the distribution,

observations
are
is called
divided
into
the inter-quartile
four
groups
of
one fourth of the observations or 25% of the total
Page 96
04.
Measures
of Dispersion
eBook
distribution. Thus, the distribution of data

second
the
quartile
median
obtained
of
after
quarter of
the
(Q,),
and
third
distribution.
discarding
This
one
observation
or
higher
quartile
inter-quartile
quarter
at
has three quartiles, first or lower q u a rt i l e (Q,),
the
of the
upper
end
(Q,).
The
range
is
observation
of the
second
quartile
calculated
at
the
from
observations
lower end
distribution.
That
represents
and
means
another
the
inter
quartile range represents the difference between the third quartile and the first quartile.
Three quartiles and
the
inter-quartile
range can
be
represented
graphically
as
shown
in
Fig. 4.4.2a.
Interquartile
Range
1"'
Lowest
2ow1
Quartile
Fig. 4.4.2a:
Quartile deviation
median
(Q.D.)
Deviation
Items
3,-,j Quartile
Quartile
Highest
Q,
Q,
Q,
the
of the d i s t r i b u t i o n .
by dividing
the inter-quartile range by 2.
Q 3 ; Q1
average
In
Range
Q1
is obtained
(Q.D.)
gives
Observation
Three Quartiles and Inter-quartile
Inter-quartile Range = Q3
Quartile
of
(median)
Observation
Quartile Deviation
of Items
amount
symmetrical
by
which
the
distribution,
two
the
quartiles
differ
two quartiles
Q,
from
and
Q,
the
are
equidistant from the m e d i a n .

Median - Q1 = Q, - Median
This
difference
exactly
small
of
variation
denotes
called
50/o
large
can
be
taken
as
the observations.
in
the
central
variation.
A small
50%
The
measure
of the
relative
of
dispersion.
q u a rt i l e
deviation
observations,
measure
The
median
denotes
while
corresponding
high
to
high
Q.D.
covers
uniformity
quartile
q u a rt i l e
deviation
deviation
the coefficient of quartile deviation.
or
Page 97
is
04.
eBook
Q, - Q l
=
Coefficient of Q . D .
Q, +
Quartiles for Ungrouped
To find
o,
Data
quartiles, first arrange the values in ascending
compute the values of the upper and
to
Upper quartile
to
above
= Q, = value corresponding
formula
is
applicable
then
lower quartiles.
Lower quartile = Q1 = value corresponding
The
order of their m a g n i t u d e and
if "N"
is
an
( N ; l rh
item
odd
(N4+ l) rh item
number
but
if "N"
is an
even
number,
say,
N =
Q1 =
10,
then:
N)'h
(4
value corresponding to
item
1)th
= value corresponding
to
= value corresponding
to
(2. s)"' item
= value of 2"'
Similarly,
the
+ 0 . 5 (value of 3'' item - value of 2"' item)
item
same
item
procedure
is
used
to
compute
Q 3,
if
the
value
of
is
an
number.
Quartiles for Grouped Continuous Data
The following
formulae are used
to compute quartiles for grouped
continuous data.
N
- - c.f.
Lower quartile = Q1 = L1 + 4
xi
3N
- - c.f.
Upper quartile
Q3 = L
x i
Where,
L1
Lower limit of the
respective quartile class, first or third
N = Total frequency
f = Simple frequency of the quartile class
Page 98
even
04.
Measures
i =
c. f.
of Dispersion
eBook
Class interval
= Cumulative frequency of class preceding
to the respective quartile class
Example 0 3 :
Calculate the quartile deviation

data
related
to the wages
and
the coefficient of quartile deviation
for the following
(tn e) of workers.
Wages
Less than 45
45 - 47
48 - 50
51
- 53
Over 53
18
(f)
14
No. of Workers
.
Table 4.4.2a:
Solution
03:
Following
table is used
62
99
D1strobut1on of Wages
(m f) of Workers
to compute quartiles.
Wages
No. of Workers
(f)
(f)
c.f.
Less than 45
14
14
45 - 47
62
76
48 - 50
99
175
51
- 53
18
193
Over 53
200
Table 4.4.2b:
.r'!_ = 200
Distribution of Wages ( i n ? ) of Workers
= 50
The c.f.
immediately greater t h a n
50
is
76;
therefore,
Q,
lies
in
the class 45
- 47
(first
quartile class).
N
- - c.f.
Lower quartile = Q1 =
4
L1 +-f-xi
45
50 - 14
62
= 46.16
3N = 3 x 2 0 0 =
150
4
The
4
c.f.
immediately
greater
than
150
is
175;
therefore,
Q3
lies
in
the
class
48
(third quartile class).
Page 99
50
04.
eBook
3N
- - c.f.
Upper quartile ; Q
L1 +
3;
x i
; 48 + 1 5 0 - 76
99
; 49.49
49.49 - 4 6 . 1 6
Thus,
Q.D.
1.67
Q, - Q ,
Coefficient of Q. D.
Merits of Quartile
It is considered to
It
also
be
not affected
It is useful
3.33
= 0.034
95.65
Deviation
can
49.49 - 4 6 . 1 6
49.49 + 4 6 . 1 6
Q3 + Q,
be a better measure of dispersion,
computed
for frequency
distribution
as compared
with
to range.
open-ended
classes.
It
is
by extreme observations.
in studying
the middle 50%
items in the series.
Demerits of Quartile Deviation
It is not applicable for any further mathematical computation.
It is affected
A variation
It is not based
considerably
in sampling
affects the value of quartile deviation.
on all observations.
4.4.3 Absolute
Mean
Absolute
deviation
mean
by fluctuations of s a m p l i n g .
Deviation
or
mean
deviation
(M.D.)
a b so l u t e deviation of a set of observations from

or
mode.
Mean
deviation
is
also
known
as
can
be
defined
its central value,
average
as
the
mean
such as mean,
deviation,
as
it
is
the
of
median,
average
difference between observations and central tendencies of the data set.
Mean
If
Deviation for Ungrouped
x 1 , x 2 , x3
. . . , Xn
are
an average "A" is given
M.D.
"n" given
Data
observations,
then
the
absolute
mean
deviation
by:
= .! L I X - A l = .! L I d I
n
Page
100
about
04.
Measures
eBook
of Dispersion
Where,
d ; x - A
x ; Value of observations
n ; Total n u m b e r of observations
A ; Central tendency of a data set
Note:
The
symbol
Ix
-Al
indicates
the
absolute
values
obtained
by
ignoring
the
sign
of
deviation.
The
relative
deviation.
measure
corresponding
to
mean
deviation
is
called
the
coefficient of mean
If the mean deviation is taken from the m e d i a n , t h e n :
Coefficient of mean deviation
(about mean)
M.D.
Mean
(about median)
MdD.
Me
(about mode)
,an
M.D.
Mode
Example 04:
The income of a group of five members is given
below.
Find
the mean deviation from the
median.
Income
3200
(t')
Table 4 . 4 . J a :
3400
3600
Income of a Group of Five
3800
3000
Page
101
Members
Solution 04:
First, the observations are arranged
in ascending order.
1
Median;
(n;
)'h
value corresponding
to
; value corresponding
to
; value corresponding
to 3'' item
l)th
T
(
item
item
04.
The
value
3400.
corresponding
The
mean
eBook
to
deviation
the
from
3''
item
is
the m e d i a n
3400,
A =
so
the
median
of
is calculated
3400,
the
as
given
shown
data
in
is
Table
4.4.Jb.
Income
I
Ix
34001
c,>
3000
1-4001
= 400
3200
1-2001
= 200
3400
I O I =
3600
12001
= 200
3800
14001
= 400
::I
Table 4.4.Jb:
Mean deviation =
.!. L I
= 1200
Income of a Group of Five
Members
Where,
Deviation of observations from median ignoring signs
io ;
12
Therefore, mean deviation =
240
This means that the average deviation of the i n d i v i d u a l incomes from the median income
is 240.
Example O S :
Calculate the mean deviation from median for a discrete series.
Table 4.4.Jc:
Discrete Series
Page
102
04.
Measures
Solution
Following
of Dispersion
eBook
05:
table
is
used
to
compute
mean
deviation
from
median
for
given
discrete
series.
c.f.
10
11
12
15
12
12
18
33
13
12
45
12
14
48
48
Table 4.4.3d:
= Lfl
M D
.
!'!.
I = L
48
Lf
I
'
= 36
Discrete Series
x - median
24
c.f.
just
greater
than
Therefore, the m e d i a n =
D.
= L fl
I = L f[
Lf
I=
24
a grouped
or
is
33,
and
the
value
of
"X"
corresponding
to
33
is
12.
12
36
0. 75
48
Mean Deviation for Grouped
In
The
M.
fl d i
[ d ]
continuous
Data
series,
first,
the
midpoint
of the
various
classes
is obtained
and the deviations of these points from the central tendency are computed.
The
mathematical
representation
or
formula
of
mean
deviation:
L f[
x - A
= Lf.
Page
103
where
04.
eBook
Example 0 6 :
Calculate the mean deviation
(about mean) for the following
Class Interval
data:
4 - 6
6 - 8
8 - 10
10 - 12
Frequency
Table 4.4.3e:
Continuous Data
Solution O 6 :
Mean deviation
{about mean)
L ti
x - X i
Now, arithmetic mean
Take assumed
" f(x
is given
Itd
X = A + N
-
by:
mean A = 7
-A)
X = A + L..,
=
N
Mid-
Frequency
(x
Class
value
(x)
- 7)
f(x - 7)
I =
Ix
7.21
(f)
4 - 6
-2
-6
2.2
6.6
6 - 8
0.2
0.8
8 - 10
1.8
3.6
11
3.8
3.8
10 - 12
Ifd
10
If!
x - X
= 2
14.8
Table 4.4.3f:
Mean deviation
(about mean)
.1:_
L ti
Continuous Data
148
x- X i =
= 1.48
10
Merits of Mean Deviation
It is less affected
by the value of extreme observation.
It is based
It is simple to understand and easy to compute.
It is rarely used
on every
item of the data.
in sociological studies.
Page
104
04.
Measures
of Dispersion
Demerits of Mean
eBook
Deviation
If mean deviation
is computed
from
the mode,
it is
not scientific because the value
of mode cannot always be determined.
It
does
not
take
mathematically
into
account
the
algebraic
Mean deviations cannot be calculated
It is affected
Standard
deviations,
which
can
cr (sigma)
for open-ended
classes.
be defined
and
as the
square
deviations from
was
first
root
of variance
arithmetic mean.
suggested
by
Karl
where
variance
Standard
Pearson
as
Computation of Standard
measure
For ungrouped data
For grouped data
Standard
Standard
Deviation
for two types of data:
(discrete series)
(continuous series)
Deviation for Ungrouped
deviation for ungrouped
Direct method
Short-cut method
Data
data can
For Direct Method, the formula is:
cr =
be computed
J L (x
by two methods:
- X)
Where,
a = Standard
x =
deviation
Observations
N = Total
number of observations
is the
deviation
dispersion.
It is calculated
are
Deviation
deviation
by
the
by the fluctuations of sample size.
average or mean of the squared

denoted
of
illogical.
4.4.4 Standard
signs
Page
105
is
of
04.
eBook
S t ep s for Calculation
Step 0 1 :
calculate the arithmetic mean of the data
(X)
Step
02:
take the deviations of the observation from the mean
Step
03:
square these deviations and obtain the total
Step
04:
d i v i d e it by N to obtain standard deviation
I<x-
(x - X)
X)
Example 0 7 :
Find the standard deviation of 4, 9,
11,
12,
17,
5, 8,
12, and
14.
Solution O 7 :
92
X=-=10.222
9
(x - X)2
11
12
17
12
14
38.7
1.49
0.60
3.16
45.9
27.3
4.94
3.16
14.3
I x = 92
I(x-X)2
= 139.55
Table 4.4.4a:
cr =
J I ( x - X)
J!
Discrete
Data
x 1 3 9 . 5 5 = 3.94
Short-cut Method
When mean
is not a whole number,
take the deviations

overcome
such
from
in a fractional value,
the mean and
difficulty,
short-cut
or
then,
obtain
assumed
it becomes a tedious process to
the square of these deviations.
mean
method
is
used
to
calculate
standard deviation. The short-cut method for calculating standard deviation is:
Where,
d = x - A = Deviation from assumed mean

A = Assumed
1d
1d
mean
= S u m of deviations
2
= Sum of square of deviations
N = Number of observations
Page
To
106
04.
Measures
Standard
Standard
of Dispersion
eBook
Deviations for Grouped Continuous
deviations
for
grouped
continuous
Data
data
can
be
measured
with
the
following
methods:
Direct method
Short-cut method
Step deviation method
For Direct Method, the following
steps can
be used
Step 0 1 :
Find
Step 0 2 :
Calculate the arithmetic mean using
to find
standard
deviation:
the mid-points of various class intervals
the formula:
Ifx
= -N
Step 0 3 :
Find
Step 04:
Square the deviations and
class and
the deviations "d" of the m i d - p o i n t s from
obtain
L fd'
, use
m u l t i p l y them
the formula:
For Short-cut Method, the following
by the respective frequencies of each
J I, fd
formula
the arithmetic mean
is used
J I, f(x - X)
to compute standard deviation:
Where,
d = x - A
A = assumed
mean
Example 08:
Find the standard
House
deviation
if house prices are, as given
below:
Prices
( In Thousands)
40 - 60
60 - 80
80 - 100
100 - 120
120 - 140
15
(ll')
Frequencies
Table 4.4.4b:
Continuous Data
Page
107
04.
eBook
Solution 0 8 :
= ::[fx = 3500
N
87_5
40
House Prices
Mid-
Frequenc
(In Thousands)
point
= (x -
fx
fd
87.5)
(x)
(')
40 - 60
50
250
1406.25
7031.25
60 - 80
70
630
306.25
2756.25
80 - 100
15
90
1350
6.25
93.75
100 - 120
110
880
506.25
4050
120 - 140
130
390
1806.25
5 4 1 8 . 75
::[ fx
Hd'=
3500
19350
Table 4.4.4c:
= J1
I fd'
= J19350 = 21.99
40
Step Deviation
Step
deviation
deviations
Continuous Data
Method
method
taken
from
is
used
assumed
to
make
mean
the
are
calculation
divided
by
easy
and
a common
simple.
factor
To
simplify
which
is
usually
the size of class interval to get the step deviation " d ' ''.
::[fd'
I td' 2
cr = ,1='-c--c-- - (--)
N
xi
Where,
( x - A)
i
i = the common factor or class interval

A= ass
u m e d mean
Page
it,
108
04.
Measures
of Dispersion
Combined Standard
It
is
possible to
the following
eBook
Deviation
compute the combined
standard
deviation
of two
or
more groups,
using
formula:
N1(crf + d f ) + N 2 ( cr + d )
"
-.,-
12 -
N1 + N2
Where,
cr.,
combined
standard deviation
cr,
standard
deviation of first group
cr,
standard
deviation of second
d1
1x
Where
1 -
12
1 ,
X 12 -
d,
Ix,
group
x.,I
N 1 X 1 + N2X2
N1 + N2
The above formula can
be extended
to find out the combined
standard
deviation of three
or more groups.
Example 0 9 :
The
number of workers employed,
deviations
in
each
section
of
the
the
mean
factory
wages
are
(in )
given.
per month,
The
deviation of all the workers are taken together as shown
mean
and
wages
in the following
Workers
Mean Wages
Standard
Employed
(Int)
Deviation
the
and
standard
standard
table.
Section
50
1113
60
60
1120
70
1115
80
90
.
Table 4.4.4d:
Solution
Sect,on-w,se
D1stribut1on of Wages
09:
The following
formula
= (50 x 1 1 1 3 )
is used
+ (60
to compute combined
x 1120)
+ (90
x 1115)
standard
223200 =
deviation of three groups.
1116
123
50 + 60 + 90
200
N 1 (0; + d ; ) + N , ( 0 ; + d ; ) + N , ( 0 ; + d ; )
CT 123
N1 + N, + N,
Page
109
04.
eBook
d.
= I X. - X 1 2 3 l = l l l 1 3 - 1 1 1 6 l = 3
d,
d,
= Ix, -
F," -
x,,,I = 1 1 1 2 0 - 1 1 1 6 I = 4
x;;;-1
N1
cr 123
o;
= 1111s-1116 I = 1
+ d ; ) + N, (
o;
o;
+ d;) + N 3 (
+ d;)
=
N1 + N , + N 3
50(60
cr 123
2
2
2
2
2
+ 3 ) + 60(70
+ 4 ) + 90(80
+ 1 )
=
s o + 6 0 + 90
1051500
200
"123
= 72.51
4.4.5 Coefficient of Variation
The
relative
measure of dispersion,
of variation and
based
on
standard
deviation
is called
the coefficient
is given as:
Coefficient of Variation
"
x
This
is generally expressed
Coefficient of Variation
in a percentage form, that i s :
" x 100
x
The coefficient of variation measures the spread
used
to
compare
the
two or more datasets.
variability,
homogeneity,
of data as a proportion of its mean.

stability,
uniformity,
and
The dataset for which the coefficient of variation
consistency
is
of
is greater is said
to be less consistent or less homogeneous.
It
Page
110
04.
Measures
Example
of Dispersion
eBook
10:
Wages paid
( i n " > to the workers in two factories, A and
Daily Wages
No. of Workers
(Inf)
in Factory A
in the table below:
No. of Workers
in
Factory
- 130
15
25
130
- 140
30
40
140
- 150
44
60
150
- 160
60
35
160
- 170
30
12
170
- 180
14
15
Table 4 . 4 . S a :
which factory
are given
120
180 - 190
Find
B,
Distribution of Workers According to Wage Group
pays a higher average wage and
which
factory
has a consistent wage
structure?
Solution
To
find
mean
10:
out
is
which
factory
calculated.
calculated.
For
The following
pays
the
higher
consistency
table
is
used
to
average
of
wage
wage
than
structure,
the
others,
coefficient
the
of
compute the average wages and
arithmetic
variation
coefficient of
variations for the given data.
Assumed
mean A =
1 5 5 and
h =
is
10.
Page
111
04.
eBook
MidWages
(x - A )
point
fA
fAd
d=
(t)
fAd
fad
fa
fad
h
(x)
120 - 1 3 0
125
15
-3
-45
135
25
-75
225
130 - 140
135
30
-2
-60
120
40
-80
160
140 - 1 5 0
145
44
-1
-44
44
60
-60
60
150 - 1 6 0
155
60
35
160 - 1 7 0
165
30
30
30
12
12
12
170 - 1 8 0
175
14
28
56
15
30
60
180 - 1 9 0
185
21
63
15
45
}J.d'
Ne=
-70
= 448
192
}JAd
NA=
200
Table 4.4.Sb:
}Jd
:i:fd
-158
562
Distribution of Workers According to Wage Group
For factory A:
XA = A + L/Ad x h = 155 + -
x 10
151. 5
200
NA
2
LfAd
70
-[LfAdJ
NA
h =
NA
448 - ( - 7 0 ) '
200
10
200
= 1 . 4 5 5 x 10
Coefficient of Variation for factory A =
"A
14. 55
100
XA
14 55
-
x 100
9.60
151.50
For factory B:
Xa = A + :d x h
1 5 5 + (-/
x 10
9528)
146. 77
cra
Lfad2 - ( L f a d J 2 x h =
Na
cra
1.499
192
Na
10 =
562 - ( - 1 5 8 )
10
192
14.99
Page
112
04.
Measures
eBook
of Dispersion
Coefficient of Variation for factory
B =
x 100
""
Xa
14.99
xlOO
146.77
= 10.22
Since the arithmetic mean

wage t h a n factory
B.
is higher for factory A,
The coefficient of variation
that is factory A pays a h i g h e r average
is less for factory A;
therefore, factory A
has a more consistent wage system than that of factory B.
Merits of Standard
Deviation
It is based on every observation of the d i s t r i b u t i o n .
It
can
be
groups.
used
To
variation
to
compare
It
It
gives
the
combined
variability
of two
or
standard
deviation
more distributions,
economists
or
two
the
or
more
coefficient
of
Deviation
For example,
the general
nature of extracting
readily comprehensible for a non-mathematical
greater
of
to be the most appropriate.
is difficult to compute.
root is not
the
is considered
Demerits of Standard
calculate
weight
to
extreme
businesspersons,
who
values
are
and
more
this
person.
has
interested
the square
not
in
found
the
favor
results
of
with
modal
class.
Difference between
In
mean
However,
The
sum
Mean
deviation,
in
the
standard
of the
Deviation and Standard
deviations
deviation,
squares of the
are
the
taken
from
deviations
deviation
Deviation
any
are
of items
of
taken
from
the
central
from
tendencies.
arithmetic
the arithmetic
mean.
mean
is the
least.
In
mean
standard
deviation,
algebraic
signs
deviation, s i gns are taken
are
ignored;
whereas,
in
the
calculation
into account.
Page
113
of
05.
eBook
Correlation
Correlation
relation
can
be
between
computed
any
two
only
for
variables.
numerical
This
data.
linear
It
measures
relation
can
be
the
degree
represented
of
linear
using
the
equation of a straight line,

Y = a +
bX
Where,
Y = the dependent variable
a = the intercept on Y-axis
b = the slope
X = the independent variable
ro
9
'
'
x
0
Fig. 5 . 2 a :
,o
'
Linear Correlation
5 . 3 Significance of Correlation
Study
the
of correlation
various
methods for forecasting
a p p l i ca b i l i t y owing
has
Most
factors
other,
such
demand,
different
and
applications
future
to the following
in
as
in
real-life
planning
by
executives.
income
factors.
and
between
expenses,
Such
It
It
is
used
has g a i n ed
as
one
of
enormous
reasons:
business environments exhibit

relationship
scenarios.
variables
etc.
relationships
some
All
are
like
these
identified
kind
price
factors
and
of relationship with
and
supply,
influence
measured
supply
one
with
each
or
the
and
more
help
of
correlation.
Once the
value
of
income
relationship
another
is
between the two factors is established,
variable.
established,
the
For
example,
value
of
one
once
the
factor
it is easier to find
relationship
may
be
between
derived
with
price
the
Page
and
help
another factor.
the
119
of
05.
eBook
Correlation
Correlation
estimating
tool
is
future
of absolute
projections,
importance
for
economists.
such as potential demand
They
use
the
of a commodity,
tool
for
effect of
price on sales, impact of advertisement in sales, etc.
The
tool
also
helps
business domain,
the
such
executives
as geographical
are crucial to decision-making
T h o u g h correlation
own
limitations,
is a widely used
as
well.
of
The
firm
to
locations,
identify
costs,
critical
profits,
factors
etc.
in
Such
the
factors
in business.
and
preferred
correct
use
of
tool
in statistical
correlation
tool
inferences,
depends
it has
on
its
correct
interpretations of the data derived from the tool.
5 . 4 Types of Correlation
Correlation
value
can
of one
be classified
variable
into
changes
various
due
to
types
depending
variations
in
the
on
value
the
pattern
of another
in
which
variable.
the
The
types depend on the relationship between two or more variables or the impact of change
in one factor on the other factors. The different types of correlation are as follows.
Positive and
Depending
Negative Correlation
on
variable's
change
in
direction,
correlation
negative correlation.
With
same direction,
there is a positive correlation
then
reference to each other,
is
classified
as
positive
if both the variables fluctuate

between them.
or
in the
Some examples of
positive correlation are:
Increase in advertisement expenses increases the sale of a product
Increase in
price of luxury goods such as, designer clothes or Rolex watches leads
to increase in demand of the said goods
Fig.
www. itmu niversityonline. erg
5.4a:
l l
Positive Correlation
Page
120
05.
eBook
Correlation
However,
value
when the decrease
of a different
fluctuate
in
variable,
the value of a variable is
that
is,
in the opposite direction,
with
reference
then there
to
identified
each
by an
other,
if
increase
both
is a negative correlation
the
in the
variables
between
them.
Some examples of negative correlation are:
Decrease in the price of petrol leads to increase in sale of cars
Decrease
in
the aviation
the
price of air tickets
witnesses an
number of air travel
in
industry
l
Fig.
Simple,
increased
Multiple, and
In simple correlation,
S.4b:
Partial Correlation
relation
between two variables is studied.
Some examples of
simple correlation are:
Price and
Age and
demand
of a product
income of the consumer
However,
when the
relationship
multiple
correlation.
It
between two or more variables is s t u d i ed ,
studies the
influence on a group
of factors.
it is known as
Some examples of
m u l t i p l e correlation are:
Effect of age of consumer,
income of consumer, and
price of the commodity on the
demand of the particular commodity
Effect
of
obtained
Partial
marks
obtained
Zoology,
Botany,
and
Physics
on
the
overall
marks
in an examination
correlation
studies
other variables u n c h a n g e d .
in
Production
of a
the
impact of one
variable
on
the
other,
keeping
effects of
Some examples of partial correlation are:
commodity
and
price
of
raw
material,
keeping
labor,
machinery,
keeping
geography,
and capital unchanged
Demand
of a commodity and
income of the
consumer,
and consumer preference constant
Page
121
price,
05.
eBook
Correlation
Linear and
Non-linear Correlation
The correlation
change
in
the
is said
other
to
be linear in
factor
in
the
nature,
same
ratio.
relationship between them,
it is represented
When any two variables do
not share
equation
then
of a
straight
line,
if the
ratio of change in one factor
When
any
two
variables
share
leads to
a
linear
are not represented
by an
by a straight line.
a linear
there exists
relationship and
a
non-linear
or
curvilinear
correlation
between them.
In
the
case
of
variables may
non-linear
or
curvilinear
correlation,
be in the form of a curve on the g r a p h .
the
With
relation
between
any
two
the change in one variable in
a non-linear correlation, the other variable will not c h a n g e with a constant ratio.
N o n - l i n e a r correlation
is represented
in
Fig.
S.4c.
1800
1600
I
1400
I
1200
I
1000
I
800
600
/
400
/
200
'
10
'
Fig. S . 4 c :
In
most
cases,
complex and
correlation
the
techniques
difficult and
hence,
of
Non-linear Correlation
interpreting
non-linear
a general assumption
type
of
correlation
is made that there
are
is a non-linear
between such variables.
Spurious Correlation
One
may
misinterpret
relationship
between
the cause and
effect
the
existence
of correlation
any two variables.

relationship
However,
between
as
the
existence of cause
correlation
does not
two or more variables.
and
necessarily
If there
effect
imply
is a cause and
Page
122
05.
eBook
Correlation
effect
relation
them
is certain.
Sometimes,
a
high
termed
For
any
two
variables,
two entirely unrelated
degree
of
correlation
then
variables with
between
them.
the
existence
no cause and
Such
of
correlation
effect
correlation
is
relation
between
may show
coincidence
and
is
as spurious or nonsense correlation.
example,
their
between
income.
numerical
there
is
no
However,
value,
which
cause
if
we
is
effect
calculate
due
cautious while interpreting
and
to
relation
its
between
correlation
change
only.
the
height
coefficient
Therefore,
it
is
r,
it
of
may
advisable
people
give
to
and
some
be
very
the correlation coefficient r.
5 . 5 Method of F i n d i n g Correlation u s i n g Scatter Diagram

He r e , the
using
the
method
explains
scatter diagram.
the scatter diagram

the
Y-axis.
The
can
how
to
identify
the
correlation
For a set of values taken
be
plotted
coordinate
points
by taking
can
be
one
by
between
the two
variable on
identified
as
(X,
If the coordinate points in a scatter diagram are closely

there
it
can
is a strong
be
correlation
interpreted
value of r will
that
between
there
is
them.
strong
positive
Based
on
variables
say,
the
X and
another on
clutter
it can
points are
correlation
be interpreted
in
upward
between
them
and
+1
'
y
3".i .. -
.. -"'
. ,:,.
. ., .
., r
:JJtM
,. .
. . , ,.,
Fig.
5.Sa:
Strong
and
Positive Correlation
Page
that
direction,
be close to + 1.
-1
Y,
be interpreted.
placed,
If the dense
variables,
two
the X-axis and
Y).
direction of points, correlation between the two variables can
any
123
the
05.
If
eBook
Correlation
the
direction
is
upward
and
the
points
are
dispersed
from
each
other,
it
can
be
interpreted that there is a weak positive correlation between them and the positive value
of r will be nearer to zero.
-1
+1
y ,

:
.
.
.

.
. . .
..
x
-
Fig. S . S b :
If
all
the
upward
points
in
scatter
direction as shown
Weak Positive Correlation
diagram
in the
Fig.
lie
on
S.Sc,
the
it can
same
be
straight
interpreted
line
and
move
in
the
that there is a perfect
positive correlation between them and the value of r is exactly equal to + 1.
-1
+1
v :
.,.
,
,,..
Fig.
If all the coordinate points
S.Sc:
Perfect Positive Correlation
in a scatter diagram are closely
in downward direction, then there is a strong
placed, and
negative correlation
if the
points are
between them and the
value of r w i l l be close to - 1 .
Page
124
05.
eBook
Correlation
+I
-.
!.-)
.....
. .,-:,
,
.........
:.
. ,
.
....
r.-.i1...
..,_,..,._.,
...
,.,.
. . ..
Fig.
However,
that
and
there
if the direction
is
a weak
S.Sd:
Strong
is downward
negative
and
the
correlation
points are dispersed,
between
them
and
the
it can
value
be interpreted
of
r is
negative
is close to zero.
+l
...
.. . . .
.,. .
. ..
..
::
..
Fig.
S.Se:
Weak
If all the points in a scatter diagram

in
the
Fig.
5.Sf,
it
can
be
between the two variables and
lie on the same line
interpreted
that
there
is
in downward
a
perfect
direction as shown
negative
correlation
the value of r is exactl y equal to - 1 .
Page
125
05.
eBook
Correlation
-1
+1
'
......
.....
.....
x
Fig. S.Sf:
If
the
points
in
direction at all,
scatter
it can
be
Perfect
diagram
are
interpreted
randomly
that,
there
is
spread
on
the
no correlation
graph
between
and
have
them
and
value of r is equal to zero.
-1
+l
'
y ,

.
.
. .
... :
.
.
: .. . .
. . . ..
. . .
. . .: . . .
. .
. .
. . .
. . . . a. : . .

. . .
.
.
. .
..
\
. .
.
.
.. .
.,
.
Fig.
5.Sg:

. I
No Correlation
Advantages of scatter diagram
It is a non-mathematical and
basic method of finding correlation.
It is quick,
It provides an approximate correlation
simple, and easy to understand.

between any two variables.
Disadvantages of scatter diagram
It gives only a rough
idea about the correlation.
It fails to give the exact degree of correlation
between two or more variables.
Page
126
no
the
05.
eBook
Correlation
Example 0 1 :
T h e following
data
gives
the
age
and
weight
of
the
players
in
state
football
team.
Prepare a scatter diagram for the given data.
Table 5 . S a :
Age
Weight
(In years)
(In kg)
29
60
31
60
27
65
30
70
28
62
35
63
28
64
29
74
32
73
30
69
Distribution of Age and Weight of 10
Players
Solution 0 1 :
Considering
age along
X-axis and
weight along
Y-axis,
the following
scatter diagram
can
be prepared.
so-
"'
-"
c:
60-
.c
40-
"'
;;;
;;:
20-
15
10
20
25
40
30
35
Age (In years)
Fig. 5 . S h :
Thus,
it
spread
may
be
noted
on the graph,
between
the
age
and
that
Scatter Diagram for Age and Weight
the
points
representing
the
nor do they follow a straight line.

weight
of
the
state
football
pairs of value are
not
randomly
This indicates that the correlation
team
is
non-linear
or
curvilinear
nature.
Page
127
in
05.
eBook
Correlation
5 . 6 Karl Pearson's Coefficient of Correlation

Correlation
variables.
analysis
used
to
identify
This degree of association
of correlation" and
The
is
most
widely
developed
by
is denoted
used
British
the
degree
is measured
of
association
between
by a numerical value called
any
two
"coefficient
by "r".
mathematical
biometrician,
formula
Karl
to
find
Pearson
the
(1867
coefficient
1936)
of
and
is
correlation
known
was
as
Karl
Pearson's coefficient of correlation method.
Cov(X, Y)
r=--
T h i s is the formula for Karl
Pearson's coefficient of correlation.
Note:
1.
Coefficient of correlation
2.
If r = + 1,
then there is
3.
If r = - 1 ,
then there is a perfect
4.
If r = 0,
Example
A sales
sales
+ 1, that is, - 1 ,; r ,; + 1.
perfect positive correlation.

negative correlation.
then there is no correlation.
02:
manager
observed
executives.
executives
and
figures
the
for
following
r lies between - 1 and
He
their
last
data and
that
wanted
to
some
analyze
performance.
quarter
are
fresh
The
given.
graduates
the
relation
experience
Calculate
between
of
the
perform
sales
better
the
than
experience
executives
coefficient
of
experienced
and
of
sales
their
sales
correlation
from
interpret the value.
Page
128
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05.
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Correlation
Name of the
Years of
Sales in
Experience
Lakh
Sales
Executive
Pradeep
Aka sh
Nisha
Yogesh
Rahul
Sajnay
0.25
Abha
0.50
Nair
David
2
5
Yasin
.
Table 5 . 6 a :
1.
Distribution of the
so
Experience and their Sales Figures of Sales

Executives
Solution 0 2 :
The
years
of
experience
is
denoted
coefficient of correlation the following
Name of
Years of
Sales in
the Sales
Experience
Lakh
Executive
(x)
(y)
by
the
variable
and
sales
by
Y.
To
find
the
table is constructed:
{x - x)
(v- v)
(x-xf
Pradeep
1.6250
-0.4500
Aka sh
-1.3750
Nisha
Yogesh
Rahul
(v-vf
(x-xXv-v)
2.6406
0.2025
-0.7313
-0.4500
1.8906
0.2025
0.6188
-0.3750
-2.4500
0.1406
6.0025
0. 9188
3.6250
2.5500
13.1406
6.5025
9.2438
4.6250
2.5500
21.3906
6.5025
1 1 . 7938
Sajnay
0.25
-3.1250
-1.4500
9. 7656
2.1025
4.5313
Abha
0.50
-2.8750
-0.4500
8.2656
0.2025
1.2938
Nair
-2.3750
-1.4500
5.6406
2.1025
3.4438
David
1.5
-1.3750
-1.9500
1.8906
3.8025
2.6813
Yasin
1.6250
3.5500
2.6406
12.6025
5. 7688
33.75
34.50
67.4063
40.2250
39.5625
Total
Table 5 . 6 b :
Distribution of the Experience and
their Sales Figures of Sales
Executives
Page
129
05.
eBook
Correlation
From the table:
Lx=33.75
X
LX
LY=34.50
= 33.75
= 3.375
10
LY
v =
and
= 34. 50
3.45
10
Now, calculate the values
ofL
(x - x )2 ,
L (y
- YJ
and
L (x
xXv - v).
From the above table,
L (x
- x)2
= 67.4063
L(Y-YJ
= 40.2250
L (x
xXv-
v)= 39.5625
Place these values in
Karl
Pearson's coefficient of correlation formula:
L(x-xXy-Y)
r =
--.=="'===-==-===-
JL (x
XJL
(y- YJ
39.5625
=
=0.7598
,/ 6 7 . 4 0 6 3
40.2250
r=0.7598
This
is
positive
experience
of
correlation
executives
with
and
their
reasonably
sales
high
figures
for
degree
the
of association
last
quarter.
It
between
indicates
the
that
h i g h e r the experience of an executive, the better their performance is.
Properties of Coefficient of Correlation
The
coefficient
of
correlation of (X, Y)
correlation
is
symmetrical
= correlation of (Y,
The coefficient of correl
If the variables X and
ation
with
respect
to
and
that
X).
is independent of change of origin and
scale.
Y are independent then coefficient of correlation
Y,
r =
Page
0.
130
is,
05.
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Correlation
Limitations of Correlation Coefficient
A high
value of r does
between
them.
It
not always i m p l y that
may
also
imply
that
both the factors have
both
the
factors
are
h i g h correlation
dependent
on
third
factor.
In
some
instances,
the
two
factors
t h o u g h there may not be any
If
the
data
misleading
At
times,
and
not
It
is
exhibit
high
correlation
basis for the relationship
in
nature,
advisable
to
correlation
ascertain
coefficient
between them.
coefficient
logical
even
may
relationship
provide
between
prior to the study.
it
hence,
logical
homogeneous
information.
the factors,
is
may
can
be
difficult
to
interpret
the
significance
of
correlation
coefficient
it may be misunderstood.
Applications of Correlation
Correlation
indicative
analysis
related
has
and
wide
not
range
of application
exhaustive.
is
is applicable to any field,
to each other.
the
The
about
common
logic w h i l e identifying
is some
not
possible
relationship
possible
Whether
there
is
Whether the
return
relationship
The
type
of
give
an
The
applications
exhaustive
list.
are
only
Correlation
in
list of a p p l i c a t i o n s
situation
under
be
is to stimulate the
study.
One
must
use
the relationships.
regression analysis can
be used
between them.
to identify:
relationship
between
the
Price-Earnings
(P/E)
ratio
of
its profit.
of a stock is
increasing
or decrease in the returns of BSE
fields.
between any two variables,
any
company's stock and
to
provide the
to investigate the cause and effect relation
Correlation analysis is used
various
where any two variables under consideration could
intention to
thinking
If there
It
in
relation
that
exists
(Sensex)
between
or decreasing
with
respect
to
increase
or N i ft y .
profit
and
expenditure
of
R&D,
sales
revenue, etc.
Whether the productivity of employees increase with
Whether there
and
relationship
between
the
money
in training
spent on
hours.
employee welfare
satisfaction.
Whether there
and gold
is any
increase
is
any
relation
between
price, wholesale price and
The type of relation that BSE
the
return
on
stock
and
inflation,
inflation
consumer price index.
(Sensex) and
gold
prices share between them.
Page
131
05.
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Correlation
Whether the dividend
per share increases or decreases with
respect to
increase or
decrease in earnings per share.
Whether
there
is
any
relationship
between
the
metal
expansion
rate
and
temperature.
The type
of
relation
that
is there
between
an
MBA
exam
score
and
performance
score on the job.
The relation
The
between the yield
relation
between
the
of a crop and the amount of fertilizers u se d .
change
in
bank
interest
rates
and
the
prices
of
real
estate.
Correlation
in
is also applied
accordance with
in stock market to analyze the change in the return of a stock
the change
in
the market
returns.
The
investor collects data on the
market and stock returns. An example is shown in Table 5.6c.
Period
Market Return
1.10%
-4.40/o
0.10%
-6.60/o
7.10%
6.00/o
3.00%
-0.50/o
3.70%
1 1 . 50/o
-1.80%
1 . 6 1 /o
0.60%
-2.30/o
-2.90%
15.40/o
-15.11%
- 1 4 . 90/o
12.56%
13.10/o
10
Table 5.6c:
To
analyze
market
has to
using
the
return,
change
in
correlation
Stock Return
the
Data of Market and Stock
return
analysis
identify the relationship
of a stock,
can
between
be
used
the
in
by
return
Return
accordance
the
on
with
investor.
stock and
the
change
For this,
the
the
market
Page
the
investor
return,
Karl Pearson's coefficient of correlation.
in
132
by
05.
eBook
Correlation
The
correlation
termed
between
any
two
variables
Coefficient of correlation
With
reference to each
r lies between
other,
if any
by
reference
to
each
other,
if
- 1 and
+ l , that is,
-1
two variables
then there exists a positive correlation

With
measured
If
the
direction
direction,
any
two
the
densely
plotted
represents a strong
it represents a weak positive correlation

closely
If
the
it
placed
points
in
coordinate
represents a strong
widely
dispersed
scatter
points
in
If
all
the
direction,
points
then
in
there
scatter
the
+l.
ct irection,
same
in
fluctuate
in
the
opposite
scatter
diagram
is
in
upward
between the two variables.

are
widely
spread
from
each

scatter
diagram
are
in
downward
diagram
are
directed
downwards,
it
diagram
exists
diagram
scatter
represents a weak negative correlation
in
negative correlation
points
in
r s
between them.
positive correlation
other,
the
directed
points
upward
direction,
it
of
fluctuate
variables
If the
If
value,
between them.
direction, then there exists a negative correlation
numerical
as "coefficient of correlation".
is
lie
on
perfectly
the
positive
same
line
correlation
and
in
an
between
upward
the
two
variables.
If
all
the
direction,
points
then
in
there
scatter
exists
diagram
perfectly
lie
on
the
negative
same
line
correlation
and
in
downward
between
the
two
variables.
If the
points are
randomly
there is no corre lation
The
existence
relation
The
of
spread
on
the graph and
have
no
ct irection at all, then
correlation
does
not
necessarily
imply
the
cause
and
between any two variables.
Karl Pearson's formula to calculate coefficient of correlation r is given a s :
L(x- xXy- v)
r -,...aaa..-...;,_....,_
L(x-xfL(y-vf
Page
133
effect
Rank Correlation
and
Regression Analysis
I T M
06.
Rank
Correlation
and
eBook
R e g r e s s i o n Analysis
6 . 1 Introduction
This chapter
introduces the concept of measuring
variables through
regression,
and
rank correlation.
coefficient
between these variables.

its properties, and
Rank
correlation
Spearman,
in
factors
that
factors.
To
frequently
can only
For
satisfaction
scale.
This
ranking
year
of
Spearman's
It
in
is
useful
nature
correlation,
between
two or more
as
you will see
the
degree
of
relationship
how to fit a regression
line,
this concept.
by
British
when
there
ranks
explains
multiple
calculating
is
are
psychologist,
no
are
correlation
quantitative
assigned
variables that
the
not
to
Charles
the
measure
factors.
Edward
between
for
these
Researchers
measurable quantitatively
but
on the basis of some characteristics.
are
does
given
research
to
not
be
projects
measured,
where
the
consumer
data
is
preference
collected
according
measure the characteristic quantitatively
characteristics.
correlation
rank
which
developed
qualitative
many
levels
of the
coefficient
in
scale
the
across
was
1904.
qualitative
be ranked
instance,
determination
regression analysis,
coefficient
calculate
come
In
relationship
introduces the concept of regression,
solve problems to understand
the
are
of
It also
the
to
In
identify
correlation
is
the
such
the
most
situations,
relation
you
cannot
between
appropriate
but
two
measure
to
or
to
employee
an
ordinal
it facilitates the
use
Karl
variables.
identify
Pearson's
Therefore,
the
relation
between two qualitative variables.
In
conclusion,
between
rank correlation
paired observations,
is
a technique
with
you
will
that
measures
strength
of association
respect to their ranks.
be able to:
Define Spearman's rank correlation
Illustrate Spearman's rank correlation coefficient
Define regression analysis
Discuss the applications of regression analysis
State the different types of regression
Discuss the different methods of obtaining
State the properties of regression coefficients
Define the coefficient of determination and
Explain multiple regression
the
regression
lines
its properties
Page
135
06.
R a n k Correlation
and
eBook
Regression A n a l y s i s
6 . 2 Spearman's Rank Correlation

Definition
The
strength
of
association
rank correlation coefficient.
between
pairs
It is denoted
of
by
ranked
data
"p" (rho)
is
computed
by
Spearman's
given as follow:
6Ld,
p=1---
n (n
2
-
1)
Where,
p =
Rank coefficient of correlation
n = N u m b e r of items or i n d i v i d u a l s being
d = R,
R1
R2 =
ranked
Difference of ranks between
paired
items of two series
Rank of items with
respect to the first variable
R2 =
Rank of items with
respect to the second
Rank
correlation
whether
ranks
correlation
method
are
is
based
given
is categorized
or
are
into three
Case 1 :
when
ranks are given
Case 2 :
when
ranks are not given
Case 3 :
repeated
Case
1:
on
the
to
variable
ranks
be
or order of
assigned,
the
the
observations.
process
of
Based
identifying
on
rank
possibilities:
ranks
when ranks are given
Example 0 1 :
company
training,
months,
gave
they
they
took
were
rank correlation
month-long
a
test
rated
between
and
with
training
were
to
10
ranked,
respect
to
sales
based
their
on
sales
t h e i r performances during
representatives.
their
the
performances.
performance.
training
At
and
Find
the
their sales
end
After
performance
Sales
2
10
Representatives
Rank Obtained
in
10
10
Training
Rank Based on Sales
Performance
Table 6 . 2 a :
Ranks of Performance of 10 Sales Representatives
eight
Spearman's
after e i g h t months.
of the
Page
136
06.
Rank
Correlation
Solution
Let
and
01:
us test whether there
obtained
eBook
in
the
training.
is any
relation
Since
the
between
given
data
the
is
performance
in
rank
order,
rating
we
and
need
the
to
rating
use
the
formula of rank correlation coefficient.
Rank
Rank Based
Sales
Obtained in
on Sales
Representatives
Training
Performance
(R1)
(R2)
d = R 1 - R 2
d'
-1
-2
-2
10
10
-2
10
1
Id'=
Table 6 . 2 b :
Ranks of Performance of
24
10 Sales Representatives
6 Z: d
Rank correlation coefficient:
p =
1 - 'c' -n(n
- 1)
Here, the sum of square of the deviations of paired
Therefore,
ranks is obtained a s :
:1:d
24
6
24
p - 1x
10 x 99
= 1 - 144
990
= 1 - 0 . 1 5
0.85
This shows that there is a h i g h degree of association

training and
(85%)
between the performance
the sales performance of the representatives.
Page
137
in
06.
R a n k Correlation
Case
2:
and
eBook
when ranks are not given
Example 0 2 :
Find
out
Spearman's
rank
correlation
between
internal
and
of postgraduate students' in a college from the data given
external
assessment
marks
below.
Internal Assessment
External Assessment
Marks
Marks
Name of the
Student
(Out of 100
(Out of 1 0 0 )
52
so
62
71
74
75
45
43
51
59
59
65
48
51
35
29
61
36
Table 6 . 2 c :
Internal and
External Assessment Marks of Postgraduate Students
Solution O 2:
In
this
example,
ranks
ascending or descending
The
internal
magnitude.
62, and
That
is,
not
given.
Therefore,
rank
data
1 to
values
the
will
highest
can
be
followed
to
be
assigned
value
The rank 9 is to be assigned
approach
first
assign
ranks,
either
in
an
order of m a g n i t u d e .
assessment
so o n .
similar
are
74;
ranks
rank
2 to
in
the
descending
second
to the lowest data value,
assign
ranks
to
data
order
highest
of
value
that is, 35.
values
in
the
external
assessment.
Following
table
is
used
to
obtain
the
rank
correlation
coefficient
between
internal
external assessment marks of postgraduate students.
Page
138
and
06.
Rank C o r r e l a t i o n a n d
eBook
Re g re s s io n Analysis
Internal
External
Name
Assessment
Rank
Assessment
Rank
Marks (Out
R1
Marks
R2
of the
d = R 1 - R 2
d'
Student
of 1 0 0 )
(Out of 100 )
52
so
-1
62
71
74
75
45
43
51
59
59
65
48
51
35
29
61
36
-5
25
Total
Table 6 . 2 d :
Internal and
36
External Assessment
Marks of Postgraduate Students
After assigning the ranks, the squared difference of the ranks are obtained.
2
Here,
ld
= 36
2
Rank correlation coefficient,
6 I; d
p = 1--
n(n2 - 1)
1 - 6 x 36
9 x 80
1 - 216
720
This is a fairly
1 - 0.3
0.7
h i g h degree of association so there is a positive relationship between the
internal and external assessment marks of postgraduate students.
Case 3 :
when
W h i l e assigning
rank can
ranks are repeated
ranks to data values,
be assigned
to
if any of the data values are repeated,
similar observations.
Suppose the
two observations at
8'" place are the same, the rank assigned to each of these two should
7
R a n k =
an average
be:
= = 7 . S
1"
Page 139
and
06.
R a n k Correlation
In
case of repeated
regular
formula
and
ranks,
of
eBook
for example,
Spearman's
obtain the correct formula,
rank
the term
if the
value
correlation
m(m' - l)
is
repeated
coefficient
is added
for "rn" times,
needs
to }:d
to
be
for eac h
then
the
adjusted.
To
repeated
value.
12
Example 0 3 :
Calculate
the
rank
correlation
coefficient
between
the
variables
and
for
the
data
given:
65
66
67
67
68
69
70
72
67
66
65
68
72
72
69
71
Table 6 . 2 e :
Observations of the Variables X and Y
Solution O 3 :
Here,
let
series
X,
highest
us
assign
we assign
value
that
ranks
rank
is
70,
to
the
observations
1 to
the
highest
and
continuing
in
descending
value that
in
the
is
same
order
of
magnitude.
72,
assign
rank 2 to
way,
assign
rank
4 to
the
For
second
data
value
68.
It
is
to
be
noted
that,
rank to both, which
5+ 6
the
value
67
is
repeated
is the average of the
twice,
therefore,
next two ranks,
5 and
we
assign
common
6.
11
Rank of 6 7 ; -2-;
5.5
2;
Continuing
with the next rank, we assign
For series Y, the highest value 72

and
rank 7 to 66 and
8 to 65.
repeats twice, so we assign the average of ranks
2 to both the values.

1
Rankof72;
; ; 1 . 5
2
Continuing
Following
X and
with the
table
2
next rank, we assign
is used
to calculate the
rank 3 to 7 1 ,
rank 4 to 69, and
so on.
rank correlation coefficient between the variables
Y.
Page
140
06.
Rank
Correlation
and
eBook
Rank R1
Rank R2
d = R1
d.
- R2
65
67
66
66
67
5.5
65
-2.5
6.25
67
5.5
68
0.5
0.25
68
72
1.5
2.5
6.25
69
72
1.5
1.5
2.25
70
69
-2
72
71
-2
4
Id2 = 2 7 . 0 0
Table 6.2f:
Observations of the Variables X and Y
After assigning the ranks, a new adjusted
correlation.
So,
in this case,
the term
formula w i l l
m('
- l)
be used
to find
has to be added
rank coefficient of
twice,
for adjusting
2
ranks of 67 and
72.
Rank correlation coefficient for repeated
[Ld 2
ranks
is:
+ m 1 ( m , 2 - 1 ) + m2(m/ - 1 ) )
12
12
p = 1 - ------------
2
n(n
1)
Where,
rn,
Number of times 67
repeated
rn, =
N u m b e r of times 72
repeated
For series X :
Since the value 67
m 1 ( m , 2 - 1 ) = 2(22
12
repeated
-1)
= _1_
12
two times,
to
hence by taking
m i = 2, we have
to add
}:d2.
For series Y :
Since the value 72
repeated
two times hence
by taking
rn, = 2, we
have to add
2
m1(m1
12
-1)
2(22
-1)
12
_1_
to
}:d2.
Page 1 4 1
06.
R a n k Correlation
By substituting
and
eBook
the values
in the formula, we get:

2
(L
6
Rank correlation coefficient
d' + 2(2
1J + 2(2
12
p = 1 - ----- -(- ,_
-_
)
8
1J)
12
_
6(2 7 + _!. + .!.)

= 1-
8 x63
= 1 - 168
504
= 1-0.3333
= 0.6667
Here
p = 0 . 6 6 6 7 i m p l i e s that, there is a h i g h degree positive association
between X and
Y.
6 . 3 Regression Analysis
Regression
define
and
the
plays an
important
relationship
education,
cost
role
between
of
in
two
the field
or
investment
more
and
of management.
related
profit,
variables,
demand
It
is a tool
such
and
as
that
level
supply,
helps to
of
income
income
and
expenditure, etc.
According
to
establish
the
functional
the
definition
nature
of
by
Ya
Lun
relationship
Chow,
Regression
between
variables,
analysis
that
attempts
is,
to
study
to
the
relationship between the variables and thereby provide a mechanism
for prediction or forecasting.
6.4 Applications of Regression Analysis
Regression analysis studies the relationship between two or more variables.
It enables a person
to find
the value of a dependent variable from
an
independent
variable.
It
is
useful
for
the
calculation
2"
determination "r
or "R
coefficient
of
correlation
"r"
and
coefficient
of
".
It estimates the statistical

consumption,
of
curve
between
the variables
like demand,
supply,
price, etc.
Page
142
cost,
06.
Rank
Correlation
Using
and
regression analysis,
price and
eBook
it
is possible to
identify the relation
Gold
Wholesale price and consumer price index
Amount of fertilizers and
Amount of rainfall and
Income and
Volume of production and
Profit and
Income and
its sales
increase or decrease in crop
crop
production
production
expenditure
percentage of defects
expenditure on advertisement
insurance of a policy
Distinguish between Correlation and
Distinguish
between:
between correlation and
holder
Regression
regression
is given
in the following
Correlation
It is the relationship
table.
Regression
between two or
It is a mathematical measure,
which
shows the average relationship
more variables
between two variables

It measures the degree of relationship
It is the measure of the nature of the
relationship
It does not study the cause and
effect
of a variable
It studies the cause and

relationship
between variables and
establishes a functional
The coefficient of correlation
relative measure and
+1
and
is a
it lies between
-1
effect
relationship
The coefficient of regression

absolute figure.
of an
If you
is an
know the value
independent variable,
you can
calculate the value of a dependent

variable
It is
not of much use for further
algebraic treatments
Table 6 . 4 a :
It is very useful for further algebraic

treatments
Distinguish between Correlation and
Regression
Page
143
06.
R a n k Correlation
and
eBook
6 . 5 Types of Regression
Simple and
In
simple
Multiple
regression,
dependent
and
relationship
Regression
only
other
is
two
an
between demand
Linear and
When
one
called
are
independent
and
variables are taken for study,
variables
supply.
taken
for
variable.
For
study,
which
example,
On the other hand,
it is a m u l t i p l e
in
the
when
one
is
functional
more t h a n
two
regression.
Non-linear Regression
variable
linear
changes
regression.
with
In
another
non-linear
variable
in
regression,
some
as
one
constant
ratio,
variable
varies,
it
is
the
other variable does not change in a constant ratio.
Partial and Total Regression
The
regression
consideration
other
is
and
variables
called
the
partial,
relation
constant.
simultaneously,
In
in order to find
total
deviations
drawn
of the
by this method
Scatter Diagram
In
this
drawn
method,
passing
non-linear.
It
shows the
lines
o
f
Regression
variables
all
the
is
are
studied,
variables
taken
into
keeping
are
the
studied
them.
regression
lines.
values
in
from
such a way that the sum of squares of

the
fitted
line
shall
be
least.
The
line
is known as the line of best fit.
Method
values
through
of
variables
the
plotted
are
ability and
plotted
points.
This
not used,
on
graph.
regression
as
free
line
can
it varies from
hand
be
person
line
linear
to
is
or
person
interpretation of the result.
Line of Best Fit
relationship
regression
variables
Lines
This technique is generally
Line or
two
regression,
line is fitted
observed
in their decision-making
Regression
only
more
Method
In this method, a regression

the
or
the relationship among
are the methods of obtaining
Least Square
two
between
6 . 6 O b t a i n i n g Regression
Following
if
between
two variables.
If two variables are
X and
Y,
then
two
are:
line of X on
Y:
this
line gives
the
best
estimate
for the
value
of X for
any given value of variable Y.
Page
144
06.
Regression
eBook
line of Y on
X:
this
line gives the
best
estimate
for the value of Y for
any given value of variable X.
Regression
Equations
It is an algebraic representation of a regression
lines. There are two forms of regression
lines.
Regression
It
is
Line of Y on X
obtained
by
using
the,
"Least
Square
Method."
The algebraic
form
of the
line
of
regression of Y o n X i s :
.............
Y=a+bvxX
Where, "a" is Y-axis intercept and
Let
(X1,
Then,
Y1),
(X 2,
Y2)
(X,,
... ,
the constants a and
Y,)
bvx
(1)
''bvx" is slope value of the
regress ion
be "n" pairs of observations on
in equation
( 1 ) , can
be obtained
line.
the variables X and
by solving
following
Y.
two
normal equations:
LY=na+bvxLX
L XY
The
aL x
values
equations
+ bvx
of
(2)
...........
L x'
'2.Y,
'2.X,
and
(3)
(2)
(3)
'2.XY,
and
'2.X'
simultaneously,
can
be
obtained
constants
"a"
from
and
the
"bvx"
given
are
data.
Solving
calculated
by
the
following formulae:
If assumed
mean
method
is used,
the constant
bvx
is calculated
by
using
the following
formula:
bvx
nLdxdv - L d x L d v
= ----=="c-nI; d x 2 - {z: d x J 2
Where,
dx = (X - A)
= Deviation of the observations from assumed
mean A for variable X
dv = (Y - B)
= Deviation of the observations from assumed
mean B for variable Y
Page 1 4 5
06.
R a n k Correlation
Regression
It
gives
and
eBook
Line of X on Y
the
best
estimate
for
the
value
of
for
any
given
value
of
variable
X.
The
algebraic form of the line of regression of X on Y is:

X=c+bxvY
Where,
"c"
determined
(4)
is
X-axis
intercept
by solving
and
"bxv"
equations
LX,
of
(5)
value
of the
regression
line.
Both
are
(5)
. . . . . . . . . .
values
slope
following two normal equations:
LX=nc+bxvLY
The
is
and
LY,
(6)
LXY,
and
(6)
LY'
simultaneously,
can
be
obtained
constants
c and
from
bxv
are
the
given
data.
calculated
by
Solving
using
the
following formulae:
If assumed
mean
method
is
used,
the
constant
bxv
is
calculated
by
using
the
following
formula:
bxv
nLdxdv - L d x L d v
= --=-=nL d v 2
- CT; d v ) 2
Example 04:
Find
the equation of regression
Y for given value X =
line Y o n
X from the following
data.
Estimate the value of
53.
x
y
Table 6 . 6 a :
Observations of Variables X and Y
Solution 0 4 :
Finding
the
equation
of
regression
line
on
means
to
find
values
of
slope
bvx
intercept a of the l i n e of regression:

Y = a +
bvxX
Page
146
and
06.
Rank
First,
Correlation
we
count
the
columns XY and
and
number
eBook
of
values
"n",
Here,
5.
Then,
For the calculation, we construct Table
calculate
the
values
of
6.6b.
xv
so
3.1
155.0
2500
51
3.5
178.5
2601
53
3.3
174.9
2809
55
4.0
220.0
3025
56
3.9
218.4
3136
17.8
IXV = 946.8
IX=
IV=
265
Table 6 . 6 b :
From
IX
14071
Observations of Variables X and
the table:
}:X
= 265
}:Y
17.8
}:XY = 946.8
2
}:X
14071
Substitute the above values in the formula of a slope.
Slope, bYX
" 'X:'f - " X"
=
,:_,
,:_,
,:_,
"L
x2 -
o: x)2
Sx 946.8-265x 17.8
=-------2
5 x 1 4 0 7 1 - (265)
4734-4717
=------
70355 - 7 0 2 2 5
17
= - = 0.13
130
Now,
substitute
the
value
of
bvx
0.13,
in
the
formula
Ly=
na + byx
LX
to
compute
the value of intercept a.
Intercept,
a=
LY -
byx
LX
n
1 7 . 8 - 0.13(265)
=----
5
- 16.25
=---
-3.33
Page
147
06.
R a n k Correlation
Now,
and
line Y o n X.
substitute these values in the equation of regression
Regression equation:
That
eBook
Y = a + bvxX
-3.33 + 0.13X
is, Y =
Therefore,
the estimated
Y =
-3.33
+ 0.13(53)
-3.33
+ 6.89
value of Y for the given value of X =
53
is:
= 3.56
Hence, the estimated
value of Y for the given value of X
53
is Y
3.56
Example 0 5 :
Using
the following data find out the equations of regression
X on Y
Yon X
line:
v
Table 6.6c:
Observations of Variables X and V
Solution O 5 :
Following
table is used
to find out the equations of regression
l i n e X on Y and
Y o n X.
xv
27
20
729
400
540
33
16
1089
256
528
34
28
1156
784
952
49
31
2401
961
1519
so
36
2500
1296
1800
so
46
2500
2116
2300
51
54
2601
2916
2754
IX=294
IV=
231
Table 6 . 6 d :
IX
12976
IY
= 8729
IXY =
10393
Observations of Variables X and V
Page
148
06.
Rank
Correlation
and
eBook
The equation of regression line X on Y is:

X=c+bxvY
n I: X Y - I: X I: Y
Where,
bxv
"L
bxv
I: X - b x v I: Y
c = =-
and
y2 -
(I: Y)
2
n
= (7 x 1 0 3 9 3 ) - (294 x 2 3 1 ) =
0_62
(7 x 8729) - (231)2
C =
I: X - b x v I: Y
= 294-0.62x231
=
21.54
Hence,
line X on Y is:
X=c+bxyY
X = 21.54
+ 0.62Y
The equation of regression line Y o n X is:

Y=a+byxX
n I: X Y - I: X I: Y
W h ere,
b vx
d
an
I: Y - b v x I: X
a
= ----
n I: X 2 - (I: x )
_ nI:
xv -
I: XI: Y
(7 x 1 0 3 9 3 ) - (294 x 231)
(7 x 12976) - (294)2
=
vx
nI: x2 _ (I: x)2
I: Y - b v x I: X
a =
2 3 1 - ( 1 . 1 x 294)
=
= - 1 3 . 2
Hence,
1.1
line Y o n X i s :
Y=a+byxX
Y =
-13.2
Arithmetic Mean
1.lOX
Method to Find
If the values of variables are

simple
linear
equation
is
large,
Regression
Lines
then calculation of the regression equation through a
cumbersome.
Therefore,
the
arithmetic
mean
method
is
for large v a l u e s .
Regression equation of Y o n X i s :
(v - y) =
r cry
(x -
x)
crx
Page
149
used
06.
R a n k Correlation a n d
I (X
cry
byx
- X)(Y - Y)
r - = =--=-
eBook
(X - X)
Regression equation of X on Y is:
(x-x)= r(v-v)
cry
cr x
- r
b
XY
(X - X)(Y - Y)
-=----
I (Y
- Y)2
Where,
X and
r crx
= Arithmetic means of variables X and Y,
= The regression coefficient of
respectively
X on Y
cry
r cry
= The
regression coefficient of Y on X
crx
r = Correlation coefficient between X and Y
2
cry = Standard deviation of Y =
JI (Y n-
Y)
ex = Standard deviation of X =
JI (X n-
X)
Example 0 7 :
Using
the following data find out the equations of regression l i n e :
Yon X
X on Y
x
y
Table 6 . 6 e :
Page
150
06.
Rank
Correlation
Solution
and
07:
(X-X)
( Y - Y)
(X - X)2
(Y - Y)2
(X - X)(Y - Y)
11
12
-29
-33
841
1089
957
19
24
-21
-21
441
441
441
29
34
-11
-11
121
121
121
41
44
-1
-1
49
59
14
81
196
126
61
68
21
23
441
529
483
70
74
30
29
900
841
870
280
315
2826
3218
2997
Table 6.6f:
From
eBook
the above table:
X =
280
x =
= 40
and
y =
Regression equation of Y on X is:
Y =
(y - Y) = r "v (x -
315
= 45
x)
"x
ay
L (X
- X)(Y - Y)
r- =
2997
=
"x
(X - X)2
= 1.0605
2826
Therefore, ( Y - 4 5 ) = 1 . 0 6 0 5 ( X - 4 0 )
Y - 45 = 1 . 0 6 0 5 X - 4 2 . 4 2
Y = 2 . 5 8 + 1.0605X
Hence,
the regression equation of Y o n
Regression equation X on Y is:
X is:
(x- X ) = r
"X
Y = 2. 58 + 1 . 0 6 0 5 X
(y - Y)
ay
-
r _<J_)(_ =
ay
( X - XH't' - Y)
L (Y
Therefore,
= 2997
- Y)2
= 0.9313
3218
(X - 40) = 0 . 9 3 1 3 ( Y - 45)
X - 40 = 0 . 9 3 1 3 Y - 4 1 . 9 1
X = 0.9313Y-1.91
Hence,
the regression equation of X on Y is:
X = 0.9313Y - 1 . 9 1
Page
151
06.
R a n k Correlation
and
eBook
Properties of Regression Coefficients
The value of regression coefficients lies between
The
correlation
coefficient
between
two
of the regression coefficients, therefore,
X and
If the variable
to co.
-ro
variables
is
equal
to
the
geometric
mean
r = Jbxybyx
Y are independent,
then the
regression
coefficients are equal
to zero.
If one of the regression coefficients is greater than

That
is,
if bxv >
1 then
bvx
< 1 and
if bxv <
1,
then the other is less than
1 then bvx >
1.
1.
Example 08:
If ex = 3,
bxv = 0. 94, and
bvx = 0. 98, then f i n d :
Correlation coefficient
Standard
deviation of Y
Solution 0 8 :
r = Jbxybyx
r = .J 0 . 9 4 x 0 . 9 8
Standard
bxv
= 0.96
deviation of Y:
"X
= r
cry
3
0.95=0.96xcry
0 . 9 5 cr y
= 0.96 x 3
Therefore,
cry
= 3.03.
6 . 7 Assumptions of L i n e a r Regression
The
relationship
coefficient can
between
two variables
be m u l t i p l i e d
nor divided
must
be
linear,
The independent variable X is not random.
The expected
The variance of the error term
The covariance between the error terms is assumed
The distribution of the error term
is,
neither
regression
by another regression coefficient.
value of the error term
that
is assumed
to
be zero.
is constant for all observations.
is
to be zero.
normal.
Page
152
06.
Rank
Correlation
and
eBook
6.8 Coefficient of Determination

The square of correlation coefficient
denoted
regression
Where,
by
or R
line.
and
and
is
It is given
the
r is termed
percent
of
by the following
Y are the means of X and
as the coefficient of determination.
variation
that
can
be
explained
It
is
by
the
in
the
formula:
Y,
respectively.
O'x =
L, ( Y - Y )
and
O'y
6.9 Properties of Coefficient of Determination
The
coefficient
of
dependent variable, which
The
coefficient
of
implies
it
that
is
the
proportion
of
the
variation
is predictable from the independent variable.
determination
between X and Y and

2
determination,
is
ranges from
the
the
O to
dependent
square
of
the
correlation
coefficient
(r)
1.
variable
cannot
be
predicted
from
the
i m p l i e s that the dependent variable can
be
predicted
without error from
the
The value of r' indicates the extent to which the dependent variable
r'
0.30
remaining
The
means
scatter
of
data.
plot,
variables.
30%
of
the
70% of the total variation
coefficient
represents
that
it
determination
If the
means
If the
line
line
on
is
regression
that
the
is away
in
is
predictable
from
and
the
in Y remains unexplained.
a
line
line
from
variation
is predictable.
is
the
measure
passes
able
points,
of
how
exactly
to
it
well
through
explain
all
means
that
the
regression
every
the
point
variations
the
on
line
the
among
l i n e explains
less
variation.
The
regression
can
be
graphically
represented
as
shown
in
the
following
figure.
Page
153
06.
R a n k Correlation
and
eBook
Regression line: Y= a+bx
'
.,
..
'
'
'
'
Fig.
The following
6.9a:
Regression
example shows the computation
Line Y o n X
of regression
line Y o n X and
coefficient of
determination.
Example 0 6 :
Five
randomly
selected
their statistics course.
students
took
The following
mathematics
aptitude
test
before
table shows the scores of students,
they
started
X represents the
scores of the aptitude test and Y represents the scores of statistics:
Student
Table 6 . 9 a :
Find
the
based
92
75
84
77
66
88
85
75
66
70
Students' Scores in Aptitude Test and in Statistics
regression
equation
that
predicts
the
performance
of
statistics,
on the aptitude scores.
If a student scores 85
to get
linear
in the aptitude test, what score would
you expect h i m or her
in statistics?
How well does the regression equation fit the data?
Page
154
06.
Rank
Correlation
and
eBook
Solution 0 6 :
Following
table is used
to obtain
regression
line.
-
Student
(Y - Y)
(X -
(X - X)(Y - Y)
(Y - Y)
XJ'
92
88
13.2
11.2
174.24
125.44
147.84
75
85
-3.8
8.2
14.44
67.24
-31.16
84
75
5.2
-1.8
27.04
3.24
-9.36
77
66
-1.8
-10.8
3.24
116.64
19.44
66
70
-12.8
-6.8
163.84
46.24
87.04
394
384
382.8
358.8
213.8
78.8
76.8
Total
Mean
Table 6 . 9 b :
Students' Scores in Aptitude Test and in Statistics
The regression equation

Now,
(X - X)
we have to find
is of the form:
Y = a +
bvxX
out the coefficients of regression a and
bvx, which
is calculated
as:
a = Y -bX
a =
76.8 - 78.8b
I (x
L (x
vx -
= 0.56
(2)
the value of bvx in equation
( 1 ) , we get:
32.67
(3)
Therefore, the regression equation
In
...........
xf
382.8
Substituting
a =
(1)
xXv - v)
= 213.8
YX
........
the
example,
The dependent
the
independent
variable Y is the
aptitude test, the estimated
+ 0.56
y =
32.67
y =
80.272
Once
you
variable
have
Y for
any
is, Y = 3 2 . 6 7
variable
student's
is
+ 0.56X
the
statistics
statistics score would
student's
score.
score
in
the
If a student
aptitude
scored
85
test.
in
the
be:
85
regression
value
of
determination we proceed
equation,
independent
you
can
variable
calculate
X.
the
For the
value
of
calculation
the
dependent
of coefficient
as follows:
To check how well the regression equation fits the data,
2.
we have to compute R
Page 1 5 5
of
06.
R a n k Correlation
and
2
R
= ji
L (X
X)
x (Y -
eBook
Y))
= ji
( 2 1 3 . 8))
74.12
cr x cr y
R2 = { 4 2 . 7 6 } 2 = 0 . 3 3
74.12
2
Where
JL (xN-x)
ox
2
= 8.7499
The coefficient of determination

the statistics grade is based
Standard
The
will
cry
is equal to
JL (v v)
= 8.4711
0.33,
implies that
which
33%
of variation
in
on the mathematics aptitude scores.
Error of Estimates
regression
values
and
(xs.
equation,
v.).
(x,,
be Y = y, and
a - bx,
y,)
Y = a
...
(x,,
the
bX
y,)
the estimated
determines
is an
estimated
of variables,
value for x, w i l l
error
committed
form
X and
be
while
Y.
of the sample of "n"
For X =
= a +
xr,
pairs of
the observed
value
b x . : Therefore, the difference
estimating
the
value
of
by
the
regression equation.
In
simple
regression
for all observed
analysis error variance
values to the total
I; ( y , - y , ) 2
is
the
ratio of the
number of samples, that is,
sum
of squares of errors
sample size n.
I; ( Y ; - a - b x ) 2
1
cre
===
This
is also called
a residual variance. The square root of variance is called the standard
error of estimates.
mean ( Y )
This
The variance of deviations of estimated values
y,
from the sample
is given a s :
equation
is
known
as
variance
of
the
values
of Y
explained
by
the
regression
equation of Y o n X.
Page
156
06.
The
coefficient
analysis.
The
of
determination
coefficient
eBook
of
measures
determination
(r
effectiveness
2
lies
or
between
reliability
and
of
The
1.
regression
greater
the
value of r', the better the effectiveness or reliability of the regression equation.
2
Explained
variation
r' = =
2
Total
oe
variation
6 . 1 0 M u l t i p l e Regression
In
simple
regression,
independent
function
variable
of more than
between them
The linear
dependent
X.
Whereas,
one
is measured
relationship
in
is
multiple
independent
expressed
regression
variable,
say
X1,
as
the
X2,
function
dependent
X3
and
of
single
variable
the
is
relationship
by the m u l t i p l e correlation coefficient.
between
and X, can be expressed
variable
dependent variable Y and
two
independent variables
X1
in the form of a regression equation of Y o n X,, X, as:
Y = b0 + b 1 X 1 + b 2 X 2
Where,
b0 = Intercept of the line

b,,
b2 = Regression coefficients or constants
The
least
values
of constants
squares.
Here,
bo,
b1,
and
b2 are
estimated
with
the
the formulae to calculate the values of bo,
help
b,,
of the
and
principle
of
b, are obtained
by solving the normal equations simultaneously.
The normal equations are given as follows:
IY
nb0 + b 1 I X 1 + b 2 I X 2
LX1Y
LX2Y
The
b0LX1 +b
b0LX2
regression
LX! +b2LX1X
+b1LX1X2 +b
constants
b0,
LX
b 1,
and
b2
can
be
thus
obtained
by
using
the
mentioned formulae.
Page 1 5 7
below
06.
R a n k Correlation
and
_ ( 1: Y X 1
1
2
-2
2
-2
- 2
( I: X 1 - n X 1 ) ( I: X 2 - n X 2 ) - ( I: X 1 X 2 - n X 1 X 2 )
_ (1: YX2
-2
- n Y X 2 ) ( 1: X1
2
-
b0
-2
- n Y X 1 ) ( 1: X 2 - n X 2 ) - ( I: Y X 2 - n Y X 2 ) ( I: X 1 X 2 - n X 1 X 2 )
eBook
(1:
Xt -
- n X 1 ) - (1: YX1
x -
nXtHI
- -
- n Y X 1 ) ( 1: X 1 X 2
n X ) - (1: X 1 X 2
- nX1X2)
- nX1X2>2
=Y-b1X1-b2X2
Multiple Coefficient of Determination

It
is
defined
as
the
ratio
of
variation
explained
by
the
variation of the dependent variable Y. This is denoted
by
regression
equation
and
total
R2 =
Therefore,
Explained
Total
Where,
the
total
variation
variation
variation
in
in
is
eq u a l
equation plus the variation unexplained

Total variation
-
= explained
L ( Y ; - Y)
L(Y,
Y =
in
to
Yl
L (Y;
L (Y;
- Y)
the
variation
explained
by
the
regression
by the regression equation, that i s :
+ unexplained variation
variation
+ 1: ( Y ; - Y ; )
- Y)
Thus, above equation of R
can
be represented as follows:
2
_ Unexplained
variation
in
Y =1-L(Y;-Y;)
1
Total
The
square
root
variation
of
2,
in
where
L(Y, - Y ) 2
is
known
coefficient that explains the correlation

derived
as
the
coefficient
of
multiple
between the dependent variable and
from the m u l t i p l e regression equation.
It lies between O and
correlation
its estimate
1.
Example 09:
The owner of ten
of next year's
the current
given
projected
year's
below.
stores
sales
in a supermarket wishes to forecast
the
sales of vegetarian and
non-vegetarian
(in
profit
crores)
and
the
net
(in
net
food
crores)
profit with
items.
of a l l
the
the
The data for

ten
stores
Also obtain the coefficient of multipl e correlation coefficient.
help
Page
158
is
06.
Rank
Correlation
and
eBook
Supermarket
Net Profit
Store
Sale of Veg.
Sale of Non-veg.
Food Items
Food Items
x,
X2
5.2
22
5.1
13
5.2
20
5.7
22
5.3
17
6.6
23
5.6
25
8.4
27
5.5
26
10
6.5
20
5
.
Table 6 . l O a :
Current Year's Sales and the
Net Profit of All Ten Stores in a
Supermarket
Solution
09:
The multiple regression equation can
be written as:
b0
+ b1X1
+ b2X2
Where,
Y =
Net profit
X1 = Sales of vegetarian food
items
X2 = Sales of non-vegetarian food

bo,
b..
items
ha = Regression constants and can be obtained
by the
principle of least squares
Page
159
06.
eBook
Following table is used to obtain the multiple regression equation.

Supermarket
y
X1
x'1
X2
X1Y
xl
X2Y
X1X2
Store
5.2
22
484
114.4
20.8
16
88
5.1
13
169
66.3
30.6
36
78
5.2
20
400
104.0
36.4
49
140
5.7
22
484
125.4
22.8
16
88
5.3
17
289
90.1
26.5
25
85
6.6
23
529
151.8
46.2
49
161
5.6
25
625
140.0
16.8
75
8.4
27
729
226.8
67.2
64
216
5.5
26
676
143.0
11.0
52
10
6.5
20
400
130.0
32.5
25
100
Total
59.1
215
51
4785
1292
310.8
293
1083
Mean
5.91
21.5
5.1
.
Table 6 . l O b :
bo,
b . , and
b, can be determined
-
Net Profit of All Ten Stores
by using the formulae:
-2
( I; Y X , - n Y X 1 ) ( I: X 2 - n X 2 ) - ( I; Y X 2 - n Y X 2 ) ( I; X 1 X 2 - n X 1 X 2 )
b, =-------------
-2
( I; X ,
-2
_ (1292 - 1 0 x 5 . 9 1 x 2 1 . 5 ) ( 2 9 3 - 1 0 x 5 . 1
1
-
- n X 1 ) ( I: X 2 - n X 2 ) - ( I; X 1 X 2 - n X 1 X 2 )
(4785 - 1 0 x 2 1 . 5
2
)-
( 3 1 0 . s - 1 0 x 5 . 9 1 x 5 . 1 ) ( 1 0 8 3 - 1 0 x 2 1 . 5 x 5.1)
)(293-10 x 5.1
) - ( 1 0 8 3 - 1 0 x 2 1 . 5 x 5.1)
b, = 0 . 1 6
-2
- -
_ (I; YX2 - nYX2HI: x, - nx, ) - (I; YX, - n Y X i l ( I: x,X2 - n X , X 2 l

2
2
-
( I; X f - n X t ) ( I; X - n X l - ( I X , X 2 - n X , X 2 )
_ ( 3 1 0 . 8 - 1 0 x 5. 91 x 5.1)(4785 - 1 0 x 21.5
2
-
(4785 - l O x 21.5
= 0.35
bo
=Y-b1X1-b2X2
2
)-
(1292 - 1 0 x 5. 91 x 21.5)(1083 - 1 0 x 21.5 x 5 . 1 ) )
)(293 - 1 0 x 5.1
)-
(1083 - 1 0 x 2 1 . 5 x 5.1)
bo = 5 . 9 1 - 0 . 1 6 x 2 1 . 5 - 0 . 3 5 x 5 . 1
b0 = 0 . 6 8 5
Page
160
06.
eBook
Therefore,
by
substituting
the
values
of
written as:
Y = 0.685+0.16X1 +0.35X2
b0,
b 1,
and
b2;
regression
equation
This equation is known as the multiple regression equation of Y o n X, and

how
change
coefficient
constant
in
X,,
for
X1
and
that
is,
every
changes
X2
b,
0.16
additional
is
unit
increases
by t 0 . 1 6 crore
or t16
constant,
then
additional
for
every
the
value
that,
of
lakh.
if
sale
of Y.
of
interpretation
X,
(sales
of
vegetarian
Similarly,
unit
The
sale
if X1
of
of
of
(sales
items,
food
the
value
food)
the
of vegetarian
non-vegetarian
be
X,. It indicates
non-vegetarian
food
can
is
net
food)
items,
of
held
profit
is
held
the
net
of
this
profit increases to t 0 . 3 5 crore or t35 l a k h .
The
multiple
coefficient
relationship and
of
determination
helps
us
to
determine
the
reliability
is given b y :
2
R2
_ Unexplained
variation
= 1 - I(Y; - Y ; )
1
2
Total variation
ICY; - Y )
To obtain the coefficient of multiple correlation coefficient following table is computed.
X1
y, =
X2
0.685 + 0 . 1 6 X 1 + 0 . 3 5 X 2
(y;-y,)'
<v; -
v>'
5.2
22
5.605
0.164
0.5041
5.1
13
4.865
0.055
0.6561
5.2
20
6.335
1.288
0.5041
5.7
22
5.605
0.009
0.0441
5.3
17
5.155
0.021
0.3721
6.6
23
6.815
0.046
0.4761
5.6
25
5.735
0.018
0.0961
8.4
27
7.805
0.354
6.2001
5.5
26
5.545
0.002
0.1681
6.5
20
5.635
0.748
0.3481
2.706
9.369
Total
Table
6.10c:
Net
Profit of All Ten Stores
Page 1 6 1
06.
Here,
eBook
Y;S.91
After substituting values from the above table, we can write:

2
R2
i _
L (Y;
- Y;)
2
L ( Y ; - Yl
; 1 - 2.706
9369
; 1 - 0.2888
; 0.7112
Page
162
06.
Rank
Correlation
and
eBook
Spearman's
relation
rank
Regression
In
is
the
most
analysis studies the cause and
simple
establishes a functional
regression,
dependent
and
only
other
is
an
two
When
one
called
variable
variables
independent
linear
regression.
with
In
are
taken
variable.
it
variables
linear
is
and
simultaneously,
neither
identify
the
called
another
non-linear
the
partial,
relation
constant.
variable
In
regression
total
coefficient
can
only
two
between
as
one
two or more
which
hand,
one
when
is
more
all
the
ratio,
variable
varies,
is
are
studied,
variables
taken
it
the
into
keeping
are
is
the
studied
them.
two variables
multiplied
constant
variables
variables
regression,
be
in
other
some
more
the relationship among
relationship
study,
the
in
regression,
two
between
in order to find
regression the
if
between
is a multiple regression.
or
regression
for
On
The
In
to
between them.
ratio.
other
measure
relationship
other variable does not change in a constant
consideration
changes
effect
relationship
t h a n two variables are taken for study,
appropriate
between two qualitative variables.
variables and
correlation
nor divided
must
by
be
linear,
another
that
is,
regression
coefficient.
The
coefficient
of
determination
between X and Y and
In
multiple
independent
measured
is
it ranges from
regression
variable,
the
say
the
O to
dependent
X,,
X,,
square
the
correlation
coefficient
and
Y
the
is
function
relationship
of
more
between
than
Page
one
them
by the m u l t i p l e correlation coefficient.
(r)
1.
variable
X, . . .
of
163
is
Business Forecasting
a n d T i m e Series Analysis
I T M
07.
Business
Forecasting
and Time
eBook
Series Analysis
7 . 1 Introduction
This
chapter
business,
the
past,
competition
the
and figures,
Prediction
a
introduces
process
plays
present,
and
attempting
and
the
concept
an
business
important
what
the
future
role
will
forecasting
and
this
and
time
generates
possibly
be.
the
Without
series.
need
to
In
any
analyze
proper data,
facts,
to answer questions of the future is difficult.
estimation of such
that
of
helps
the
future conditions
management
to
is
known as 'forecast'.
make
decisions
and
Forecasting
understand
is
the
implications of these decisions on the future of the organization.
Time
of
series
data
collection,
movement
making
is why
and
is one of the most

with
of economic
process of an
time
series
business
known
respect
factors
to
that
i n d i v i d u a l firm
has
occupied
statistics.
This
methods of forecasting.
time
are
variable.
continuously
within
changing
important
introduces
the
of
helps
and
to
affect
analyze
the
in
the
time
field
series
you
will
in
both
be able to:
Define time series
Explain the different components of time series
Discuss methods of measuring
State mathematical model of time series
Describe the decomposition of time series
Discuss analysis of time series
This
of economics
fields.
the
decision
economy as a whole.
place
role
is a systematic method
series
industries or in an
a u n i q u e and
chapter
Time
It
trend
Page
165
these
07.
B u s i n e s s Forecasting
and
Time
eBook
Series Analysis
7 . 2 Time Series
The
arrangement
the
incidence
of
of
statistical
time,
is
known
quantitative methods that can
According
to
data
Patterson,
in
as
time
be used
time
chronological
series.
order,
Time
to
Spiegel,
time
series
series
is,
series
in
concurrence
analysis
is
one
with
of
the
to predict the future.
consists
collected, recorded or observed over successive
According
that
is
set
of
of
statistical
data
which
are
increments.
observations
taken
at
specified
times, usually at equal intervals.
Mathematically,
(temperature,
time
closing
series
is
defined
price of a share,
etc.)
by
the
values
at times ti,
Y1,
t, . . .
Y,
Thus,
...
or
variable
Y is a function of
Y
't,'
given asY = f(t).
Table
7.2a
is
an
example of time
of students registered for an
series data.
MBA program
Year
It
shows
the
time
series
for the
number
in an Indian college.
2000
2001
2002
2003
2004
2005
2006
2007
3000
3050
4000
4500
5000
5300
5500
6000
Number of Students
Registered
Table 7 . 2 a :
N u m b e r of Students
Registered for an
MBA Program
Components of Time Series

Time
series
T h i s could
or
is
be daily,
temperature,
national
set
of observations
weekly,
weekly
at
equal
monthly, quarterly or yearly.
crimes
in
city,
monthly
intervals
over
period
of time.
For example, d a i l y share prices
sales
or
annual
profit
of
firm,
income, etc.
The analysis of time series

the
recorded
variable
considering
is
the
used
types
to forecast the
of variations
monthly, weekly or quarterly values of
present
in
it.
There
responsible for changes in the values of the variable at different
are
various
factors
periods of time.
Page 166
07.
Business
These
Forecasting
influencing
and Time
factors are
eBook
Series Analysis
broadly classified
into the following
four categories,
known
as components of time series:
Secular trend
(T)
Seasonal variation
Cyclical variation
Random or Irregular variation
(S)
(C)
(!)
Some or a l l of these may be present in a time series in varying
degrees.
7.3 S e c u l a r Trend
According
to
and
Simpson
basic tendency of production,

over a period of time.
"Trend also caf/ed secular or long-term
Kafka,
safes,
income,
employment,
or the like
trend,
is
the
to grow or decline
The concept of trend does not include short-range oscillations but,
rather, steady movements over a long time".
Secular
trend
cannot move
can
in
upward
either
tendency
is
sales and
profits recorded.
not
circulation,
seen
in
is
necessary
throughout
the
the
movement and
currency
It
in
both the directions.
not exhibit erratic

an
go
that
given
values of certain
etc.
in
The
direction
upward
and
or
data
related
or
Occasionally,
one
may
trends
may
a constant
the
downward
direction
be
come
be
across
reading,
in
a
in
production,
data
the
related
same
situation
which does
where
Increasing/::Jecreasing trends of a
vanable
Line
Time in Years
the
not change with
Fig. 7 . 3 a :
to
direction
time.
Secular Trend
It
For example,
agricultural
noticed
should
direction.
movements do
duration of time.
population,
tendency
decreased
series fluctuate around
to
in
downward
are constant for a long
downward
increased
period.
upward
Secular Trend
Page
167
07.
eBook
B u s i n e s s Forecasting a n d Time S e r i e s A n a l y s i s
If the consumer price index is considered over a period of time, the secular trend can
represented
trend
with
secular
graphically,
an
upward
trend
line.
It
can
the straight
line.
linear,
otherwise
is
In
linear
trend,
a m o u n t . This
the
The
be
in
actual
seen
Here,
Fig.
that
the trend
7.3a.
data
the
is
The
straight
shown
values
of
is executed
by
the
line
a curve
series
by a straight
indicates
moving
gather
line and
secular
around
more
or
the
less
is termed
as
non-linear.
time
linear trend
linear secular trend
shown
slope.
around
it
as
be
series'
is also
values
increase
known as straight
is given by the equation:
or decrease
line trend
by
a constant
absolute
or first degree curve.
The
Yt = a + bX
Where,
Y, = Trend
value of the variable
X = Time
a and
b = Constants
The trend
shown
in
for production of a particular factory can be either increasing or decreasing, as

Fig. 7 . 3 b .
Decreasing Trend
Increasing Trend
cc
cc
.,
Y = a + bX
u
:,
s
:,
Q.
Q.
Fig. 7 . 3 b :
N o n - l i n e a r trend
Y = a + bX
is a type of trend
Linear Trend
where the rate of c h a n g e in growth and
decline is not
constant.
Page
168
07.
Business
Forecasting
and Time
eBook
Series Analysis
Uses of Secular Trend:
To determine basis of fluctuations
To study forecasting
To study the effect of short term
To compare data that
To analyze the
variations
has been collected
long-term
impact of such a policy
for a long
results of a policy
based
duration of time
implemented
and
determine the future
on the analysis
7.4 S e a s o n a l Variation
Seasonal
pattern
such
variations
during
as
the
certain
seasons,
seasonal
are
for
that
months
weather
movements.
demand
those
In
of
within
the
to
business,
products,
Prof.
period
or
can
fluctuation
variation
changes
etc.
due
plays
refers
to
within
of data
to
an
natural
important
systematic
in
recurring
similar
forces,
role
variations
time
in
in
period.
be foreseen.
variations
the
variation
precise, and
from
the
years.
consumption,
"Seasonal
results
show
climate
seasonal
services,
Hirsch,
that
successive
conditions
Seasonal variations are definite,
According
periodically
are
operation
the
recurrent
of forces
pattern
connected
of
with
change
climate
or
custom at different times of the period."

Some examples of seasonal variation are:
The
demand
for sunscreen
be h i g h d u r i n g
summer and
is
likely
Demand
for cold drinks and
Demand
for woolen wear tends to
variations
fashions, and
can
also
customs of local
have an
annual
cycle,
in which
demand
will
low in other seasons.
Seasonal
to
ice-cream go up
occur
increase
due
to
in summer.
in winter.
manmade
conventions,
such
as
habits,
like
Diwali,
populations.
Some examples of seasonal variations due to manmade conventions are:
Sale of jewelry
Sales and
Eid,
is higher d u r i n g
marriage seasons.
profits of departmental
Dusshera,
stores go
up
during
festive
seasons,
Christmas, etc.
Such variations occur in a regular manner and
repeat year after year.
Page
169
07.
eBook
Therefore,
seasonal
variations
are
due
to
change
in
the
environment
or
other
cultural
factors, which causes people to have different types of requirements in different seasons
but within a specific time-period of the year.
Seasonal behavior within one year
Seasonal Variation
x
Time in Years
Fig. 7 .4a:
Seasonal Variation
Uses of Seasonal Trend:
It ai d s in the study of irregular and
cyclic variations.
It helps in understanding the pattern of change in a particular commodity.
7 . S Cyclical Variation
The oscillatory movements of variables in a period of more t han one year are termed as
cyclical variation.
occur d u r i n g
According
to
One complete oscillation
longer periods of time, say,
Spiegel,
"Cyclical
may
or
may
not
be
periodic,
patterns after equal interval of time.
a cycle.
Cyclical variations generally
7 or 10 years.
movements
oscillations or swings about a trend fine

caf/ed,
is called
or cyclical
or curve.
i.e.
they
variations
These
may
or
cycles,
may
refer
as
not
to
the
long-term
they are sometimes
fof/ow
In business and economic activity,
exactly
similar
movements are
considered cyclical only when they occur after time intervals of more than a year."
Page
170
07.
Business
Forecasting
and Time
eBook
Series Analysis
Long-term cyclical
behavior of a variable
Cyclical Variation
Trend Line
Time in Years
Fig. 7 . S a :
A cyclical variation
1.
Prosperity
2.
Recession
3.
Depression
4.
Recovery
Cyclical Variation
has the following four phases:
Use of Cyclical Variation
A business cycle
with
long-term
is one of the most appropriate examples of a cyclical variation.

economic
aspects,
like
prosperity,
recession/decline,
It deals
depression,
and
recovery.
7.6 Random or I r r e g u l a r Variation

Random
or
unpredictable.
beyond
irregular
They
are
human control
episodic
and
identified.
removing
variations/fluctuations
residual
but are
fluctuation.
Such
to
strikes,
fluctuations,
fluctuation
is
non-recurring
and
part of the system.
variations.
For example,
episodic
due
are
Episodic
wars,
the
The
earthquakes,
is
nor
erratic,
circumstances
irregular variation
are
famines
residual
identified.
are
is d i v i d e d
into
or
variation
It affects
but
can
floods.
or
be
After
chance
business and
economic activities unexpectedly but the effect exists for a very short period.
and
that
unpredictable
epidemics,
called
predictable
random,
irregular
fluctuations
variation
neither
purely
Page
171
07.
and
Time
eBook
Series Analysis
Random movement of variable
'--x
Time in Years
Fig. 7 . 6 a :
Random or Irregular Variation
7 . 7 Trend Measurement Methods

The four methods used
to measure trend
Free Hand
Semi Average Method
Moving Average
Least Squares Method
Free
As
trend.
Curve Method
Hand Curve
the
name
are:
Method
Method
suggests,
this
is a completely graphical and
The values of the variables are plotted
the trend
can
be determined
Semi Average
According
to
by
subjective
with time along
method
the X-axis.
and
Kafka,
"Semi-average
means average
of semi
that is the average of each half of the series." In t h i s method,
divided
into
parts and
is skipped
Moving Average
In this method,
will
have
this method,
inspection only.
halves,
the middle data
locate a
Method
Simpson
two
In
to
the
middle
year of the
and the remaining
data
data
is
marked.
is divided
the o r i g i n a l data
In
into two
or average
case of odd
of
is
data,
parts.
Method
if the origina l
similar
pattern.
data
If
the
gives a straight
original
series
l i n e on a g r a p h ,
gives
concave
the moving
curve,
the
Page
average
moving
172
07.
Business
average
Forecasting
will
be
average w i l l
below
it
and Time
and
if
eBook
Series Analysis
the
original
series
gives
convex
curve,
the
moving
be above it.
Least Squares Method
This method
minimizes the sum of the squared errors of the data series. This method
a widely used
method to obtain the trend.
7.8 M a t h e m a t i c a l
The
is
following
models
Model of Time Series
are
commonly
used
to
decompose
time
series
into
its
components:
Additive
Model
According
to the additive model, a time series can
be expressed
as:
Ut = Tt + S t + C t + Rt
Where,
U1
= Time series value at time t
Tt = Trend
s.,
c,,
values
R, = Seasonal, cyclic, and
This model
is based
random components of time series,
on the assumption
that all
the components are
respectively.
independent of each
other.
Multiplicative
Model
Decomposition
by
multiplicative
multiplicative relation.
Ut
The
Tt
St
Ct
According
method
is
one
in
which
all
the
four
components
have
to this m o d e l :
Rt
multiplicative
model
of
time
series
is
equal
to
the
additive
decomposition
logarithmic values of the o r i g i n a l time series.

log U, = log Te + log St + log Ct + log Rt
Page
173
of
07.
eBook
7 . 9 Decomposition of a Time Series

The analysis or decomposition
various components.
series are affected
Not all
of a t i m e
series
is used
to
segregate and
types of variations affect the whole time
by a few of these variations.
determine the
series.
Most time
The objective of the decomposition of a
time series is to obtain data free from the effect of one component on the other,
so that
it can be used for more accurate forecasting.
The moving
average method
is another method
that
is used
especially when a seasonality factor is present in the data.

by moving average method
Step
1:
Step 2:
Step
3:
Decomposition of time series
Moving Average (CMA) for each month or quarter
obtain seasonal ratios by dividing each observed

raw
values,
involves the following steps:
calculate a Centered
obtain
to determine trend
seasonal
indices
by
averaging
value "yt"
the
quarterly
or
monthly
seasonal
ratios
Step 4:
obtain the adjusted seasonal indices such that the sum of the indices is e q u a l to
12 (monthly) or 4 (quarterly)
5:
deseasonalize
adjusted
seasonal index
Step
Step
6:
determine
the
Obtain the forecasted

Step
7:
the
trend
in the
of
series
by
dividing
deseasonalized
values by trend
determine adjusted
component
time
trend
observed
time
series
y,
by
value
curve
by
respective
fitting
method.
line equation
values
projected or forecasted
of forecasted
trend
values
quarter.
Adjust
by multiplying
the
seasonality
the corresponding
quarter seasonal index with the forecasted trend value
The
aforementioned
steps
are
illustrated
through
the
following
example.
Table
shows the quarterly sales of a particular medicine in lakh.
At the End of Each Quarter

Year
March
lune
September
December
(Q1)
(Q,)
(Q,)
(Q4)
2006
351
469
472
492
2007
549
532
522
610
2008
650
640
712
770
2009
718
853
780
840
Table 7.9a:
Quarterly Sales of a Pharmacy
Page
174
7.9a
07.
Business
Step
1:
Forecasting
calculate Centered
The CMA is calculated

and
i r r eg u l a r
considered
values,
and Time
for calculation.
consider
.
.
First moving
of
average method
the
In this
values
average is obtained
Moving Average (CMA } for each quarter
by moving
components
eBook
Series Analysis
for
time
series.
problem,
obtaining
by averaging
so as to isolate the combined

In
this
method,
the time series
moving
one
is given
average.
The
in
first
year
seasonal
of
data
is
terms of quarterly
4-quarter
moving
the first four quarters of year 2006 as follows:
351+469+472+492
average=
= 446
4
Since
first
placed
moving
between
quarter. The
average
and
second
3'
represents
quarter.
moving average=
Second
moving
51
quarter
of
average
2007,
series,
moving
hence
446
place
first
the
year
so
average
value
value
by averaging
has
to
be
against
3'
the 2,
3'd,
4th
place
549
= 495.5
mid-value
average
of 2,
value
as shown
is
calculated.
The
first
3',
against
4th
4th
quarters of year
quarter
of
2006.
2006
and
Similarly,
in Table 7.9b.
average does not correspond
CMA
of
is obtained
represents
average as shown
First CMA=
average
4 7 2 ; 492
remaining average values are obtained
time
simplicity
thus,
The 4-quarter moving
mid-value
1" quarter of 2007 as follows;

469
Second
For
4-quarter moving
quarters of year 2 0 0 6 and
the
directly to the original quarter of the
CMA
is
an
average
of
first
and
second
below:
4955
+
= 470.75
2
Similarly,
remaining
plotted as shown
CMAs are calculated
as shown
in Table 7.9b. These
in Fig 7.9a to indicate that the trend
CMA values are
is l i n e a r .
Page 1 7 5
07.
Step 2:
and
Time
calculation of Seasonal
In the multiplicative model,
eBook
Series Analysis
Ratios
the original data y can
be expressed
as:
y = Ut = Tt x St x Rt
If
is
divided
components
the moving
will
the
trend
remain.
averages,
component will
.J....
by
component
However,
even the
be left.
if y
random
Mathematically,
is
T,,
only
divided
the
by
component
it can
seasonal
the
trend
(S,)
and
values
is separated
random
obtained
(R,)
through
and o n l y the seasonality
be written a s :
st
Tt
On
the
basis
obtained
centered
by
of
the
above
dividing
moving
the
formula,
original
averages.
Thus,
seasonal
values
of
respective
ratio
y
of
is
calculated.
the
quarter
time
The
series
seasonal
seasonal
by
ratios
the
are
ratio
4-quarters
calculated
Table 7.9b.
Seasonal
ratio=
Original values of sales
(y)
Corresponding centered moving average
values
Centred
4-quarter
Sales
Year
Quarter
Seasonal
Moving
Moving
(y,)
Ratio
Averages
Average
(yt/CMA)
(CMA)
Q,
351
Q,
469
Q,
472
446.00
470.75
1.00
Q.
492
495.50
503.38
0.98
Q,
549
511.25
517.
so
1.06
Q,
532
523. 75
538.50
0.99
Q,
522
553.25
565.88
0.92
Q4
610
578.50
592.00
1.03
Q,
650
605.50
629.25
1.03
Q,
640
653.00
673.00
0.95
Q,
712
693.00
701.
so
1.01
Q4
770
710.00
736.63
1.05
2006
2007
2008
Page
is
176
in
07.
eBook
and Time Series Analysis
Q,
718
763.25
7 7 1 . 75
0.93
Q,
853
780.25
789.00
1.08
Q,
780
797.75
2009
840
Q.
.
Table 7 . 9 b :
Calculation of CMA and Seasonal
Ratios of Quarterly Sales of a
Pharmacy
1000-
BOO
2
"'
c :l;i
600-
3
0
iii
ro
...
400-
"'
200
0
10
12
14
16
Quarters
Fig. 7.9a:
Step 3 :
Centered
Moving Averages
calculation of Raw Seasonal Indices
Summarize the seasonal ratios as per quarters as shown in Table 7.9c.
Raw seasonal
index is obtained
Raw seasonal
by averaging the seasonal ratios for the same quarter.
index for the first q u a rt e r of complete time series is calculated as follows:
Raw seasonal index for first q u a r t e r = 1 . 0 6 + 1.i3 +
Seasonal
Year
Qi
o.
93
= 1.007
Ratios per Quarters
Q,
Q2
Q.
2006
".
" .
1.00
0.98
2007
1.06
0.99
0.92
1.03
2008
1.03
0.95
1.01
1.05
2009
0.93
1.08
".
"
Average (Raw
1.007
1.007
0.980
1.018
Seasonal Index)
Table 7.9c:
Raw Seasonal
Indices for Quarterly Sales of a Pharmacy
Page 1 7 7
07.
eBook
These seasonal
indices for various quarters
indicate only the seasonal component
original time series. They are shown in the following g r a p h :
1.2
IG
1.0
.
!..!
.s
"'
.,.
0.8
ls
0.6
.,:
w
0.4
e
"'
;;
0.2
Quarters
Fig.
7.9b:
Average Seasonal Indices for Quarterly Sales of a

Pharmacy
Page
178
in the
07.
Business
Step 4:
The
and Time
eBook
Series Analysis
obtain adjusted seasonal indices
table
model
Forecasting
summarizes
of seasonality
be e q u a l
to
1.00,
is
raw
requires
so the
then adjustment
the following
the
sum
required
seasonal
that
the
of the
in
the
indices
average
four
of
various
seasonal
indices
raw seasonal
should
indices.
quarters.
The
multiplicative
indices of four quarters

be 4 . 0 0 .
If the total
The adjusting
is
should
not 4 . 0 0
factor is given
by
formula:
4
Adjusting
factor=
----------
Sum
As the
sum
of the
factor is obtained
Adjusting
of
raw
seasonal
indices
indices
is greater
four seasonal
than
4.00
in
this
case,
the adjusting
as follows:
factor=
0. 997
4.;12
The adjusting
factor is m u l t i p l i ed
indices as shown
to the
raw
seasonal
indices to obtain adjusted
seasonal
in Table 7.9d
Adjusting
Raw Seasonal
Factor
Adjusted
Quarter
Seasonal
Indices
Q,
1.007
0.997
1.004
Q2
1.007
0.997
1.004
Q,
0.980
0.997
0.977
Q,
1.018
0.997
1.015
Total
4.012
.
Table 7 . 9 d :
Step 5 :
The
Deseasonalize the Time series
process
expressed
If
4.00
.
AdJusted Seasonal Indices for Quarterly Sales of a Pharmacy
of
removing
deseasonalization
Indices
of
the
data.
In
seasonal
the
effect
from
multiplicative
time
model,
series
the
data
original
is
data
known
as
be
can
as:
Ut = Tt x St x Rt
is
divided
components
will
by
be
the
seasonal
left.
season from time series is
If
is
component
divided
removed.
by
St,
the
only
the
seasonal
Mathematically,
it can
trend
index
(Tt)
and
then
the
random
effect
of
be written as:
Page 1 7 9
(Rt)
the
07.
and
Time
eBook
Series Analysis
y
- = T,
s,
Thus,
the
new
deseasonalized
seasonal
time
index,
for the sale at
trend
values
series.
value
obtained
Thus,
obtained
is
if the
called
pharmacy is calculated
will
be
quarter
free
of
sale
value
deseasonalized
seasonal
is
sale.
effect
divided
The
by
and
will
give
corresponding
deseasonalized
value
in Table 7.9e.
Adjusted
Deseasonalized
Year
Sales
Seasonal
(y,)
Index
Quarter
Sales
(yt!S.)
(S.)
Q,
351
1.004
349.6
Q,
469
1.004
467.13
Q,
472
0.977
483.11
Q,
492
1.015
484. 73
Q,
549
1.004
546.81
Q,
532
1.004
529.88
Q,
522
0.977
534.29
Q,
610
1.015
600.99
Q,
650
1.004
647.41
Q,
640
1.004
637.45
Q,
712
0.977
7 2 8 . 76
Q,
770
1.015
758.62
Q,
718
1.004
715.14
Q,
853
1.004
849.6
Q,
780
0.977
798.36
Q,
840
1.015
8 2 7 . 59
2006
2007
2008
2009
Table 7 . 9 e :
Step 6 :
Deseasonalized Sales of a Pharmacy
determine trend of deseasonalized time series
The trend
is determined
by fitting
a curve. The equation of a straight line can
be written
as:
y,
a + bt
.............
(1)
Page
180
07.
eBook
Where,
Y = Deseasonalized medicine sales

t = Quarter of the year
a and b = Constants which can
be determined
P r e l i m i n a r y Adjustment before Analyzing
Since
one
of the
variables
is
time,
given
by the principle of least squares
the Time Series
here
in
terms
of quarters,
you
can
represent
time variable by sequential number as follows:

1 for the quarter e n d i n g
Q,, 2 0 0 6
Q 2, 2 0 0 6
Q3, 2 0 0 6
Q., 2006
Sales at the
Q., 2009
End of Each Quarter
The values of a and
b can be obtained
using
the following formula:
L Y d t ; - nydt
b
= -- and
2
I tt - n(tJ
a=
y - bf
Where,
n = Highest code assigned
The values o f t , Yd,
Yd!;,
L IF
can be calculated as shown in Table 7.9f.
Page 1 8 1
07.
eBook
Deseasonalized
Year
Quarter
t;
Sales
yot;
t?
Q,
349.6
349.6
Q,
467.13
934.26
Q,
483.11
1449.33
Q,
484. 73
1938.92
16
Q,
546.81
2734.05
25
Q,
529. 88
3179.28
36
Q,
534.29
3740.03
49
Q,
600.99
4807.92
64
Q,
647.41
5826.69
81
Q,
10
637.45
6374.5
100
Q,
11
728. 76
8016.36
121
Q,
12
758.62
9103.44
144
Q,
13
715.14
9296.82
169
Q,
14
849.6
11894.4
196
Q,
15
798.36
11975.44
225
Q,
16
827.59
13241.44
256
Total
136
9960
94862.44
1496
Average
8.5
622.50
2006
2007
2008
2009
Table
By substituting
7 .9f:
the values o f t , Yd,
Fitting trend
Z:
Ydt,,
Z: t t ;
b = 9 4 8 6 2 . 4 4 - 1 6 x 6 2 2 . 5 x 8 . 5 = 10202.44 =
Line
Method
we get:
.0l
30
1496-16(8.5)
340
a = 622.5 - 3 0 . 0 1 x 8.5 = 367.41
Page
182
07.
Business
Forecasting
Therefore, the equation
and Time
eBook
Series Analysis
representing
the trend component
is:
y = 367.41 + 30.0lt
Here,
the
increased
obtained
interpretation
by ? 3 0 . 0 1
by
of
lakh
substituting
the
value
of
every quarter.
30.01
Quarterly trend
the values of the
respective
is
that
the
medicine
sales
values for the year 2 0 1 0 can
number of the quarter
in
the
has
be
trend
equation y d = 3 6 6 . 9 5 + 3 0 . 0 2 t .
For example,
is:
for the first quarter of 2 0 1 0 ,
the code of the quarter
is
17,
so the forecast
Y=367.41+30.01x17=877.58
Similarly,
you can determine the forecast of trend
values for the other quarters of 2 0 1 0 .
They are tabulated as follows:
Forecast of Trend Values

Code of
Year
Quarter
for the Quarters

the Quarter
(f in lakhs)
March
17
877.58
June
18
907.59
September
19
937.60
December
20
967.61
2010
Table 7 . 9 g :
Deseasonahzed
Forecasted Quarterly Sales for year 2 0 1 0 of a

Pharmacy
Step 7 :
The
derivation of Adjusted
forecast
for
with the seasonal
Year
quarters
of
the
Quarterly Forecasts of 2 0 1 0
year
2010
will
be
obtained
by
multiplying
the
values
indices.
Quarter
Deseasonalized
Seasonal
Adjusted
Quarterly Sales
Index
Quarterly
(in Lakhs)
March
(Q,)
(f)
sales
877.58
1.004
881.09
June (Q2)
907.59
1.004
911.22
September (Q,)
937.60
0.977
916.04
December (Q 4 )
967.61
1.015
982.12
2010
Table 7 . 9 h :
Quarterly Sales of a Pharmacy
Page
183
07.
and
Time
eBook
Series Analysis
7 . 1 0 Analysis of Time Series

Analysis
of
time
series
can
be
explained
appropriately
with
the
help
of
the
following
examples.
Example 0 1 :
The following
table shows the seasonal indices for the sale of refrigerators by a dealer:
Seasonal
Quarter
Indices
Table 7 . 1 0 a :
If
the
should
sales
be
in
the
stocked
first
by
0.95
II
0.87
III
0.85
IV
1.33
Seasonal Indices for Sales of Refrigerator
quarter
of
the dealer to
year
are
180,
determine
meet the demand
of the
how
many
refrigerators
other three quarters of the
year.
Solution O 1 :
According
seasonal
to
the
multiplicative
model,
the
total
index in the first quarter is 0 . 9 5 , which
Thus, for a seasonal
index of 0 . 9 5 ,
Therefore,
second
for
the
of
four
is equal to
the amount to s t o c k =
quarter
with
seasonal
seasonal
180
indices
is
4.00.
The
in terms of sales.
180
index
of
0.87,
the
number
of
0
refrigerators to stock=
8 7 x 180 = 165
0.95
For the third
quarter with a seasonal
0 85
161
180
index of 85,
the
number of refrigerators to stock
0.95
For
the
fourth
quarter
33
stock= 1.
x 180
with
seasonal
index
of
1.33,
the
number
of
refrigerators
252
0.95
Page
184
to
07.
Business
Forecasting
and Time
eBook
Series Analysis
Example 0 2 :
Assuming
there
is
no
trend
in
the
series;
calculate
the
seasonable
indices
for
the
following data.
Quarter
Year
II
III
IV
2005
74
68
80
80
2006
82
72
86
74
2007
74
64
83
72
2008
72
74
81
76
2009
76
74
86
80
Table 7 . 1 0 b :
Solution
In
the
Quarterly Observations over Five Years
02:
given
data
components are
the
trend
present.
is
not
Seasonal
present,
that
factor method
is,
only
is applied,
the
seasonal
and
random
the steps of seasonal
factor
is as follows:
Step
1:
calculate average demand
Step
2:
calculate seasonal
per year or period
ratio for each
corresponding average demand
period
by d i v i d i n g
actual demand
calculate seasonal index by taking average of seasonal
Step
calculating average demand
ratios for each quarter
per year
Average
Quarter
Total
Demand
Year
II
III
IV
2005
74
68
80
80
302
75.5
2006
82
72
86
74
314
78.5
2007
74
64
83
72
293
73.25
2008
72
74
81
76
303
75.75
2009
76
74
86
80
316
79
Table 7 . 1 0 c :
by the
per year
Step 3 :
1:
value
A v e r a g e Demand
per Year
over Five Years
Page
185
07.
S t ep 2:
and
Time
calculating Seasonal
Seasonal
ratio for 74
eBook
Series Analysis
Ratio
= 0.9801
75.5
Seasonal
ratio for 82
= 1.0446
78.5
Similarly seasonal
ratios are given
below:
Quarter
Year
II
III
2005
0.9801
0.9007
1.0596
1.0596
2006
1.0446
0.9172
1.0955
0.9427
2007
1.0102
0.8737
1.1331
0. 9829
2008
0.9505
0.9769
1.0693
1.0033
2009
0.9620
0.9367
1.0886
1.0127
Total
4.9475
4.6052
5.4462
5.0012
Table 7 . l O d :
Step 3:
IV
Calculation of Seasonal
Ratios over Five Years
Calculating Seasonal Indices
Quarter
Year
II
III
IV
Five-year
Seasonal
4.9475
4.6052
5.4462
5.0012
0. 9895
0. 9 2 1 0
1.0892
1.0002
Ratio
Average
Seasonal Indices
Table 7 . l O e :
Since,
their
and
seasonal
moving
ratios
average
have
been
values,
Seasonal Indices over Five Years
calculated
the
trend
by
and
obtaining
random
the
ratios of original
components
have
been
values
removed
the values represent only seasonal components.
Page
to
186
07.
eBook
Example 0 3 :
The
profit data of a company
trend
for five
years
is available.
Determine the equation
of the
line. The data is as given below:
Code of Year in
Profit
Cumulative Order
(in Crores) (')
Year
2005 - 06
64
2006 - 07
73
2007 - 08
100
2008 - 09
113
2009 - 10
110
.
Table 7 . l O f :
Solution
03:
Trend equation can be represented

y = a
Profit Data of a Company for Five Years
as:
bt
Constants "a" and
"b" can
be obtained
using
the principle of Least Squares.
Therefore, by using formulae for the calculation of constants a" and
b =
L Y;t;
L t;2
a =
y-
Here n =
b, we have:
- nyt
- n(tl
bt
-
Calculations to obtain the values of
L y,t,,
y, t,
Lt,
Code of Year
Profits
(t;)
(y;)
t?
Yiti
64
64
73
146
100
300
113
16
452
110
25
550
Total
15
460
55
1512
Average
92
Table 7 . 1 0 9 :
Profit Data of a Company for
Five Years
Page 1 8 7
5.
07.
Substituting
and
Time
eBook
Series Analysis
the values in the above equation, we get:
b = 1 5 1 2 - 5 x 3 x 92 = 132
55-5x9
= 13.2
10
a = 92 - 1 3 . 2 x 3 = 5 2 . 4
Therefore,
the equation of trend
y = 52.4 + 1 3 . 2 t
line is:
Example 04:
Calculate
the
five-yearly
distribution from
Year
moving
averages
from
the
following
data
related
to
income
1990 - 2 0 0 0 :
1990
91
92
93
94
95
96
97
98
99
2000
159
129
150
145
147
164
182
179
155
160
159
Income
(in
thousand
units) (t)
Table 7 . l O h :
Income Distribution from
1990 - 2000
Solution 0 4 :
For the calculation of five-yearly moving
Year
averages, Table
7.lOi
is constructed.
Income
Five-yearty
Five-yearly Moving
(in thousand
Moving Total
Averages
units) (')
1990
159
1991
129
1992
150
730
146
1993
145
735
147
1994
147
788
157.6
1995
164
817
163.4
1996
182
827
165.4
1997
179
840
168
1998
155
835
167
1999
160
2000
159
Table 7. l O i :
Income
Distribution
From
1990 - 2 00 0
Page
188
07.
Business
Forecasting
and Time
eBook
Series Analysis
7 . 1 1 Coding of Time V a r i a b l e
To
s i m p l i fy
the
variable can
from
the
Suppose
be translated
time
the
then
the
time
series
computation
series and
time
mean
is
series
( X )
value is represented
For odd
For even
to a coded
then
is
to
the
new
To code,
that
of five
2003.
l i n e a r trend
form.
subtract
consists
value
translated
of fitting
years
Now
coded
value
series
each
2001,
the
-2,
least
first find
from
(X)
subtract
by
O,
method
out the mean

of the given
2002,
mean
-1,
square
2003,
value
1,
and
2.
time
time
2004,
from
If
the
the
period
periods.
and
the
time
2005,
years,
coded
the
time
by "d" t h e n :
number of time periods in time series, d

n u m b e r of time periods
in time series,
= X - X .
d = 2 x (X - X ) .
Example O S :
The following
is data
related
to the output of a factory for 7 years.
Year
1980
1981
1982
1983
1984
1985
1986
47
64
77
88
97
109
113
Output
(In Tonnes)
Table 7 . 1 1 a :
Calculate
the
production
Solution
in
trend
values
1 9 9 0 and
by
Output of a Factory for 7 Years
using
the
Least
Squares
method.
Also,
forecast
1993.
05:
To calculate trend
values following
table is used.
Year
Output
Coded Time
(X)
(Y)
( d = X - X )
d2
dY
1980
47
-3
-141
1981
64
-2
-128
1982
77
-1
-77
1983
88
1984
97
97
1985
109
218
1986
113
339
13881
595
308
28
Table 7 . 1 1 b :
Output of a Factory for 7 Years
Page
189
the
07.
When there is odd
Note:
Lx
= 13881 =
and
Time
eBook
Series Analysis
number of elements in t i m e series, coded
timed= X- X
1983
Lv
595
Y=--=-=85
n
7
The trend
b =
dY - ndY
L d'
As
b =
line is
Y e = a + bd
and
a = Y - bd
nci'
d = 0
dY = 308 = 1 1
Ld'
28
a = Y = 85
The trend
line equation
is
Ye= 85 + l l d
Therefore,
Y19so = 85 + 1 1 ( - 3 ) = 52
Y19s1 = 85 + 1 1 ( - 2 ) = 63
Y19s2=85+11(-1)=74
Y19s3 = 85 + 1 1 ( 0 ) = 85
Y1984 = 85 + 1 1 ( 1 ) = 96
Y1985 = 85 + 1 1 ( 2 ) = 1 0 7
Y1986 = 85 + 1 1 ( 3 ) = 1 1 8
Now,
is 1 0 .
since the code for the year

So,
production
1986
is 3,
in tonnes for the years
for the year 1990

1990 and
it will
1 9 9 3 can
be 7, and
for
be calculated
as:
1993
Y1990=85+11(7)=162
Y1993 = 85 + 1 1 ( 1 0 ) = 1 9 5
Page
190
it
07.
Business
Forecasting
and Time
eBook
Series Analysis
Example 0 6 :
From
the following
data,
forecast production
fit a straight
(in lakhs)
Table
Solution
by using
in lakhs for the years 2006 and
Year
Production
line trend
z.i re:
the
Least Square method.
Also,
2009.
1995
1996
1997
1998
1999
2000
2001
2002
45
44
66
59
71
78
75
84
Production in
Lakhs from
1995 - 2002
06:
For the calculation of the trend
values following
table is used.
Production
y
Coded Time
(in lakhs)
d = (X - X) x 2
YearX
dY
d'
(f)
1995
45
-3.5x2=-7
-315
49
1996
44
-2.5x2=-5
-220
25
1997
66
-1.5x2=-3
-198
1998
59
-0.5x2=-1
-59
1999
71
0. 5 x 2 = 1
71
2000
78
1. 5 x 2 = 3
234
2001
75
2.5x2=5
375
25
2002
84
3.5x2=7
588
49
15988
522
476
168
Table 7 . l l d :
When there is even
Note:
Lx
X=
Lakhs from
number of elements
1995
- 2002
in time series, coded t i m e d = (X - X) x 2
= 15988
Lx
= 15988 = 1998.5
Production in
Lv
= 522 = 6 5 . 2 5
The trend
line is
Y = a + bX
Page
191
07.
b =
dY - ndY
z: d2
As
b =
d
an
a=
and
Time
eBook
Series Analysis
b
d
-
- n,i2
d = 0
Z: d Y
= 476
Z: d 2
168
2.83
a= Y = 65.25
The trend
line equation
is
Ye= 6 5 . 2 5 + 2 . 8 3 d
Y1995 = 6 5 . 25
2. 8 3 ( - 7 ) = 4 5 . 4 4
Y1996 = 6 5 . 2 5
2.83(-5) = 5 1 . 1
Y1997 = 6 5 . 2 5 + 2. 8 3 ( - 3 ) = 56. 76
Y1998 = 6 5 . 2 5
2 . 8 3 ( - 1 ) = 62.42
Y1999 = 6 5 . 2 5 + 2 . 8 3 ( 1 ) = 68.08
Y2000 = 6 5 . 2 5
2.83(3) = 73.74
Y2001 = 6 5 . 2 5
2.83(5) = 79.4
Y2002 = 6 5 . 2 5 + 2 . 8 3 ( 7 ) = 8 5 . 0 6
Therefore,
production
Y2006 = 6 5 . 2 5
Y2009 = 6 5 . 2 5
in
lakhs for the years 2006 and
2.83(7.5
2.83(10.5
2009 can
be calculated
as follows:
2) = 1 0 7 . 7
2) = 124.68
Page
192
07.
Business
Forecasting
and Time
eBook
Series Analysis
The
arrangement
with
the
of statistical
incidence of time,
is
data
known
the quantitative methods used
Time
series
time.
This could
share
prices,
of a firm,
is
Secular
trend
can
go
as
recorded
at
eq u a l
monthly, quarterly,
weekly
either
are
in
those
certain
movements
cyclical
crimes
in
a city,
intervals
monthly
an
upward
direction
over
concurrence
is one of
period
For example,
of
daily
sales or annual
or
downward
that
profit
the
fluctuation
show
variables
One
in
complete
period
of
oscillation
Random
or
or
irregular
variations
They are due to
human control
The
linear trend
the
line
and
direction.
It
is
data
in
fluctuations
non-recurring
are
and
more
is
than
called
say,
purely
one
year
cycle.
are
Cyclical
7 or 10 years.
random,
erratic,
and
irregular circumstances that are
but are part of the system.
equation
"t"
of
months of successive years.
of
variation.
periodically
longer periods of time,
beyond
in
series analysis
or yearly.
variations generally occur d u r i n g
unpredictable.
Time
is,
both the directions.
variations
oscillatory
termed
series.
that
national income, etc.
Seasonal
The
order,
to predict future demands.
be daily, weekly,
similar pattern d u r i n g
chronological
as time
of observations
temperature,
cannot move in
set
in
the
isY = a + b t ;
time.
The
w h e r e ,a is the Y intercept,
trend
equation
is
determined
b i s the slope of
using
the
Least
Squares principle.
A moving
The
moving
variables.
and
average is used
It
to smoothen the trend
average trend
will
will
be a curve,
be
a straight
if there
is
in a t i m e series.
line,
if there
is
regular
irregular movement due
to
movement
of
business cycles
seasonality.
Seasonal
factors are
factor is used
usually
computed
to adjust forecasts, taking
on
monthly
or quarterly
basis.
Seasonal
into account the effects of the season.
Page
193
C o n c e p t of P r o b a b i l i t y
I T M
08.
eBook
Concept of P r o b a b i l i t y
8 . 1 Introduction
In general, the term
probability means "chance." The Probability Theory
the seventeenth century.
It was first a p p l i e d
In
of
1812,
many
Laplace,
others,
contributed
The
like
rain on
one
J.
his
works,
Bernoulli,
gave
the
De-Moivre,
T.
classical
Bayes,
etc.
of
The
probability
probability
a particular day;
the
is
immense
statements
rise
in
the
in
different
that
sales
you
of
these
statements are
event
and
to
statements
has
not certain.
measure
Ya-Lin Chou,
chapter
two
Thus,
such
of
Mises,
in g a m b l i n g .
Probability.
and
R.A.
Also,
Fisher
probable
the above
statements,
fields
often
science,
encounter are:
engineering,
the forecast
store d u r i n g
introduces
the
Thus,
outcomes,
Probability
probability is used
concepts
of joint,
weekends,
that
is,
not
Theory
the
outcomes
indicate certainty
is
applied.
of
you
will
According
Explain various terms related
Define probability
State the basics of probability
Explain the operations of an event
Explain the addition and
marginal,
and
conditional
Define Bayes' Theorem and
List the applications of probability
risks
probability.
to probability
multiplication
to
to measure uncertain events.
be able to:
the
of any
addition to this, you will study the Bayes' Theorem.
of
petrol cars.
statements do
the
like
Probability is the science of decision-making with calculated
in the face of uncertainty.
This
Levy,
of a departmental
the prices of diesel cars are likely to go h i g h e r than
Each
definition
later,
to the establishment of the "Theory of P r o b a b i l i t y . "
applicability
medicine,
in
in a game of chance and
has its o r i g i n s in
law of probability
its applications
Page
195
In
08.
eBook
8.2
Basic Terminologies
Probability
It can
be defined
Random
An
as, a chance that something
will
happen.
Experiment
experiment whose outcomes cannot
is referred
to as a random experiment.
be
predicted
in
advance with complete certainty
For example, one cannot
predict the n u m b e r that
w i l l show up after rolling a die.
Trial and
Event
Performing
random
outcomes is called
Flipping
Throwing
experiment
is
called
an event or case.
a fair coin
and
and
the
outcome
or a
combination
of
Some examples of trial and event are:
is a trial and
a d i e is a trial
a trial
getting
getting
heads or tails is an event.
a n y number among
the faces,
1,
2,
3,
4,
5,
or
6 is an event.
Favorable Cases
The
desired
example,
results
occurring
when d r a w i n g
d i a m o n d card
is
a card
out
of
from
an
experiment
a pack of cards,
is
called
favorable
case.
For
the cases favorable to drawing
of a
13.
E q u a l l y Likely Cases
When
there
likely case.
is
no
preference to the
For example,
on
rolling
result
a die,
in
an
there
experiment,
is
no
it
is
known
preference for a
to
be an equally
particular outcome
repeatedly.
Notations Used in
Probability Theory
Different notations with their meanings used
Au B:
A union
A n B :
A intersection
n:
the n u m b e r of points in a sample space
S:
sample space
n(A):
the n u m b e r of points corresponding to happening
of event A
n(B):
the number of points corresponding to happening
of event
n(AB):
the
B or ( A +
BJ
to denote events are given below.
implies either A or B, or both
B or (AB)
i m p l i e s A and
B both
number of points corresponding to happening
a null set implies the set
of both events, A and
is empty
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eBook
Diagram
diagrammatic
various
representation
sets of variables
that
is a Venn
shows
diagram.
all
possible
For example,
logical
Fig.
relationships
8.2a
between
is a Venn
diagram
for the g i v e n data:

N u m b e r of students in a class:
n =
10
6 out of 10 students who
have opted
for Biology form
4 out of 10 students who
have opted
for Mathematics form
There
are
two
students
who
have
opted
for
section A:
both
nA
section
= n(A) = 6
B:
subjects
= n(B) = 4
form
section A n B :
nAB = n(A n B) = 2
Therefore, the Venn diagram for above information can
be represented as:
AnB
Fig. 8 . 2 a :
Sample Space and Sample
The
A
set of all
sample
referred
is
generally
to as sample
space S =
points.
Diagram
Point
possible outcomes
space
Venn
resulting
denoted
by
For example,
from
an
"S"
or
experiment
(omega)
"Q"
in f l i p p i n g
is called
and
a sample space.
the
outcomes
a fair coin experiment,
the
are
sample
{head, tail}, where heads or tails are the outcomes.
Independent Events
Events
say
A,
are
is
example,
of getting
said
not
to
be
independent
affected
on flipping
a head
by
the
if the
happening
happening
or
or
non-happening
non-happening
a fair coin the event of getting
a head
of
the
of any
other
in the first flip
one event
event
B.
For
is independent
in the second flip.
Dependent Events
The
events
possibility
are
said
of the
to
be
happening
dependent
of another.
if
the
happening
For example,
of any
if you
one
of
them
draw a card
affects
from
Page
197
the
pack of
08.
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well-shuffled
cards and
replace
it
before drawing
draw
is independent of the first draw.
draw
before
drawing
draw as the total
Mutually
Two
them
or
events
restricts
events,
the
A and
B,
second
card,
the
said
to
be
mutually
happening
of
all
the
are
are
such
that
they
there is
Fig. 8 . 2 b :
Exhaustive
not
the
replace the card
second
draw
is
result of the second

selected
dependent
at the first
on
the
first
Events
mutually exclusive. That is,
For example,
then
do
card,
number of occurrences change.
Exclusive
more
the
If you
a second
exclusive
other
cannot
events
happen
no common
if
in
the
happening
the
same
together,
then
of
any
one
experiment.
they
are
point between two sets A and
If
said
of
two
to
be
B.
Mutually Exclusive Events
in flipping of a fair coin experiment,
heads and tails cannot occur together.
Event
An
event which
an
exhaustive
contains of all
event.
possible outcomes
For example,
when
a die
is
resulting
rolled,
from
the
an
experiment
outcomes,
1,
2,
3,
is called
4,
5,
are collectively called an exhaustive event.
8.3
Definitions of Probability
Probability
prevails
between
in
is
the
our
science
day-to-day
of
providing
life.
two teams planning
For
numerical
example,
what
will
a cricket tournament or the
day? The chance that an event will occur is called

which something
measure
be
the
to
the
result
uncertainty
of
fair
coin
flip
possibility of rain on any given
probability.
Probability
is the extent to
is possible.
that
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Classical
Definition of Probability
If an experiment
is performed
in
"n" possible ways, out of which,
"m" ways, then the probability of the h a p p e n i n g

is given
P(E)
by the following
of that event
an
event "E" occurs
E is denoted
in
as " P ( E ) " and
formula:
Number of favorable cases of an event E
Total number of cases
=
p
Where, "p" is the probability of occurrence of an event E
Similarly,
given
P(E')
the
probability
by the following
of non-occurrence of that event
_ N u m b e r of favorable cases of an event E
_ m
1
Total number of cases

e
denoted
by " P ( E ' ) " and
is
formula:
=> i = p
E i s
Where, "q" is the probability of non-occurrence of an event E.
Therefore,
p + q
Properties of Probability
The
probability of an event lies between zero and one,
If P(E)
o,
then event E will not occur at all and
will
If P(E)
1,
then the event E w i l l occur and
be called a certain event.
P(A)
+ P(A')
happening
of an
1,
is
the
result
when
it will
the
including
be called an
probability
of
the
both.
impossible event.
happening
and
non
event when added
Limitations of Probability
A classical definition cannot
It
has a limited
reach and
be used when the total number of outcomes is infinite.
in
some cases,
the total
number of outcomes cannot
be
identified.
Classical
definition
involves
ascertain
probability
in
the
"equally
likely"
probability.
Thus,
it
fails
random cases.
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199
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Some examples of probability are:

If
an
experiment
outcomes,
of
head
or
possible, that is,
A box
flipping
tail.
fair
coin
Therefore,
is
the
performed,
occurrence
then
of
there
one
will
among
be
two
them
possible
is
equally
contains four
probability
of
balls.
picking
A ball
of red,
particular
orange,
color
ball
green,
and
(for example,
white color,
a white
ball)
each.
will
The
be
.!. .
4
Where,
one
is
the
number of favorable outcomes
and
four
is
the
total
number
of
outcomes.
There
say,
are
seven
in
a week.
can
be
written
Wednesday,
outcomes and
Statistical or
The
days
seven
Empirical
empirical
is the total
The
as,
probability
Where,
of
raining
one
is
on
the
one
particular day,
number of a favorable
number of outcomes.
Definition of Probability
probability
of
an
event
is
defined
as
the
relative
frequency
occurrence of the event when the number of observations is very large.
there are
in
"n" repetitions of an event and
total
particular event
i n n
repetitions.
T h e n , " ( ) " is
of
Suppose
"rn" is the number of occurrence of a
known
as the
relative frequency
of that
event.
Some examples of empirical definition of probability are:
In
basket,
picking
there
are
30
oranges
and
70
up an orange from the basket w i l l
mangoes.
The
probability
of
randomly
l.Q_ = 0 . 3 or 3 0 % .
be
100
boy
the
has
100
probability
crackers.
of
Out
randomly
of those
picking
100
up
crackers,
defective
60
are
cracker
defective.
will
be
Therefore,
0.6
or
happening
to
1
6
00
60/o.
Probability Defined
The
odds
the
probability
and
"q" is the
as "Odds"
of occurrence
are " p : q"and
of
its
of an
event
non-happening.
probability
are
the
If "p"
of non-happening
o d d s a g a i n s t its h a p p e n i n g
ratio
is
of the
the
of an
probability
probability
event,
then
is, " q : p ," where
of
of
its
happening
odds
in
of an
event
favor of the event
q = 1 - p.
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For example,
face is
and
when
a die
is thrown
the
probability
the p r o b a b i l i t y of not getting
of getting
number 6 is
Moreover, the odds against number 6 are
If
you
have
odds
in
favor
probability of the happening
event are
3 : 5 , then the
of
an
event
of that event.
.!:.
number "6" on
- : - = 1 : 5
6
6
= 5 : 1
or
odds
against
For example,
probability of its happening
an
event,
if given
is given
you
odds
against
probability of its
an
event
happening
is:
are
3 : 7,
7
__ =
the
odds
in
by:
favor
find
the
3
3
__ =
are
7 : 3.
Therefore,
the
7
10
7+ 3
8.4
then
can
that, odds in favor of an
3+5
If the
the top
1
Thus, o d d s in favor of number 6 in the throw of a d i e :
the
Basics of Probability
Permutations without Repetition
The
total
number
"r" repetition
p , - (
n!
of
permutations
is denoted
out
by " " P r " and
of "n" different
is defined
objects
taken
at
a time,
without
as:
O < r < n
n - r .
'
Where,
n!=n(n-l)(n-2) ... 3.2.1
For
n = 1, 2, 3, . . .
you get:
1!= 1
2!= 2 x 1
3! = 3 x 2 x 1 and
so on
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Example 0 1 :
How
many
u s i n g each
three-letter
words
can
be
formed
from
the
letters
of the
word
N U M E RA L S ,
letter only once?
Solution O 1 :
You
have to form
word
a three-letter word
without repetition from eight different
letters of the
" N U M E RA L S . "
Therefore,
number of words =
'P
8!
= 8!
(8 - 3)
5!
8 x 7 x 6 x 5 !
=
5!
= 8 x 7 x 6
=
Permutations with
The
total
number
336
Repetition of Objects
of different
permutations
where any of the objects are repeated
any
of "n"
different
objects
number of times:
taken
"r" at
x .. x
time
n = n'
Example 0 2 :
How
many
four-digit
d i g i t is used
numbers can
be
formed
from
the
digits
3,
4,
7,
8,
and
9,
if each
any number of times?
Solution O 2:
Since
one
the
of
repetition
the
thousand's
given
place,
multiplication
4
each,
is allowed,
in
five
ways.
can
be
the
total
the d i g i t
in
Similarly,
occupied
in
number
ten's
five
of
unit
place can
place,
different
ways
of
be
occupied
hundred's
ways.
Repetition of Not All
type,
by
any
and
the
number
is
Different Objects
number of permutations of "n" objects taken all at a time where, " n
one
place,
Hence,
forming
by
625
Permutations for
of
digits
principle,
5 x 5 x Sx 5 = 5
The
of a d i g i t
"n2"
is
similar
and
of
second
type
...
"nk"
is
similar
1"
and
is similar and
of
k"
type,
given as:
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Example 0 3 :
How
many
different
words
can
be
formed
by
permuting
all
letters
of
the
word
APPLICATION?
Solution
03:
The word
"APPLICATION" contains
C, T,
0,
L, and
N each occur once.
11
letters,
in which A,
Hence, the total
P,
and
I occur twice and
letters
number of permutations is:
1 1 x lOx 9 x 8 x 7 x 6 x 5 x 4 x 3 x 2'
11!
--- = ---------------
2!
2! 2! 2!
2!
x 2!
19958400
=---,----
4
= 4989600
Example 04:
Ten
books are placed
randomly
in a shelf.
that a particular p a i r of books shall
Always together
Nevertogether
Find
the
number of different arrangements so
be:
Solution 04:
Since
two
Therefore,
books
are
now you
packed
total
you
have n i n e books that can
However, the two packed

Hence,
together,
number
always together is 9!
of
books can
of
regard
be arranged
be arranged
arrangements
x 2!
should
in 9!
them
as
such
that
single
book.
ways.
among themselves in 2!
books
particular
different ways.
pair
of
book
= 725760
Total
number of ways for a r r a n g i n g
Total
number of arrangements such that a particular pair of books is never together:

=
(total
number
number
of
of
ways
arrangements
10 books among themselves is 1 0 1
for
of
arranging
books
such
10
that
books
a
among
particular
themselves)
pair
of
book
is
1 0 ! - ( 2 ! x 9 ! ) = 10 x 9 ! - 2 ! x 9 !
= ( 1 0 - 2 ) x 91
8 x 91
= 2903040
(total
always
together)
is
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Combinations
A combination
of "n" different objects taken "r" at a time
a selection of "r" objects out of n objects and
is given as:
is denoted
"C,
by
""C,
"or"
( ) " is
= (n) = ( _n')I
r
n
r .r.I
Remarks:
"C 0 = 1
nc , -
" C0 1
-
Example 0 5 :
bag
contains
random.
Find
10
white,
red,
black,
and
blue
balls.
When
five
balls are drawn
the number of combinations so that two of them are red
and
at
one is black.
Solution O 5 :
You
have to select five balls out of 22
There should
be two
red
balls and
balls.
one
black
ball,
from
10
that
is,
the
remaining
two
balls can
be
either white or blue.

Thus,
these
selected
Two
red
4)-
15!
2!
be
selected
13!
3)1
15
balls.
These
as shown
below.
balls and
one
two
balls
can
be
four can
_ 4
2!
be selected as shown
below.
2! _
6
(4-2)!2!
2!
2!
In addition, one black ball out of three can
= 1 5 x 1 4 x 1 3 ! = l 0 5
13!2!
balls from
4!
can
below.
15!
(15-2)!
(2
balls
as shown
15J=
( 2
two
3!
_ 3
(3-1)'1!
Therefore,
2'
be selected
2'1!
the total
number of ways to
principle of multiplication
select two
red
black
ball
using
is given as:
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Concept of Probability
8.5
Operations of Events
Operations of events
lead
to formation of new events. These new events can
of the o r i g i n a l sample space.

Union of Two or More
If "A" and
Operations of events are given by the following
be subsets
types:
Events
"B" are two events defined
on a sample space "Q," then " A u B " is the event
that contains all points belonging to either A or B, or both.
Let
0={1,2,3,4,5,6},
Let B
A={l,2,3,4}
{2, 4, 6}
Then, A u B
{ 1 , 2, 3, 4, 6}
Remarks:
A u B = B u A
Au A'= Q
Au,p=A
A u r:J = Q
Intersection of Two or More
If "A" and
Events
"B" are two events defined
on a sample space "Q," then
the event which contains all the points, which are in both, A and
Let
intersection
A r. B
B.
{1, 2, 3, 4, 5 ,6, 7, 8}
Let A = { 1 , 2, 4, 6, 7}
Let B
{2, 4, 6, 8}
Then, A r. B = {2, 4, 6}
Remarks:
A n B = B n A
A r. t = t
A r. A ' = t
A n r:J = A
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Complement of an
Event
If "A" is an event defined

points
of Q
that
are
not
simultaneous flipping
on "Q,'' then the complement of A is the event that contains all

in
and
is
denoted
by
A.
For
example,
in
the
event
of
the
of three fair coins, the sample space is
Q = { H H H , H H T , THH,HTH,HTT, THT, TIH, TTI}
The event A getting
at least one head
is:
A = {HHH, HHT, THH, HTH, HTI, THT, TTH}
The event A' =
{TTI}
which
is not in A.
Remarks:
'
(A')
Q'
<1 > ' = 0
q,
Relative Complementation
If A and
B are events,
A' n B
or (B - A ) "
relative
complement
then the
is
the
of
relative complement of A with
event
B with
that
respect
contains
to
A,
all
the
denoted
respect to
points
of
but
B,
denoted
not
by " A n B' or ( A - B ) "
of
A.
is the
that contains a l l the points of A but not of B.
Set Identities
Commutative laws
A u B = B u A
A n B = B n A
Associative laws
o
( A u B) u C = A u ( B u C)
( A n B) n C = A n (B n C)
Distributive laws
o
A u (B n C) = ( A u B) n ( A u C)
A n ( B u C) = ( A n B) u ( A n C)
De-Morgan's laws
o
( A u B)' = A' n B'
( A n BJ' = A' u B'
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by"
The
event
08.
8.6
To
eBook
Probability Laws
calculate
sample
the
probability
space and
calculate
identify
probability
in
of various
the
such
events,
corresponding
cases,
it
may
sample
different
laws
not
always
points
of
be
possible
for a said
addition,
to
event.
draw
Hence,
multiplication,
etc.
a
to
are
applied.
Addition
It states
Law of Probability
that
exclusive
the
probability of occurrence of either an event "A" or "B" of two
events
represented
is
equal
as, "P(A u B)
Here, "A" and
to
the
P(A)
sum
of
their
individual
probabilities.
mutually
It
is
also
+ P(B)"
"B" are mutuall y exclusive events.
" ( A u B ) " denotes the event that A or B
occur when the experiment is performed.
If
the
stated
two
events,
as the
A and
probability
are
not
mutually
exclusive,
of occurrence of either an
to the probability that event A occurs,
plus the
then
the
addition
event A or event
probability that event
B,
or
law
both
can
be
is equal
B occurs m i n u s the
probability that both events occur.
It can be represented
as,
P(A u B) = P(A) + P ( B ) - P(A n B)
Here, " ( A n B ) " denotes the event,
Similarly
addition
law
of
that both A and
probability
same sample space "S" can
be stated
for
three
B occur.
events
"A,"
\\B,"
and
\IC"
defined
on
the
as follows:
P(A u B u C) = P(A) + P(B) + P(C) - P(A n B) - P(B n C ) - P(A n C) + P(A n B n C)
Where " ( A u B u C ) " denotes the occurrence of either an event A or event
or
any
two
of them
occur,
or
all
three
occur,
" ( A n B rv C)"
denotes
the
B,
or event
event,
that
the three events occur.
Example 0 6 :
Find the probability that at least one head occurs when two fair coins are flipped.
Solution
06:
Let A be the event of getting
heads on the first coin.
Let B be the event of getting
heads on the second
coin.
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The p r o b a b i l i t y of getting
a head on flipping
The probability of getting
a tail on flipping
a fair coin
a fair coin
is
is
P(A)
P(A')
P(B)
P(B')
= ;
.!:.
2
The event that there is a head
According
to the addition
the event of getting
second
least one coin can
law of probability,
P(A v B) = P(A) + P ( B ) - P(A
Here
on at
r,
it can
be written as P(Av B)
be obtained
as:
B)
heads
on
the first coin
and
the event of getting
heads on
the
coin are independent events.
If two events are independent then
( A n B) = P(A) x P(B)
P(A v B) = P(A) + P ( B ) - P(A r. B)
=;+;-(;x;)=!
Example 0 7 :
single
drawn
card
is
drawn
from
deck
of
52
cards.
What
is
the
probability
that
the
is a queen or a diamond?
Solution O 7 :
Let "Q" be an event that the card
drawn
is a queen.
Let "D" be an event that the card
drawn
is a d i a m o n d .
As there are four queens in a deck of 52 cards
Therefore,
P( Q) =
5
As there are
13
diamonds in a deck of 52 cards

13
Therefore,
P(D)=
52
Also as there is o n l y one queen of diamonds in a deck of 52 cards,
Therefore,
P(Q n D) =
512
The probability that the card

P(Q u D)
drawn
is a queen or a diamond
is given a s :
P(Q) + P(D) - P(Q n D)
4
13
1
- + - - 52
52
52
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16
= - = -
52
13
The probability that a card
drawn from a deck of 52 cards is a queen or diamond
is
Example 0 8 :
Two
the
dice,
sum
showing
A, B,
B,
of
green
the
the
and
points
number
one
on
red
them
one.
are
is
thrown
odd
Describe
A u B, A n B, A, ( A u B),
Solution
The
one
and
and
the
simultaneously.
"B"
be
the
complete
Let "A"
event
sample
that
be
at
space,
the event
least
also
one
the
find their probabilities.
sample
space
"S"
is as given
corresponding
to
the
experiment
of
throwing
two
below.
(2, 1), (2, 2), (2, 3), (2, 4), (2, 5), (2, 6)
(3, 1), (3, 2), (3, 3), (3, 4), (3, 5), (3, 6)
(4, 1 ) , (4, 2), (4, 3), (4, 4), (4, 5), (4, 6)
( 5 , 1 ) , ( 5 , 2), (5, 3), (5, 4), ( 5 , 5), ( 5 , 6)
(6, 1 ) , (6, 2), (6, 3), (6, 4), (6, 5), (6, 6)}
n(S)
36
A = The event that the sum of the points on the dice is odd.
Therefore,
sample space for A is:
A = { ( 1 , 2), ( 1 , 4 ) , ( 1 , 6), (2, 1), (2, 3), (2, 5)

(3, 2), (3, 4), (3, 6), (4, 1 ) , (4, 3), (4, 5)
(5, 2), ( 5 , 4), (5, 6), (6, 1 ) , (6, 3), (6, 5)}
n(A)
Therefore
18
P(A)
'
n(A)
n(S)
18
=
36
_! and
P(A)
1 - P(A)
Therefore,
1 - _!
B = The event of atleast one d i e is showing
_!
2
number 1.
sample space for B is:
B = { ( l , 1), ( 1 , 2), ( 1 , 3), ( 1 , 4), ( 1 , 5), ( 1 , 6)

(2, 1), (3, 1 ) , (4, 1 ) , (5, 1 ) , (6, 1 ) }
Here,
is
events,
S = { ( 1 , 1), ( 1 , 2), ( 1 , 3), ( 1 , 4), ( 1 , 5), ( 1 , 6)
Here,
die
08:
simultaneously
Here,
that
n(B)
11
n(B)
Therefore,
P(B)
11
= - = -,
n(S)
36
P(B)
n(B)
=
1-
= - =
n(S)
11
1- -
36
25
= -
36
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08.
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A n B = The event that sum

Therefore,
is odd and
sample space for
atleast one d i e is showing
number 1.
A n B is:
A n B = { ( 1 , 2) (1, 4), ( 1 , 6), (2, 1), (4, 1), (6, 1 ) }

n(A n B)
Here,
= 6
n(A n B)
Therefore,
P(A
rv
B)
= - = -
n(S)
36
A u B = The event that the sum is odd or at least one is showing

Therefore,
Au B
sample space for
Au B
number 1.
is:
= { ( 1 , 1 ) , ( 1 , 2 ) , ( 1 , 3 ) , (1, 4), ( 1 , 5 ) , ( 1 , 6),

(2, 1 ) , (3, 1 ) , (4, 1 ) , ( 5 , 1), (6, 1 ) , (2, 3),
(2, 5), (3, 2), (3, 4), (3, 6), (4, 3 ) , (4, 5 ) ,
(5, 2), (5, 4), (5, 6), (6, 3), (6, 5)}
Here,
n(A u B)
23
23
Therefore,
P( A u B)
n(A u B)
n(S)
36
P(A u B) = 1 - P(A u B)
1 - 23
36
_!2
36
Example 09:
If two dice are
thrown
the numbers appearing
Greater than 9
Neither 7 nor 1 1
simultaneously,
then
what will
on the face of two dice
be the
probability
that the sum
is:
Solution 0 9 :
Sample space corresponding
to the experiment of throwing
two dice simultaneously is:
S = { ( 1 , 1 ) , ( 1 , 2), ( 1 , 3), ( 1 , 4), ( 1 , 5), ( 1 , 6)

(2, 1 ) , (2, 2), (2, 3), (2, 4 ) , (2, 5 ) , (2, 6)
(3, 1 ) , (3, 2), (3, 3), (3, 4), (3, 5), (3, 6)
(4, 1 ) , (4, 2), (4, 3), (4, 4), (4, 5), (4, 6)
(5, 1), ( 5 , 2), ( 5 , 3), (5, 4 ) , (5, 5), (5, 6)
(6, 1 ) , (6, 2), (6, 3), (6, 4), (6, 5), (6, 6)}
Here,
n(S)
36
Let "T" be the event of the sum of the numbers appearing
on the face of two dice.
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Probability that the sum
is greater than 9 means
Therefore, the required event "(T
P(T > 9)
> 9)" can happen in the following ways:
T=10, T=11, T = 1 2
Hence,
by the addition
law of probability:
P(T > 9) = [P(T = 10) + P(T = 11) + P(T = 12)]
In the sample space of two dice, there are 36 sample points.

The sample points favorable for sum
10 are (4, 6 ) ,
1 1 are (6,
(6, 4 ) ,
and
(5,
5).
P(T = 10) = -2_

Therefore,
36
The sample points favorable for sum
Therefore,
P(T
11)
5) and
(5,
6).
.3...
36
And
the sample
Therefore,
P(T
points favorable for s u m =
12
is (6,
6).
12) = ....!:...
36
Therefore,
P(T > 9) = [P(T = 10) + P(T = 1 1 ) + P(T = 12)]
= - + - + -
36
36
36
= - = -
36
Let A be the event that sum of the numbers appearing
on the face of two dice is 7.
Let B be the event that sum of the numbers appearing
on the face of two dice is
The sample space corresponding to the event A will
11.
be:
A = { ( l , 6), (6, 1 ) , (2, 5), ( 5 , 2), (3, 4), (4, 3)}

Here,
n(A)
Therefore,
= 6
n(A)
6
1
P(A) = -- = - = n(S)
36
6
The sample space corresponding to the event B will
be:
B={(5,6),(6,5,)}
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08.
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Here,
n(B)
Therefore,
P(B) = n(B)
n(5)
The events
A, B
18
36
denote the events of not getting
Therefore,
An B
is the event getting
Therefore,
P(A n B) = P(A u B)
sum
sum
7 and
11
respectively.
neither 7 nor 1 1
=1-P(AuB)
= 1 - [ P ( A ) + P(B) - P(A n B)]

= 1 - P(A) - P(B)
Here,
P(A n B) = $ ,
because A and
P(A n B) = 1 -
Therefore,
Conditional
B are disjoint events.
18
Probability
Probability "P(A)" of an
event A represents the
result
in
in
an
experiment.
must
be
in
outcome
If you
a "set
have
"set
prior
B" of 5,
that the outcome will also

is
read
as the conditional
A"
information
then
be
relative
in
this
B.
likelihood
to
that
information
the
sample
the
outcome
must
T h i s evaluated
probability
that a random
be
of the
used
probability
of the event A,
space
given
"5"
experiment will
of
the
random
experiment
to evaluate the
is denoted
that
random
likelihood
as "P(A/B)" and
the event
B has already
occurred.
Marginal
Probability
The probabilities of the happening

n (A)
P(A) = n (5)
n (B)
and
P(B) = n (S)
of A and
B,
are defined as
.
, respectively.
They are also known as marginal probabilities of A and
B.
Joint Probability
It
is
the
probability of a joint event An B or AB,
denoted
as "P(AB) "and
is given
by
following formula:
P(A n B)
P(AB)
n(AB)
n(S)
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Thus,
P(AB)
is the joint probability of the happening
Let "A" and "B" be two events defined

then the conditional
probability
P(A/B) = P ( A " B) P(B)
The
P(B)
'
probability
of
given
of both events, A and
B together.
on the sample space "S" of a random experiment,
P(A/B)
is given
by the following
already
happened,
formula:
0
>
B,
given
by the following
that A
has
is denoted
by
"P(B/A)" and
is
formula:
P(B/A) = P ( A " B) P(A)

0
P(A)
'
>
Suppose a candidate appears for two examinations successively.

Let the sample space S for his possible result
be:
S = {PP, PF, FP, FF}, n(S) = 4
Where,
Let P be the candidates who have passed
Let F be the candidates who have failed
Let A be the event that candidate
probability of A is
P(A)
Let
"B"
be
the
event
space corresponding
Then the marginal
that
the examination
passed
both the examinations,
then
the marginal
= .!
n ((A))
has
the examination
the
candidate
to the event B w i l l
probability of B is
be
passed
at
least
one
examination.
The
sample
B = {PP, PF, FP}
P(B) = n ((B))
n
The sample space corresponding to the event
I
4
A n B = {PP, PF, FP}
n(A rv B) = 3
n(AnB)
Therefore,
P(A n B) =
Probability that a candidate

passed
at
3
= -
has
least one examination
." It is given
by the following
passed
both
the examinations
is the conditional
given
p r o b a b i l i t y and
that
the candidate
is denoted
by "P(A/B)
formula:
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P(A/B) = P(A n B) = 1 / 4 =
_!
P(B)
3 / 4
Properties of Conditional
If "A" and
"S
"B"
are
Probability:
mutually
events
defined
on
the
same
sample
space
" then
'
'
P(A/B) = P(A n B) = P($)

P(B)
exclusive
= O
P(B)
If A is a subset of B that is
P(A/A') = P(A n A ' ) =
an
P(A')
P($)
= O
P(A')
A c B then,
P(B/A) = P(A n B) = P(A) = l

P(A)
Example
10:
is
dig it
P(A)
selected
at
random
from
dig its
A = { 1 , 3, 5, 7, 9 } , B = {2, 3, 5, 7}, C = {6, 7, 8, 9 } .
Solution
Find
to
9.
Consider
P(A/B) and
the
events
P(B/C).
10:
Since a d i g i t
equal and
is selected
at
random,
the
probability
of selecting
any d i g i t
from
1 to 9
is
9
P(A)
= P(l)
+ P(3)
+ P(5)
+ P(7)
+ P(9)
1
1
1
1
1
= - + - + - + - + 9
5
=
9
P(B)
= P(2)
+ P(3)
+ P(5)
+ P(7)
+ P(7) + P(B)
+ P(9)
= - + - + - + -
4
=
P(C)
= P(6)
1
1
1
1
= - + - + - + 9
9
9
9
4
=
9
( A n B)
= {3, 5, 7}
Therefore,
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08.
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P(A n B) = P(3) + P(S) + P(7)
P(A n B) =
(B n C) = {7}
P(B n C) = P(7) =
P(A n B)
Therefore,
P(A/B)
3 /9
P(B)
P(B/C)
P(B n C) =
P(C)
Example
bag
1/9
4/9
!
4
blue
and
other without replacement.
Total
4/9
11:
contains
Solution
= - - = -
red
Find
balls.
Two
balls
are
drawn
the p r o b a b i l i t y that both
at
random,
balls drawn are
one
after
the
red.
11:
number of b a l l s =
Let A be the event of getting
a red
ball
in the first attempt.
Let B be the event of getting
a red
ball
in the second
Therefore,
Probability
P(A)
attempt.
of d r a w i n g
red
ball
in
second
draw,
given
that
the
first
ball
selected
red:
3
P(B/A)= -- =
3+ 5
Therefore, the probability that both the balls are red:

P(A n B) = P(A) P(B / A)
= - X - = -
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08.
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Law of Multiplication
For any two events A and
Also,
B,
P(A n B) = P(A) P(B
P(B n A ) = P(B) P(A / B ) ;
If A and
P(B)
B a r e independent, then
I A);
P(A)
P(A n B) = P(A)P(B),
P(B n A ) = P(B)P(A)
Remarks:
If A and
P(at least one occurrence)
For
example,
B are independent events,
if
two
fair
coins
are
then
A and
are also independent events.
1 - P(no occurrence)
flipped,
then
the
probability
of
getting
heads
on
at
least one of the two coins is:

P(at
least one head
occurs)
1 -
P(no head
occurs)
= 1 - P(tails on both sides)

= 1 - P(tails on one coin and tail on the other coin)
= 1 - P(T) P(T)
=1-(X)
=1-()
=
Example
[!)
12:
The odds against student A solving

of student
B solving
independently, find
Solution
these
Mathematical
problems are
12:14.
problems are 7 : 5 and
If both
of them
the probability that these problems w i l l
try to
the odds in favor

solve the
problem
be solved.
12:
Let A denote the event that student A solves the problem.

Let B denote the event that student B solves the problem
Given that, odds a g a i n s t A are 7 : 5 .
Therefore,
odds in favor of A will
Therefore,
P(A)
5
-
= 2.
5+ 7
12
12
Similarly,
P(B)
12
=
12 + 14
P(problem w i l l
be 5 : 7
be solved)
26
=
1 - P(problem
is not solved)
Page 2 1 6
08.
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Since, A and
Bare
1 - P(A')P(B')=
1 - P(neither A nor B can solve the problem)
1 - P( A' n B ' )
1 -
P( A')P(B')
independent, A' and
1 - [1
- P(A)]
independent.
[ 1 - P(B)]
1 - [1-/2][1-
1 -
!]
7
14
-x-
12
=
B' w i l l also be
26
1 - 0.314
= 0.6858
Example
13:
The probability that A hits the target is
.!
and
the
probability that B hits the target
Both fire once at the target, find
the
Both hit the target
The target is hit exactly once
Solution
probability that:
Let A denote the event that A hits the target.

Let B denote the event that B hits the target.
P(A)
.!:_ , P(B) = .!:_

5
3
4
Therefore,
P(A')
1-
P(A)
=
5
P(B')
1-
P(B)
P(both
hit the target)
P(A n B) =
P(A)P(B),
1
=
Since
A n B'
has hit exactly once)
and
A' n B
since both A and
B a r e independent.
- x - = -
P(the target
1
3
15
P(either A or B hit the target)
P((A n B') u P(A' n B))
are disjoint events:
.!
3
13:
Given that,
is
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08.
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P((A n B') u P(A' n B))
P(A)P(B') + P(A')P(B)
1
=
- x - + - x -
Therefore,
by independence
P(the target has hit exactly once)
15
Example
14:
Candidate X can
of the
same.
solve 85% of the Accounting
When an Accounting
that at least one of them
Solution
problem
problems while candidate Y can solve 95%
is selected
at
random,
what
is the
probability
will solve it?
14:
Let A be the event that candidate X can
solve the problems
Let B be the event that candidate Y can solve the problems
Given that,
Then,
P(A)
= 0 . 8 5 and
by theory of addition
Here A and
P(B)
= 0.95,
you
have to find
law of probability:
P(AuB).
P(A u B) = P(A) + P(A)- P(A ,.-, B)
B a r e independent events.
Hence P(An B) can
be found
by
law of multiplication a s :
P(A n B) = P(A) P(B) = 0 . 8 5 x 0 . 9 5 = 0 . 8 1
Substituting
the values,
you get:
P(A u B) = 0 . 8 5 + 0 . 9 5 - 0 . 8 1
P(A u B) = 0 . 9 9
Thus,
the probability that at least one of the candidates w i l l solve the problem
Example
From
15:
a division
A can
solve
solve is
is 0 . 9 9
1/3.
three
students A,
problem
in
B,
and
Mathematics
If all of them try
is
C a r e selected
1/4,
that
independently, find
at
B can
random.
solve
is
The
1/3,
probability
and
that
that
C can
the probability that the problem will
be
solved.
Solution
The
15:
problem
is solved
by at
least one of them,
that
is,
either A,
B, or C,
or two of them,
or all of them solve the problem.

Therefore, by the law of total p r o b a b i l i t y :
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P(A u B u C) = P(A) + P(B) + P(C) - P(A n B) - P(B n C) - P(A n C) + P(A n B n C)
This problem can
be solved
in two w a y s :
Method I :
Since A,
B, and
C a r e independent events
1
P(A
r-,
B J = P(AJP(BJ =
1
P(B n C J = P(BJP(CJ =
l2
1
x
1
P(A n CJ = P(AJP(CJ =
1
= g
1
x
l2
=
3
1
P(A n B n CJ = P(AJP(BJP(CJ =
1
=
36
P(A u B u C) = P(A) + P(B) + P(C) - P(A n B ) - P(B n C ) - P(A n C) + P(A n B n C)
1
Thus,
P(A u B u CJ = 4 + 3 +
3 - 12 -
9 - 12 + 36
2
=
Method II:
The
probability that
none of A,
B,
or C are able to solve the problem when each of them
tries independently.
P(A does not solve) x P(B does not solve) x P(C does not s o l v e ) =
3
2
2
-x-x-
4
Therefore,
1
=
P(at least one s o l v e s ) = 1 - P ( n o n e solves)
= 1 - 3
2
=
Therefore
it is the same as the value of probability obtained
in method
I.
Example 1 6 :
A car rental agency
randomly selected
has
16 compact cars and
for a safety check,
12
intermediate size cars.
how many ways can they
If 5 of them
be selected
so that there
are:
2 cars of compact
At least 2 cars are of compact size
At the most,
All
size
2 cars are of compact size
5 cars are of compact size
are
Page 2 1 9
08.
Solution
1.
eBook
Out
16:
of
selected
cars,
are
of
compact
size,
therefore,
there
will
be
cars
of
are
of
intermediate size.
1
2 cars of compact size is
The number of ways of selecting
1}
3 cars of intermediate size is (
)
Therefore,
the
compact size
.
.
rs
m u l t i p l i ca t i o n
(16)
( 1 2 )
2.
Selecting
at
least 2
principle
1 6 !
of
1 2 !
cars
out
of
which
26400
91 31
141 2 1
(z 2)
selection
;J
The number of ways of selecting
compact cars out of 5 selected
cars
is equal to the following
four possible combinations.
Combination
1:
2 compact cars and
3 intermediate size cars
Combination 2 :
3 compact cars and
2 intermediate size cars
Combination 3 :
4 compact cars and
1 intermediate size car
Combination 4 :
5 compact cars and
no intermediate size car
Using
the multiplication and
16!
=
14!2!
=
=
3.
12!
16!
x--+
9!3!
addition principle,
12!
16!
+
13!3!
10!2!
12
x
12!4!
the total
16!
number of ways
is:
11!5!
26400 + 36960 + 21840 + 4 3 6 8

89568
At the most,
2 cars are of compact size:
Combination
Combination 2 :
1 car of compact size and 4 of intermediate size
Combination 3 :
0 car of compact size and
Using
1:
either 2 cars are of compact size and
3 of intermediate size
5 of intermediate size
addition principle, the total
number of ways
is:
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08.
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16!
12!
16
12!
x--+
14! 2!
12!
x--+ 1 x
9! 3!
8! 4!
7! 5!
= 35112
4.
All cars are of same size;

Using
either all
16!
addition
principle,
the total
n u m b e r of ways is:
12!
x 1
11!
5 are compact cars or all are of intermediate size.
+ 1 x--
5!
7! 5!
= 5160
8.7
Bayes' Theorem
This chapter discusses

taken
place and
the
are known to be "a
of the
happening
the computation
happening
of a favorable event
priori." However,
of the event
of probability,
has to
when the event
is computed,
it
where
be
physical
known.
experiment
Such
has already occurred
is called
"a
has
probabilities
and
the cause
posterior." The following
topic
will cover such cases of probability.
Bayes'
Theorem
is
named
estimates
the
probability
example,
regarding
after
of
Thomas
the
cause
particular
Bayes.
by
ailment
This
which
this
an
there
events
each
be
an
B,, B
of
the
event
B"
A,
has
events
which
happened.
and
of
P(B,) and P(A/B,)
are known.
Now,
is
due
suppose
to
it
known
B1,orB2,or
happening
of
A.
can
Bayes'
Also,
conditional
that
. . . ,or
happen,
Bn.
event
That
Theorem
A
is,
gives
only
suppose
events
has
if
this
event
one
the
(A
of
theorem
of
may
could
probability
have
be
occurred.
used
to
I
I
A)
P(B,) P(A
L P(B,)
P(A
B,)
(i
B,) '
2 .. .
For
find
the
"n"
probabilities
I B,)(i
B,
of
of
= 1, 2, 3 . . . n)
but
it
is
criteria
information,
in
mutually
the
not
was
terms
the
are
of
happening
known.
known
the
exclusive
cause
it
for
probabilities,
n)
'
Page 2 2 1
of
Thus,
whether
follows:
P(B
that
patients.
happened
which
theorem
probability of cause due to which the a i l m e n t occurs in
Let
is
is
the
as
08.
eBook
Example
There
and
B1
are
box
17:
two
B2
boxes
contains
B1
and
2 white
B2
where
balls and
given that the ball drawn from
Solution
box
B1
3 black
contains
balls.
Find
3 white
the
either of the two boxes
balls
and
black
probability of selecting
B1or
B2
balls
box
is white.
17:
Let us define the events as follows:

A:
The ball drawn
is white
B1:
Box selected
is
B1
B2,
Box selected
is
B2
A / B1 : White ball
is drawn, given that the box selected
A/8
is drawn, given that the box selected
2:
B1 / A :
B2 / A :
You
White
Box
Box
ball
A)=
B2
is selected, given that the ball drawn
I A)
P(B,
P(B;)P(A
is white
I B;)
i = 1, 2
L P(BJP(A I B ; ) '
P(B
is
B1
is selected, given that the ball drawn is white
have to find
P(B
is
)
1
1
= P(B,) = 2
P(A/81) = 3 / 5
P(A/82) = 2 / 5
_
Th
f
ere ore,
P(B
I A)
P(B1 )P(A
I 81)
I B i ) + P(B2 )P(A I 8 2 )
- P(Bi)P(A
3
-
10
=
3
2
- + -
10
3
-
10
3
Thus,
the
probability
of
selecting
box
B1
given
that
ball
drawn
is
white
is
and
probability of selecting
box
B2
is
1- =
Page 222
the
08.
eBook
Example
Three
18:
machines
produce
defective
particular d a y ,
the
producing
proportion
separately
and third
machines.
Solution
18:
M 1 , M 2 , and
Let
P(M
M3
30%,
of
a u n i t of output
probabilities
Let
45%,
of
items,
is
and
as
selected
the
25%
0.04,
at
defective
of
0.06,
random
item
the
is
being
total
and
found
output
0.03,
to
by
be the probability of an
item
being
produced
by machine
Let
P(M )
item
being
produced
by machine
Let
P(M
item
being
produced
by machine
Given that:
You
P(Mi) = 0 . 4 5 ,
know that, total
P(M
the
first,
On
Find
an
"D"
item that
represent
probabilities
out
second,
P(M 2) = 0 . 3 0 ,
probability
P(M 3 ) = 0 . 2 5
is always eq u a l to one.
of
has to come from any of the three machines.
defective
defective
items,
items
then
being
P(D
M i ) , P(D
produced
by
M 2 ) and P(D
the
machines
M3)
M
1,
denote
2,
and
the
respectively.
P(D
I M i ) = 0.04
P ( D / M 2 ) = 0.06
P(D/M3)=0.03
Let "P(M
Using
P(M
/ D ) " be the probability that an
item
produced
by m a c h i n e
being
defective.
Bayes' Theorem:
/D) =
1
)+P(M,)+P(M,)= 0.45+0.30+0.25 = 1
That is,
Let
defective.
to
be three machines a n d :
known
respectively.
be
produced
are
P(Mi) P(D / M i )
L P(M;)
P(D I M ; ) '
(i = 1
2
'
3)
'
P(M1) P(D I M1)

=------------
P(M1) P(D I M1) + P(M,) P(D I M , ) + P(M,) P(D I M , )
0 . 4 5 x 0.04
=-------------0 . 4 5 x 0.04 + 0 . 3 0 x 0 . 0 6 + 0 . 2 5 x 0 . 0 3
Page 223
08.
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0.018
=-------0 . 0 1 8 + 0.018 + 0.0075

0.018
= - --
0.0435
= 0.4138
Thus,
the probability of defective items produced
Similarly,
"P(M
/D)"
be
the
probability
that
an
by machine
item
M1
is 0 . 4 1 3 .
produced
by
machine
being
defective.
Using
Bayes' Theorem:
P(M2/D)=
P(M2)P(D/M2);
L P(M,)
(i=l,2,3)
P(D / M ; )
P(M ) P(D I M )
2
2
=--------------P(M,) P(D I M 1 ) + P(M ) P(D I M ) + P(M,) P(D / M )
2
2
3
0.30 x 0.06
=-------------0 . 4 5 x 0.04 + 0 . 3 0 x 0 . 0 6 + 0 . 2 5 x 0 . 0 3
0.018
0.018
0.018 + 0.018 + 0.0075

=
0.0435
0.4138
Thus, the probability of defective items produced
Similarly,
"P(M
/ D)"
be
the
probability
that
an
by machine
item
M
2
produced
is 0 . 4 1 3 8
by
machine
defective.
Using
Bayes' Theorem:
P(M3/D)=
P(M3)P(D/M3);
L P(M,)
(i=l,2,3)
P(D I M ; )
P(M
)
3
P(D / M
)
3
=--------------P(M,) P(D / M 1 ) + P(M,) P(D / M,) + P(M,) P(D / M 3 )

0 . 2 5 x 0.03
=
-------------
0 . 4 5 x 0.04 + 0.30x 0 . 0 6 + 0 . 2 5 + 0 . 0 3
0.0075
0.0435
= 0.1724
Page 224
being
08.
eBook
Thus, the probability of defective items produced
8.8
by machine
Applications of Bayes' Theorem
Bayes' Theorem
engineering
has various applications.
processes
to
telecommunications to
received.
Also
test
the
It
quality
is used
of
predict the variations
diagnostic
test
conducted
in exploratory and
product.
It
in transmitted
for
medical
also
of Bayes' Theorem can
Example
responsible
the
is
experiencing
are
price,
dissatisfaction
quality,
and
its
in
applications
treatment
is
an
the message
ideal
scenario
By
conducting
respectively.
dissatisfied
With
overall,
this
what
with
survey
probabilities of a customer going
below.
away
the
the
three
amongst
the
its
customers.
By conducting
dissatisfied
information,
are
amongst
due
that
to
these
wants
it
is
analysis,
are
customers,
company
probabilities
factors
an
The
0.45,
it
to
due
know
to
it
is
0.40,
also
factors
three
factors
assessed
and
is
if
0.4,
a
price,
0.6,
B, be a customer is dissatisfied d u e to price.
Let
be a customer is dissatisfied
due to quality.
Let
B,
be a customer is dissatisfied
due to packaging.
Let A be a customer is dissatisfied
P(B
P(B
= 0.45,
P ( A / 8 1 ) = 0.4
= 0.40,
P(A
= 0.15
Find out
Using
I B2)
P(A / 8 3 )
P(B1
quality
or
overall.
= 0. 6
= 0.5
A), P(B2
A), P(B3
A)
Bayes' Theorem:
and
is
Given:
P(B
the
customer
19:
Let
0.15,
evaluated
packaging?
Solution
for
A few more applications
through the examples g i v e n
packaging.
probabilities of dissatisfaction
respectively.
0.5,
in
19:
company
that
be better understood
finds
troubleshooting
messages from
application of Bayes' Theorem to check the authenticity of tests.
is 0 . 1 7 2 .
Page 2 2 5
08.
eBook
P(B
/A)-
P(B1)P(A/Bi)
1
- P(B1 )P(A
I B i ) + P(B2 )P(A I B 2 ) + P(B3 )P(A I 8 3 )

0.45 x 0.40
=-----------0.45 x 0.4 + 0.6 x 0.40 + 0 . 5 x 0 . 1 5

0.18
=
0.495
= 0.3636
Therefore,
a customer is dissatisfied
due to price with
probability
is 0 . 3 6 3 6
Similarly,
I A) _
P(B
P(B2 )P(A
2
- P(B1 )P(A
I B2)
I B 1 ) + P(B2 )P(A I B 2 ) + P(B3 )P(A I 8 3 )

0.40x0.60
= -------------
0.45 x 0.4 + 0.6 x 0.40 + 0 . 5 x 0 . 1 5

0.24
=
0.495
= 0.4848
Therefore,
I A) _
P(B
P(B3 )P(A
due to quality with
probability
is 0 . 4 8 4 8
I 83)
3
- P(B1 )P(A
I B 1 ) + P(B2 )P(A I B 2 ) + P(B3 )P(A I 8 3 )

0 . 1 5 x 0.5
= -------------
0 . 4 5 x 0 . 4 + 0 . 6 x 0 . 4 0 + 0. 5 x 0 . 1 5
0.075
=--
0.495
=0.1515
Therefore,
Example
due to
packaging
with probability
is 0 . 1 5 1 5
20:
A salesperson
sells
four
products in 6 attempts.
products
in
6 attempts,
while the other
salesperson
sells three
Find the probability that:
No sale will take place when they
Either of them w i l l succeed
both try to sell the product
in selling
the product
Page 226
08.
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Solution
20:
Let A be the event that the first salesperson

Let
A'
be the event that the first salesperson
Let B be the event that the second

Let
B'
P(A)
4
and P(B)
is a b l e to sell the product.
salesperson
is not able to sell the product.
6
4
P(A') = 1 -
2
and
=
6
The required
product.
=i
Therefore,
product.
is not a b l e to sell the
salesperson
be the event that the second
Given that,
1.
is a b l e to sell the
P(B') = 1 -
=
6
probabilities are calculated
i
6
as:
P(no sale w i l l take when they both try to sell the product)
= P(A' r; B ' )
P(A')P(B')
2
3
1
= - X - = 6
6
6
Therefore,
the
by multiplication
law
=0.167
probability
that
no
sale
will
take
place
when
they
both
try
to
sell
the
product is 0 . 1 6 7
2.
P(either of them w i l l succeed
in selling the product)
= P(AuB)
= P(A) + P(B) - P ( A " B),
by addition
law
= P(A) + P(B) - P(A)P(B)
:::: - + - - - x -
::;
- - - x -
---
5
6
Therefore,
the
probability
that
either
of
them
will
succeed
in
selling
the
product
0.8333
Page 227
is
08.
eBook
8.9
Applications of Probability
Applications of probability in various fields are as given below.
It
is
used
in
investment
companies
to
evaluate
prospects
of
stocks
of
various
companies.
In
trading
companies,
it
is
used
to
assess
the
prices of commodities
and
trade,
accordingly.
In b a n k i n g ,
it is used to develop methodology for assessing the creditworthiness of
an i n d i v i d u a l or a company.
A manufacturer or producer conducts market research to evaluate the current and

future demand for their product and services in the market.
An
operations
manager can
use
it
to
produce
better q u a l i t y
products
with
lesser
defects.
Doctors use it to study abnormality of a part or a system of a h u m a n being.
An
H R manager can
use
it
to
develop
a system
so
that
recruited
employees
will
happen to be more useful to the company.
Palmists and
astrologers
use
it to develop
t h e i r own
methodology
to evaluate the
chance of happenings of various events.
Page 228
08.
eBook
Probability
is
probability
of
happening
An
chance
the
The
whose
events
are
Events
are
said
said
event,
say
A,
to
is
an
1/2.
outcomes
will
event
Thus,
is
happen.
1/2
the total
cannot
be
and
It
the
is
assumed
probability
probability is
predicted
in
of
that
the
the
non
1.
advance
with
complete
to as a random experiment.
to
the possibility of the
of
of an event is also
experiment
something
happening
certainty is referred
that
be dependent
if the
happening
of any one
of them
affects
happening of another.
be
independent,
not
affected
by
if the
the
happening
happening
or
or
non-happening
non-happening
of any
of
the
one
other
event B.
The
probability of an event lies between zero and one,
including
The
topic
number
on
of
permutation
ways
in
and
which
combination
something
can
provides
be
done
both.
technique
or
counting
of
obtaining
the
number
a
of
possible outcomes of an experiment.
To
conduct
may
an
experiment
be dependent,
Union
If A and
B are
A and
B,
If A and
then
trial
and
its
result
is the
set of points
two events defines on
that
an
event.
belong
These
events
or impossible.
to any one of them
points.
the same sample
P(Au B) = P(A) + P(B)- P(A
B a r e two mutually exclusive events defined
P(An B) = 0 ,
is
mutually exclusive, exhaustive,
intersection is the set of common
law of probability states that
called
independent,
of two events,
or both, whereas,
is
space
r-,
5,
then
the addition
B).
on the same sample space 5,
P(A u B) = P(A) + P(B).
and
Joint probability of an event means the h a p p e n i n g
of both the events,
say, A and
together.
The
marginal
event,
of
an
event
regardless of the happening
Bayes' used
He
probability
assumed
calculate
industries,
prior and
that
posterior
posterior
on
the
is
probability
of
the
basis
happening
of
that
of the other event.
probabilities for the evaluation
probabilities.
of
some
It
has
social, engineering, medicine,
the
additional
wide
prior
applications
of better solutions.
information,
in
various
you
can
fields,
like
etc.
Page 229
Binomial
I T M
09.
Probability
Distribution:
eBook
Binomial
9 . 1 Introduction
The
concept
Many
For
business
example,
amount
the
of probability
by
processes
the
call
loan
can
and
arriving
be
activities
at
the
department.
n u m b e r calls that
applied
per
Statisticians study
pattern
in
variation.
probability
outcome
in
the
P.M.
technicians are
This
In
chapter
the
process
required
will
such
probability
space
to 2 P . M .
time
interest at
which
might
loan
random
required
the
varies from
be
are
to
process.
in
nature.
sanction
loan
service center m i g h t
hour
to
processing
in the values of the variables and
statistics
sample
of
or
which
activity and
hour.
time,
be
Whereas,
which
varies
loan a m o u n t .
variation
distribution.
characteristics
between
such
center
hour,
business
outputs
variable of
for loan department the variable of interest

as per documentation and
analyze any
generate
service
The
have arrived
to
This
distribution
defined
like
pattern
how
by
variation
model
random
many
helps to make
of
calls
is
assigns
process.
will
arrive
find
out a systematic
represented
a
probability
This
at
helps
the
by
to
to
the
each
analyze
service
center
predictions or decide whether extra
service
in t h i s timeslot.
discuss
discrete
distribution
known
as
binomial
distribution.
also h i g h l i g h t the importance and applications of b i n o m i a l distribution.
After reading this chapter,
you
will
be able to:
Define a random variable and
probability function
Explain the meaning
Define the expectation and
Define binomial distribution
List the properties of b i n o m i a l distribution
State the applications of binomial distribution
Define mean and
Explain the fitting
of probability distribution
variance of a random
variable
variance of binomial distribution

of a binomial distribution
Page 2 3 1
It
will
09.
Probability
Distribution:
eBook
Binomial
9 . 2 Basic Terminologies
A
probability
distribution
Frequency distribution
then
indicating
an
experiment
four.
To
by
listing
with
all
reference
is conducted
Outcome
Outcome
possible outcome.
with
a fair coin.
The coin
A probability
Tails in Tosses
Heads in Tosses
(T)
(H)
above
Outcomes of Tossing
table
the
is tossed
Number of
emphasize
distribution.
Number of
the
frequency
twice.
the
number
total
of
number
tails
and
of Two Coins Experiment
of outcomes
its
for
tossing
probability
the
of two
following
coins
table
computed.
Sample Points
Probability of
Number of
Number
Depending upon the
Number of
Sample
of Tails
Number of Tails
Tails
Points
(T)
(P(T))
(H,
= 0.25
HJ
4
1
2
(T,
HJ,
( H , T)
2
(T, T)
= 0 50
1
-=
0.25
Table 9 . 2 b :
Probability
The
be written as:
Second Toss
in
to
possible outcomes of an experiment and
value or frequency of each
First Toss
Table 9.2a:
shown
understood
how outcomes may vary in a particular experiment.
results of the experiment can
As
be
prepared
the observed
distribution describes
For example,
is
can
Distribution of Number of Tails
Page 232
is
is
09.
Probability
Distribution:
eBook
Binomial
The probability distribution of number of tails can
be represented
in a graphical form.
0.6
0.5
0 4
"
0.3
J'I
a:
0.2
0
0
2
Number of Tails
Fig. 9.2a:
Random
Probability
Distribution of Number of Tails
Variable
A random
variable
experiment.
It
can
"X"
means
take
any
that
of
the
real
number
various
is
associated
possible
values.
with
Each
the
outcome
one
has
of an
definite
probability.
For example,
dice,
then
equal
X is a random
a fair or unbiased
variable which
can
if X denotes a number obtained
take the values
variable X assumes only a finite
it is known as a discrete random
example,
1,
2,
3,
4,
5 or 6,
on the
each with
the
marks
obtained
by
Continuous
it
is
infinite
integer,
distinct
set of
students
in
an
examination
or
the
number
of
variables.
Random Variable
random
interval,
or countable
variable.
students in a college are discrete random
If the
dice,
Random Variable
random
values,
For
throwing
probability.
Discrete
If a
in
variable
said
height of people,
to
X can
be
assume an
continuous
infinite and
random
uncountable set
variable.
For
of values
example,
speed
in
of
electricity consumption, etc.
Page 233
some
a
car,
09.
Probability
Distribution:
eBook
Binomial
9 . 3 P r o b a b i l i t y Functions
If a function of a random
probability
function.
Function and
variable computes the probability for an event
There
are
two
types
of
probability
it
is termed
as a
functions:
Discrete
Probability
is
discrete
probability
Continuous Probability Function.
Discrete Probability Function
The
probability
function
for
discrete
random
function since the domain of the function
called
is discrete.
Probability Mass Function (p.m.f.)
probability
function
which
gives the
random variable occurs is called

by:
f(x)
Also,
variable
f(x)
P(X
with
single
value of discrete
a probability mass function or p . m . f .
;;, O for all values of X and
It is denoted
p.m.f.
greater than x,
f(x),
or e . m . f .
which
written as:
1f(x)
(e.m.f.)
The cumulative mass function

F(x),
that any
; x)
Cumulative Mass Function
by
probability
F(x)
gives
P(X
of a discrete
the
random
probability
that
variable X is denoted
value
would
not
be
,; x)
Continuous Probability Function
The
probability
function
probability function,
for
continuous
random
since the domain of the function
Probability Density
For
continuous
variable
is
called
continuous
is continuous.
Function ( p . d . f . )
random
variable
probability density function.
It
the
is denoted
corresponding
by f(x) and
function
abbreviated
f(x)
is
called
as p . d . f .
Where, f(x)
2' 0 for all values of x and
f f(x);
1, a
Cumulative Density Function
(c.d.f.)
Cumulative
observed
value
variable X .
F(t)
P(X
density
of
function
X
is
not
It is denoted
of
continuous
greater
than
t,
by F(t), abbreviated
variable
where
is
"t"
as c . d . f.
is
and
the
any
probability
value
of
that
random
is written a s :
s t)
t
That
is:
F(t)
P(X s t)
f f(x)dx
-ro
the
Page 234
09.
Probability
Distribution:
eBook
Binomial
Note:
The concept of probability distribution

explains
how
Similarly,
the
total
probability
frequency
is an analogue to that of frequency distribution.
is distributed
distribution
explains
the various values that a random
among
how
different
the tota l
values of the
probability
is
It
variables.
distributed
among
variable can take.
9.4 Expectation a n d Variance

Managers
as:
a
often
have to
the expected
firm,
the
cement,
life of an
expected
item,
profit
refrigerator,
mathematically
take deci sions
etc.
credit cards held
1,
E(X)
...
by an
then
o r and
expected
or
the
values
expected
of
the expected
demand
random
of
variables
variable is
such
sales of
product
can
be
like
obtained
known.
Variable
per day, the
n u m b e r of finite values.
number of children
in a family,
For
instance,
the number of
i n d i v i d u a l , etc.
variable
the
values of variables,
life of a car battery,
variable can take only a limited
random
Pn,
company
Random
the number of u n i t s produced
the expected
if the probability distribution of the random
random
If a discrete
on
the expected
These
Expectation of a Discrete
A discrete
of
based
X takes the values
expected
is defined
as:
value
E(X) =
of this
L p,x,
,x
. . . Xn
discrete
with
random
respective
variable
probabilities
is
denoted
by
The expectation of a random
Variance of a Discrete
If a discrete
,p
...
p"'
random
and
variable represents the mean of the d i s t r i b u t i o n .
Random Variable
variable
X takes the values
the expectation
variance of variable X is given
Where,
E(X')
Lp x
1
of the discrete
by:
V(X)
E(X
,x
. . . Xn
random
2
)
[E(X)]
with
respective
variable X i s
E(X)
probabilities
or,
then the
12
For example,
when
occurring
the
on
a fair dice
top
probability equal to
face
of
is thrown;
the
dice.
suppose the variable

X
can
take
any
value
represents the
from
1,
... 6,
number
with
for all the possible outcomes.
Page 2 3 5
the
09.
Probability
Therefore,
Distribution:
the expected
eBook
Binomial
value of X denoted
by
and
is given
by:
E(X) =
E(X)
LP;X;
= P1X1 + P 2 X 2 + p 3 X 3 . . . + p 5 X 5
= 5 ( 1 + 2 + 3 + 4 + 5 + 6 ) = 6 (21)
1=1
E(X) = 3 . 5
Also, variance is given
by:
V(X)
S o , to calculate V(X), first E(X2)
L P;X;2
E(X2) =
= P1 x2 + P 2 X 2
- [E(X)]2
is to be calculated.
+ p 3 X 2 . . . + p5x2
E(X2)
= !(12 + 22 + 32 + 42 + 52 + 5 2 )
6
15
1
91
= 6(1 + 4 + 9 + 16 + 25 + 36) =
6
= 15.167
Therefore,
V(X)
2
= E(X )
[E(X)]2 =
15.167
- (3.5)2 =
15.167
12.25
= 2.917
will
never
Note:
Even
though
However,
it
the
is
expected
located
at
value
the
situation where the average

1.25.
Obviously,
however,
children
there
centre
of
is
3.5,
the
the
be
family
variable
values
number of children
cannot
quite relevant.
of
from
in a certain
with
When this is m u l t i p l i e d
1.25
by
to
This
is
locality with
children
1000,
6.
take
but
it gives
the
this
similar
value.
to
the
1 0 0 0 families
number
1.25
is
is,
1 2 5 0 as the number of
in the entire locality.
Expectation of Continuous Random Variable

If X is a continuous
height
of an
random
individual,
variable is defined as:
Where, f(x)
is the
life
variable,
of
E(X) =
an
it
w i l l take all
electric
bulb,
etc.
possible values
The
in
expectation
its
range,
of the
like the
continuous
f xf(x)dx
probability function of the variable X.
Theorems on Expectations
E(X + Y) = E(X) + E ( Y ) , where, X and Y are two variables
E(X - Y) = E(X) - E(Y)
E(XY) = E(X) E(Y), when X and Y are two independent variables
E(cX)
= cE(X), where "c" is a constant
Page 236
09.
Probability
Distribution:
eBook
Binomial
Variance of a Continuous Random
Variable
The variance of a continuous random variable X i s given as:

V(X)
= E(X
Where,
f(x)
2
)
[E(X)]
E(X);
xf ( x ) d x and
E(X
2
);
f x'
f(x)dx
is the p . d . f of the variable X.
9.5
Binomial
Binomial
Bernoulli
Distribution
distribution
process
is
process is a random
The
Every trial
Each trial
The
James
from
is
also
known
mandatory
in
as
the
order
to
outcome
describe
of
a
Bernoulli
binomial
process.
Knowledge
distribution.
of
Bernoulli
process in which:
process is performed
for a finite number of times,
under the same conditions.
is independent of each other.

has two mutually exclusive possible outcomes.
probability of success remains constant for each trial.
Bernoulli
(1654-1705)
discovered
the
Bernoulli
process
and
hence
it
is
derived
his name.
Some examples of b i n o m i a l distribution are:
The tossing of a coin
Inspection of an
The
Shooting
results in either head
item determines whether it
result of an examination
be
discrete
independent trials.
Here,
if the
random
is either pass or fail.
Distribution
variable,
which
denotes
the
The possible values that X can take are:
probability
distribution with
of success
or
P(Success)
parameters "n" and "p" with
; x :::
0, 1, 2 . . .
, p + q ; l ,
;Q
is defective or non-defective.
a target with g u n results in either hit or miss.
Representation of B i n o m i a l
Let
or tail.
its
p,
p.m.f.
then
number
of
successes
is
said
to
follow
binomial
given as:
, otherwise
"n"
0, 1, 2 . . . n
o s e s
in
Page 237
09.
Probability
If a
random
denoted
by
equal to
1.
Distribution:
variable
xB(n,
X follows
p).
eBook
Binomial
The
binomial
sum
of a l l
distribution
the
with
parameters
n and
p then
it
P(X = 0), P(X = 1) . . . P(X = n)
probabilities
is
is
It can be mathematically expressed as:
P(X = 0) + P(X = 1) + . . . + P(X = n) =
(n) p ' q n - x
X:::0
= 1
9 . 6 Properties a n d Applications of B i n o m i a l Distribution

Following
are some important properties of b i n o m i a l distribution:
Range of the variable X is from zero to n, where n is the number of trials
Mean=
Variance =
Shape of the distribution

p <
Following
np
npq, and
1/2 and
are
distribution
skewed
some
is used
is always
to
less t h a n mean
is symmetrical for p =
left when
examples
of
p >
binomial
1/2
(skewed
to the right when
1/2)
distribution
in
real
life
scenarios.
Binomial
to identify the number of:
Students remaining
Correct answers in a multiple choice test of n questions
Seeds germinated
Heads observed
N u m b e r of times the target is hit out of n attempts
Defective articles found
in
absent in a class of n students
in a row of n planted
seeds
n tosses of a coin
in a lot containing
n articles
Page 238
09.
Probability
Distribution:
eBook
Binomial
9 . 7 Mean a n d Variance of B i n o m i a l Distribution

Every
probability
mean
is
the
distribution
expected
variable are defined
E(X) =
L xP(x)
is
value
identified
of
the
by
its
variable.
parameters,
The
expected
or mean
and
values
E(X)
variance.
of
The
random
as:
L x (:J
p'qn-x
= np
The variance of variable X is defined

=
L (x
- mean)' P(x)
L (x
- n p ) ' ( : ) p'q"-'
E(X - mean)'
as:
= npq
Note:
For a binomial distribution with
Mean=
Variance = npq
Standard
parameters n and
p, where p + q =
1:
np
deviation
..jnpq
Some examples of b i n o m i a l distribution are:

Example 0 1 :
In
chemistry
laboratory
is
experiment,
successful.
probability that at
Solution
there
is
chance
If 7 experiments were
least one w i l l
that
done
6%
in
of the
the
experiment
laboratory,
then
done
what
be successful?
01:
Let X denotes the number of successful experiment out of the seven experiments.
Given that:
n = 7, p
= 0.06
then q
1 - p = 1 - 0 . 0 6 = 0.94
'
The distribution of X i s b i n o m i a l with
parameters n =
7 and
p = 0.06.
Therefore,
P[X = x] = ( : ) ( 0 . 0 6 ) ' ( 0 . 9 4 ) 7 - '
; x = 0 , 1 , 2
... 7
, p + q = l , O s p s l
= 0
; otherwise
Page 239
in
the
is the
09.
Probability
Distribution:
eBook
Binomial
P(at least one experiment is successful)= P(X 2'. 1)
= 1-
P(X < 1)
1 - P[X
OJ
0
= 1-()co.06) co.94)7-
= 1-(0.94)7
= 0.3515
Therefore,
the
probability
that at
least one experiment out of seven
will
be successful
is
0.3515.
Example 0 2 :
The overall
percentage of personal
that out of a group of 8 borrowers,
loan
payers in
at least 6 w i l l
a bank is 60%.
What
is the
probability
repay the loan?
Solution O 2:
For
the
given
situation,
the
because there are only two

The binomial distribution
problem
can
possibilities:
is defined
be
solved
using
binomial
a borrower may or may
distribution.
This
is
not repay the loan.
as:
0-
P(X = x) = (:) p'q
Given that,
n = 8
x =
N u m b e r of payers among
the 8 borrowers
p = Probability of success that a borrower is a p a y e r =
0.6
q = Probability of failure that a borrower is a n o n - p a y e r =
The
probability
that at
least
6 out
of a group
of 8
1 - p = 1 - 0 . 6 = 0.4
borrowers
will
pay
the
loan
is
by:
p ( n u m b e r of pavers z 6) = P(X = 6) + P(X = 7) + P(X = 8)
P(X = 6) = (!Jro.6) (0.4)
28
0.2090
6
-
x 0.0467
x 0.16
P(X = 7) = (Jro.6)7(0.4)
8 x 0.0280 x 0.4 = 0.0897
Page 240
given
09.
Probability
Distribution:
P(X = 8) = (!)o.6)
(0.4)
1 x 0.0168
eBook
Binomial
8
-
= 0.0168
Thus,
P(X 6) = P(X = 6) + P(X = 7) + P(X = 8)
0.2090 + 0.0897 + 0.0168
= 0.3155
Therefore,
the
probability that at
on a particular day,
would
least
6 out of 8
repay their loan
borrowers,
who were
sanctioned
loans
is 0 . 3 1 5 5 .
Example 0 3 :
The
probability
that an
thrown 4 times,
number occurs when
Only twice
At least twice
of
parameters
Therefore,
are
0,
1,
n = 4 and
P[X
x]
2,
3,
4,
and
even
is
0.5.
If the
number occurs out of 4 throws.
p = 0.5.
dice
is
The
distribution
of
is
The possible
binomial
p = 0.5.
= (:)o.5)'(0.5)4'
P(even
is thrown
03:
Let X denotes the number of times an

values
a dice
what is the probability that even n u m b e r occurs:
Solution
even
; x
number occurs only twice)
= o, 1, 2, 3,
4.
; otherwise
P(X
2)
()o.5)2(o.5)4-'
6x0.25x0.25
0.375
Page 2 4 1
with
09.
Probability
P(even
Distribution:
eBook
Binomial
number occurs at least twice)
P(X
2 2)
P(X 2 2) = 1 - P(X < 2)

= 1 - [P(X = 0) + P(X = 1)]
= 1 - [ ( ) o . 5 f (o
5)
1-[0.0625+0.25]
0.6875
+ ()o.5J(o.5)
1
-
9 . 8 Fitting a B i n o m i a l Distribution
If
the
observed
data
for
the
values
of
and
condition of applicability of b i n o m i a l distribution,

observed
data
an example.
by determining
For example,
the values of n,
its
frequency
distribution
a binomial distribution can
p, and
q.
The
procedure
satisfy
be fit to the
is explained
the frequencies for various values of the variable X, from
4 are:
X = x
Frequency
12
28
34
18
Table 9.Sa:
Frequency Distribution
If,x,
The mean of the data
is defined
as:
M e a n ::::
=
,
1
If,
1 ::: 0
the
Page 242
with
O to
09.
Probability
Distribution:
eBook
Binomial
The table for the calculation of values of "fx" is:
X = x
Frequency
12
28
28
34
68
18
54
32
Total
100
182
Table 9 . S b :
Therefore,
182)
mean=
fx
= 1.82
( 1 )
..................
(2)
( 100
The mean of b i n o m i a l distribution
Now,
is:
Mean=
comparing the two equations ( 1 ) and
The maximum value of X is 4 therefore,

Therefore, 4p
This implies,
frequency
is
p = 0 . 4 5 and
the
q =
distribution,
particular value and
1.82
1 - 0.45 = 0.55
by
one
can
multiplying
the total frequency
the fitted
binomial distribution
is:
calculate
the
the
expected
probabilities
that
in the observed data.
frequencies.
variable
will
This is illustrated
Expected
assume
below:
is:
P(X = x) = [:) ( 0 . 4 5 ) ' ( 0 . 5 5 ) " -
The probabilities for
; x =
x = 0, 1, 2, 3, 4 can
P(X = 0) = f(O) = (}0.45)
; x = 0, 1, 2, 3, 4
obtained
The distribution
np
1. 82
[:) ( 0 . 4 5 ) ' ( 0 . 5 5 ) " -
fitting
( 2 ) , gives:
n = 4
Once the value of "n" and "p" are known,
After
np
1(0.55)
(0.55)
0, 1, 2, 3, 4
be calculated
as:
0
-
0.0915
Page 243
09.
Probability
P(X
1)
f(l)
D is tri b u ti o n :
= (;)
= 4
eBook
Binomial
(0.45) (0.55)
x 0.45 x ( 0 . 5 5 )
1
-
= 0.2995
P(X
2)
f(2)
= (;)
(0.45) (0.55)
0.2025
_,
0.3025
= 0.3675
P(X
3)
f(3)
= ()
= 4
( 0 . 4 5 ) ( 0 . 5 5 ) ._
x 0.091125
x 0.55
= 0.2005
P(X
4)
f(4)
= (:)
Expected
(0.45) (0.55)
0.0410
frequencies are computed
in the following table.

Expected
Observed Frequency
X = x
P(X = x)
Frequency
f(x)
= N x P(X = x)
0
12
0.0915
9.15
28
0.2995
29.95
34
0.3675
36.75
18
0.2005
20.05
0.0410
4.10
100
Total
N =
100
.
Table 9.Bc:
Frequency D1stnbut1on
Note:
The measure of closeness between expected frequencies and the observed frequencies is
ca ll ed
a "goodness of fit."
Page 244
09.
Probability
Distribution:
eBook
Binomial
Example 04:
Five
coins
following
are
tossed
500
times
and
the
number
of
tails
is
recorded
as
given
in
the
table.
10
51
111
185
95
48
No. of Tails
Frequency
Table 9.Sd:
Fit a binomial distribution to the given data.
Solution
Let
is
04:
the
number of tails.
Given,
500
and
5.
The following
table
is
used
compute mean of the given d i s t r i b u t i o n .

No. of Heads
Frequency
f(x)
10
51
51
111
222
185
555
95
380
48
240
500
1448
Total
Table 9 . S e :
The mean of a binomial d i s t r i b u t i o n =
xf(x)
Frequency
Distribution
np
1
5
:
4
0
8
Therefore,
np =
2.896
2896
This implies that,
0.5792
5
Therefore, q
1 - p = 0.4208
Once the values of "p" and "q" are obtained, the fitted
P(X = x)
f(X)
= [J
(0.5792)'(0.4208)'-; x
binomial distribution
is:
0, 1, 2, 3, 4, 5
Page 245
to
09.
Probability
Distribution:
eBook
Binomial
The probabilities for x = 0, 1, 2, 3, 4, 5 can be calculated as follows:
P(X = 0) = f(O) = () (0.5792) (0.4208)'-
P(X
= 1) = f(l)
0.0131
= ()
(0.5792) (0.4208),_
= 0.0908
P(X = 2) = f(2) = () (0.5792) (0.4208)'-'
= 0.2499
P(X
= 3)
f(3)
= () (0.5792) (0.4208)'-
= 0.344
P(X
4)
f(4)
= (!)
(0.5792)'(0.4208)'-'
= 0.2367
P(X
5)
f(S)
= (:)
(0.5792)'(0.4208)
5
_,
= 0.0651
Page 246
09.
Probability
Now,
the
Distribution:
expected
frequencies
by the total frequency
(N
eBook
Binomial
obtained
= 500)
by
multiplying
are represented
each
of the
probabilities
in the following table.
Observed
X = x
above
Expected
Frequency
P(X = x)
Frequency
= N x P(X = x)
f(x)
10
0.0131
6.597
51
0.0908
45.4076
111
0.2499
124. 9839
185
0.344
172.0312
95
0. 2367
118.3941
48
0.0651
32.5921
Total
500
0.9996
500.059
"'.
Table 9.Sf:
"'
.
500
Frequency D1strobut1on
Example 0 5 :
For a binomial distribution,
Solution
m ea n =
4 and v a r i a n c e =
6.
Comment if it is appropriate.
05:
It is known that for a binomial distribution with parameters "n" and

Mean =
E(X)
"p":
= np
Variance = V(X)
npq
V(X)
= 6
Given that,
E(X)
= 4 and
Therefore,
q = npq
np
This is not
= = 1. 5 > 1
possible. Therefore, the given data
is not appropriate.
Page 247
09.
Probability
Distribution:
eBook
Binomial
A random
variable X,
of an experiment.
it means that a real
It can
take any
number is associated
of the various
with the outcome
possible values.
Each
one
has a
definite probability.
If
random
variable
distinct set of values,
If the
random
assumes
only
finite
or
countable
variable X can assume an
infinite and
uncountable
to be a continuous random variable.
If
variable
discrete
integer
and
it is known as a discrete random variable.
some interval, it is said

a
infinite
random
probabilities
p1,p2 ... Pn,
X is denoted
by E(X) o r and
takes
the
then the expected
is defined as:
values
x 1 , x2 . . . x,
value of t h i s discrete
E(X)
set of values
I p,x,
with
in
respective
random
variable
If
discrete
probabilities
random
variable
p1,p2 ... Pn,
and
takes
the
the expectation
values
of the discrete
E(X) o r , then the variance of variable X is given by:
Where,
For a b i n o m i a l distribution with
random
E(X
2)
-
respective
variable X
[E(X)]
is
E(X ) = L P ; x ; 2
parameters n and
variance = npq, and standard deviation =
The
V(X) =
with
x 1 , x2 . . . Xn
measure
of
closeness
between
p, where p + q =
1, m e a n =
,/ n p q .
expected
frequencies
and
the
observed
frequencies is called a "goodness of fit."
np,
Page 248
Poisson a n d N o r m a l
I T M
10.
Probability
Distribution:
Poisson
and
eBook
Normal
1 0 . 1 Introduction
The
previous chapter
importance
Poisson
distribution
also
and
used
distribution.
normal
its
discrete distribution,
This
chapter
importance
known as
introduces
and
binomial distribution,
another
applications.
For
discrete
rare
its
distribution,
events,
Poisson
is appropriate where a binomial distribution fails to estimate distribution.
chapter
widely
applications.
distribution,
distribution
This
and
introduced
introduces
its
importance
probability
Also,
as
Mathematician
and
in
concept
real
distribution,
the
distribution.
the
sample
This
life
as
size
Gauss
continuous
scenarios.
many
used
is
to
also
normal
distribution
Normal
natural
increases
distribution
physicist
of
distribution
phenomena
larger
known
distribution
value,
as
like
is
Normal
the
represent
it
tends
Gaussian
normal
to
this chapter,
you will
to evaluate the distribution
be able to:
Define Poisson distribution
Describe applications of Poisson distribution
Solve Poisson distribution examples
Define normal distribution
List the properties of normal distribution
Describe the various applications of normal distribution
Discuss graph of a normal distribution
Illustrate how to find
the area under the normal curve
follow
distribution.
of errors in Astronomy.
After reading
most
Page 250
10.
Probability
Distribution:
Poisson
and
eBook
Normal
1 0 . 2 Poisson Distribution
French
mathematician
Poisson
distribution.
situations
It
where the
the number of trials

of road
accidents,
reported
The
and
is
physicist,
distribution
probability
is very
the
Simeon
of
rare
of success
large.
It
Poisson
events.
( 1781-1840)
This
is
or occurrence of an
is used
n u m b e r of printing
Denis
because
event
to describe rare events,
mistakes
in a
developed
book or the
is
it
is
very
the
applied
small,
in
yet
such as the number

n u m b e r of suicides
in a particular city.
above
examples
have
one
common
element;
random variable that takes integer values,
that is,
they
0,
1,
can
2,
be
described
3, and
by
discrete
so o n .
Definition
A
random
variable
"X"
negative values and
is
said
to
follow
Poisson
its probability mass function
distribution
if
it
assumes
only
is given as:
e-;i..,._x
P(X = x) = f(x) =
; x =
o,
1, 2 . . . oo
x!
Where,
e =
Base of natural
logarithm,
its
>, =
Parameter of the distribution
X =
N u m b e r of occurrences
numerical value is 2. 7 1 8 2
Conditions for the applicability of Poisson d i s t r i b u t i o n :
The variable is a discrete variable.
The occurrences are random.
The occurrences are rare.
The
number of trials
is infinitely
large.
Page 2 5 1
non
10.
Probability
Distribution:
Poisson
Characteristics of Poisson
The
occurrence
one event
eBook
Normal
Probability Distribution
The characteristics of a Poisson
and
of the
probability distribution are:
events
is
independent.
This
implies
that
the
occurrence
of
has no effect on the probability of the occurrence of another event.
An
infinite number of occurrences of the event are possible.
If an event occurs once in a given
interval,
then
its probability is proportional to
its
interval length.
In a very
event
small
length of interval,
Poisson and
Poisson distribution differs from

Poisson
time,
probability of two or more occurrences of an
is negligible.
Difference between
the
distribution
distance,
etc.
Distribution
B i n o m i a l distribution
operates
area,
Binomial
continuously
However,
in the following
over
binomial
the
given
distribution
ways:
occurrences,
operates
such
over
as
discrete
trials.
Binomial
Poisson
distribution
distribution
produces
produces
sequence
successes
of
successes
occurring
at
and
random
failures.
points
in
However,
specified
time.
Mean and Variance of Poisson
Distribution
00
The mean of a Poisson distribution is given
by:
Lxx
E(X) =
P(X = x)
x=O
E(X)
e->,.x
x!
x = 0
The variance of Poisson distribution
is defined as:
V(X)
E(X
- h)
V(X)
L (x
x=
V(X)
- 1-)
P(X
x)
(x - l.)
e-'i.'
x= o
x!
V(X) = 1-
Therefore, the mean and

Mean
Variance
variance for Poisson distribution
is the same.
Page 252
10.
In
Probability
addition,
Distribution:
the
standard
parameter, which
Therefore,
F o r >- =
i f >.
Poisson
deviation
and
is
eBook
Normal
cr =
,Ji .
Poisson
distribution
depends on
only
one
is >..
is known, a l l probabilities for the different values of X can
be calculated.
1:
P(X = 0) = e-'i!
= e-110
x!
1
= e-
O!
.!.
= 0.368,
Since, 1
= 1 and O! = 1
-l
11
1
1
= e-
P(X = 1) = e
x -
1!
1!
1
= - = 0.368
-1
= e
x -
21
= - x - = 0 . 1 8 4
Poisson
distribution
and "p" is s m a l l .
may
be
used
It is, therefore,
to approximate
regarded
as the limiting
1 0 . 3 A p p l i c a t i o n s of Poisson
Poisson
distribution
management science,
has
and
been
distribution
when
"n" is
large
case of binomial d i s t r i b u t i o n .
Distribution
extensively
operations
binomial
research.
used
in
various
business
applications,
Some applications of Poisson distribution
in real-life scenarios are:
The
demand
of
product
can
be
analyzed
with
the
help
of
Poisson
distribution
tool.
Printing errors that occur in the pages of a book can
One can compute the
The
One
number of visitors on a particular webpage in a day.
number of calls made to a customer-care department of a bank ( i n a specified
time,
be estimated.
such as 60 minutes) can

can
also
estimate
the
be calculated.
number
of customers
entering
shopping
centre
shop.
Page 2 5 3
or
10.
Probability
Though
Poisson
to estimate
but
Distribution:
Poisson
distribution
and
eBook
Normal
has a theoretical
approach,
it
is widely
probabilities of uncertain events. The results may vary,
owing
to
less time consumed
in
the
usage of the
tool,
it
has
used
in
by
researchers
terms of accuracy,
extensive
benefits for
researchers.
Some Examples of Poisson
Distribution
Example 0 1 :
Consider
that
one-hour
received
telephone
period.
office
Calculate
the
received
on
probability
an
for
average
exactly
two
three
customer
customer
complaints
complaints
in
to
a
be
in the next hour.
Solution O 1 :
Given that, >, = 2 and e = 2. 7 1 8

e- =
(2. 7 1 8 ) - =
0.135
3
the value o f >, '
for x = 3,
f(x) =
= 2
= 8
e-'-,.'
x!
f(3)
(0.135)(8)
0.18
3!
Therefore,
there
is
an
18%
chance
that
three
customer
complaints
will
be
received
in
the next hour.
Example 0 2 :
In
bottle
defective.
manufacturing
Find
company,
the probability that
3%
of
the
bottles
in a sample of 60
produced
were
bottles
produced,
cannot
be
at
found
to
be
least three will
be defective.
Solution O 2:
Given that,
n = 60 and
Since,
30
;,
distribution
and
can
be
p = 3/o
s
0.05,
used
as
= 0.03
binomial
an
distribution
approximation
to
binomial
used.
However,
distribution
and
Poisson
its
becomes:
>, = np = 60
x 0.03
1.8
Let variable X denote the number of defective items

To find
out the probability of getting
in a sample of 60 units.
at least three defectives
is given
by:
Page 254
mean
10.
Probability
Distribution:
P(at least 3 defectives)
Here
follows
distribution
f(x) =
x = 0,
and
eBook
Normal
1 - P(at most 2 defectives)
1 - P(X
1 - [P(X
Poisson
is given
e-,: ,
Poisson
2)
= 0)
distribution
+ P(X = 1) + P(X = 2)]
with
parameter
>-
1.8.
The
p.m.f.
of
Poisson
below:
1, 2 . . .
oo
x!
Th at 1s,
f(
e-1.(1.8)'
O
x =
1
,
2
,
...
oo
x.1
Substituting
computed
the
values
as shown
of
O,
1,
and
2;
the
probabilities
for
O,
1,
and
can
be
below:
= e-18 x 1 = _
l
_
P(X = 0) = f(O) = e-1.s(l.8)
O!
e1.a
= 0.1652
18
eP(X
(1.8)
-1.B
= 1) = f(l) =
1.8
= 0.1652
x 1.8
11
= 0.2975
18
P(X
2)
f(
2)
e-
(1.8)
= 0.1652
2'
3.24
= 0.2678
Therefore, the required
probability,
P(at least 3 defectives)
1 - [P(X
1 - ( 0 . 1 6 5 2 + 0.2975 + 0.2678)
P ( X ;,
3)
= 0)
+ P(X
1)
+ P(X = 2)]
1 - 0.7306
= 0.2694
Example 0 3 :
The
four.
average
Find
number of customers
the probability that d u r i n g
arriving
counter
of a
retail
store
per
minute
a given m i n u t e :
No customers arrive
Three or more customers arrive
at
Page 2 5 5
is
10.
Probability
Distribution:
Poisson
and
eBook
Normal
Solution O 3 :
To find
the required
Poisson distribution with rnean x = 4 can
probabilities,
be used.
e-)..1/
f(x) =
x =
o,
oo
1, 2 . . .
x!
P ( N o customers arrive)
f(O)
e-
= P(X
= O)
= 0. 0 18 3
P(Three or more customers arrive)
This
probability can
be obtained
0)
P(X
3) +
P(X
2:
3)
+ P(X
P(X
P(X
P(X
3)
+ P(X
1)
+ P(X
2)
4)
+ P(X
5) +
1 - [P(X
P(X
0)
+ P(X
0), P(X
4)
+ P(X
5)
+ ... ]
P ( X 2: 3)
+ P(Three or more customers arrive) = 1
1 - [P(X
Now evaluate,
as:
P(At the most two customers arrive)

P(X
[P(X
1) + P(X
1),
P(X
0)
+ P(X
1)
+ P(X
2)]
2)]
2)
0) = 0 . 0 1 8 3 2 has already been calculated
e-441
1)
f(l)
=
11
= 0.0183
=
x 4
0.0732
e-442
P(X
2)
f(2)
= 2!
=
0.0183
x 8
= 0.1465
So,
P(X
0)
Therefore,
P(X
3) +
+ P(X
1)
the required
P(X
4)
+ P(X
2)
0.0183 + 0.0732 + 0 . 1 4 6 5
0.2381
p r o b a b i l i t y is:
+ P(X
5) + . . .
1 - 0. 2381
0. 761 9
Page 256
10.
Probability
Distribution:
Poisson
and
eBook
Normal
1 0 . 4 N o r m a l Distribution
Until
now,
one
discussed.
This
within
given
of
the
topic
discrete
will
range
probability
elaborate
and
the
the
distributions,
cases
probability
in
which
distribution
Poisson
the
is
distribution,
variable
can
continuous,
take
that
is,
has
any
been
value
continuous
distribution.
Normal
distribution
is one
is a useful s a m p l i n g
practically
physical
and
distribution.
theoretically
sciences,
Moivre in
of the
and
most
It
important
has a u n i q u e
important.
many
allied
It
is
fields.
continuous
role
used
Normal
in
in
probability
distributions.
probability theory,
Economics,
distribution
as it
business,
was
is,
both,
social
discovered
It
by
and
De
1733.
Definition
A continuous
and
a2,
variable "X"
if its density function,
f(x)
random
is
said
to
have
normal
distribution
with
parameters
is given as:
--:A,(x-)'
, - oo <
2o
x <
oo, - co < < co,
cr
> 0
cr,12;
=
Where,
3.1415,
, otherwise
e and
1C are
two
irrational
numbers whose values are approximately 2. 7 1 8 2 and
respectively.
Remark:
Notation
normal
"X
distribution
variance of X,
If
The
0 and
a2
1,
--e
parameters
continuous
and
02,
then the normal variable
normal
function f(z)
f(z)
with
the
where
random
and
variable
a'
denote
follows
mean
variable
is
is represented
generally
is called
denoted
a standard
by
"Z"
normal
and
its
variable.
probability
as:
--2
2
2
co < z < co
,ff;;
=
and
respectively.
standard
density
ri')" denotes that
N(,
, otherwise
Page 2 5 7
10.
Probability
Distribution:
Properties of Normal
Graphical
Poisson
and
eBook
Normal
Distribution
representation of normal
probability curve is given
in
Fig.
10.4a.
Mean, Median, Mode
Fig.
With the help of Fig.
The
curve
10.4a:
Probability Curve
the following characteristics can
10.4a,
has
Normal
single
bell
curve
line,
thus
it
is
be understood
unimodal.
The
as:
mean
lies
at
the
center of the curve.
The
normal
probability
and
mode lie in the center and
The
two
tails
of
the
curve
normal
is
symmetric.
are equal
Due
to
the
symmetry,
mean,
median,
in value.
distribution
extend
indefinitely
and
never
touch
the
horizontal axis.
The probability of total area under the normal curve is one.
If
and
is denoted
O and cr
Normal
= 1 , then the normal variable
is called
the standard
normal variable
by " Z . "
distribution
is an approximation
to
b i n o m i a l distribution
when
the value of
"n" becomes large.
Area u n d e r Normal Curve
Irrespective of the
1.
values o f and
Diagrammatic
10.4b.
If f'
is the
representation
mean
its symmetric nature,
68/o
the
values
in
lies
the total area
of the
of distribution
it can
of the data
2,
cr
area
and
the
between
normally
f'
cr and
distributed
under
cr is the
be conveniently stated
under the
normal
normal
standard
curve
deviation,
curve
is
is equal
shown
then
in
Fig.
because
of
that:
+ cr, that is, approximately 68% of all
population
lie
within
standard
deviation
from the mean.
to
Page 258
10.
Probability
Distribution:
Poisson
and
eBook
Normal
,+------99. 7% Data------.
e----95% Data-----..
-:\CT
-2CT
Fig.
- CT
10.4b:
+CT
the
values
in
normally
+::kr
Area under Normal Curve
95% of the data lies between f' - 2cr and f' + 2cr,
+2CT
distributed
population
that
lie
is,
approximately 9 5 % of all
within
standard
deviations
from the mean.
99. 7/o of the data
of all
values
in a
lies
between
3cr and
normally distributed
f'
+ 3cr, that is, approximately 99. 7%
population
lie within
standard
deviations
from the mean.
Relation
The
between
three
earlier,
zero
probability
when
and
Binomial,
"n"
"np"
is
is
Poisson, and
distributions
large
and
finite
the
are
Normal
very
closely
probability
constant,
then
Distribution
related
of occurrence
the
binomial
to
each
of an
other.
event
distribution
"p"
tends
As
is
stated
close
to
to
Poisson
distribution.
In a similar manner,
normal distribution
is a
limiting
form
of binomial distribution
under
the conditions that:
=, it is read as n tends to infinity or n steadily grows large
n ->
Neither p nor q
Thus,
it
can
be
is very small
stated
that
binomial
distribution
approaches
normal
distribution
with
X - np
standardized
normal
variable,
That
is,
here
follows
normal
distribution
npq
with mean O and
variance
1.
Page 2 5 9
10.
Probability
Distribution:
Poisson
and
eBook
Normal
1 0 . 5 Applications of N o r m a l Distribution
Normal
distribution
decision m a k i n g
Normal
It
can
is
used
then
be
items under consideration.
To
estimate
tires, and
wide
by estimating
distribution
quantities.
has
the
range
of
applications.
It
is
to
study
used
to
many
such
generalize
cases
results
for
in
managerial
entire
with
population
large
of
the
Some a p p l i c a t i o n s of normal distribution are:
average
lifetime
of
necessary
goods,
such
as
bulbs,
batteries,
electronic items.
To estimate the height and
To calculate the weekly sales of a shop or sales of an
To calculate yield
To estimate the amount of cash withdrawal for a given
distribution
curve.
by students
weight of children
in an examination.
by a doctor, at the time of birth.

item
in the shop.
of a particular fertilizer used for crops.
1 0 . 6 Graph of N o r m a l
shaped
in
consideration
the
To compute the aggregate marks obtained
bell
used
the various aspects of business.
Normal
mainly
has
gained
period.
Distribution
importance
in
almost
every
field
of
research
due
to
its
The most important features of normal curve are:
f(x) =
(x-,,f
20
'
a.ff;.
f(x)
Fig.
The
normal
curve
takes
curve is symmetrical
single
point,
which
in
10.6a:
its
values
within
nature, that is,
divides the
Normal
curve
Distribution
the
range of
the mean,
in
to two
-oo
mode,
eq u a l
to
and
parts,
co,
The
bell
shaped
m e d i a n coincide on a
with
respect
to,
Page 260
both,
10.
Probability
shape
Distribution:
and
size.
The
which is equal to
Since the area
Poisson
total
and
area
under
u n d e r the
curve
is
1,
in the curve becoming flatter.
If X
N(,
2
),
the
curve
represents
the
total
probability,
1.
results
eBook
Normal
then
the
standard
then
for a given
normal
variable
value
is
of ,
an
defined
increase
as,
in a
Z = X -
CJ
N(O,
1).
Then the curve of the
standard
normal distribution
has the same shape as
a normal distribution.
f(z)
50%
50%
L:::::::::::__L_..:::::==--.z
Z = O
Fig.
1 0 . 7 How to
10.6b:
Standard
F i n d t h e Area
The area under a normal curve can
Normal
Distribution
u n d e r a N o r m a l Curve
be calculated
as shown
in
Example 04.
Example 04:
The
life
1500
of a
hrs and
What
bulb
Standard
is the
or equal to
What
is the
1470
hrs?
What
What
is
Deviation
probability
1470
by
that
the
the
normally
distributed
with
mean
of
hrs.
life of a
bulb
selected
at
random
will
be
less t h a n
that
the
life of a bulb
life of a
bulb
selected
selected
at
random
at
will
random
be more t h a n
will
be
less t h a n
hrs?
probability
t h a n or e q u a l to
of 30
is
hrs?
probability
1540
company
(S.D.)
p ro b a b i l i t y that the
is the
or equal to
manufactured
1540
that
the
life
of a
bulb
selected
at
random
will
be
greater
hrs?
Page 2 6 1
10.
Probability
Distribution:
Poisson
and
eBook
Normal
Solution 0 4 :
Let X be the life of a b u l b .

hrs and
standard
The
to
deviation o = 30
probability
1470
hrs=
1470
-ro
It
is
that the
P(
-oo
1500
hrs.
life of a bulb
s X ,;
X follows normal distribution w i t h
1470).
selected
at
random will
Mathematically
it can
be
less than or equal
be written as:
-x-)2
In given example,
2a2
a..Jz;
difficult to
standard
solve the above
integral.
So
the
normal variable Z using the formula
normal
variable
is converted
to
Z = X -
CJ
.
Smee,
1470 - 1 5 0 0
=
1 5 0 0 and
5. D.
(o)
30 then,
Z =
= -1
30
the above integral becomes
,,-
_00
Since,
the
standard
value
of an
normal curve;
integral
between
_.!.zz
-1
Therefore,
"Y2n
two
limits
this probability is computed
is
equal
using
to
the
area
u n d e r the
normal probability table.
Note:
To
compute
standard
the
normal
probability from
=
1.0
interval
value
corresponding
in
probabilities
distribution
=
0 to any
the
first
table
standard
given
column
of
normal
value in the column 0 . 0 which
10.7a:
Z = O
Area under Standard
in
positive value of Z.
Z = -1
Fig.
of
normal
the
variable
appendix.
To compute
probability
Z,
The
P(O
,;
table,
refer
to
table
Z s
then
1),
Z =
Normal
gives
see
see
is equal to 0 . 3 4 1 3 .
Distribution
Page 262
the
the
10.
Probability
It
is
Distribution:
known
that
symmetrical.
1, and
the
total
Therefore,
-1)
-co
= P(l
=
P(O
= 0.5
and
area
the
from
is,
eBook
Normal
under the
area
is equal to 0 . 3 4 1 3 , that
Since the area from
P(-oo
Poisson
-1
normal
to
s Z s
P(O
1)
curve
is the
s Z s
- P(O
and
that
the curve
same as the area

s Z s 0)
= P(-1
to O is 0 . 5 , then the area from

$
is
from
is
Oto
= 0.3413
-co to - 1
is given as:
co)
co)
s Z
- P(O
$
s Z s
1)
1)
= 0. 5 - 0 . 3 4 1 3
=0.1587
Therefore,
the
random will
2.
The
probability
be up to
probability
1470
that
an
that
the
life
of
an
electronic
component
selected
at
hrs is 0 . 1 5 8 7 or 1 5 . 8 7 % .
electronic
component's
life
will
be
more
than
1470
hrs
is
life of an electronic component selected
at
given a s :
P(X
"
1470)
p ( X : f' " 147 -
p(X-1500
1470-1500)
2
30
30
-1)
= P(Z ;,
P(O
P(O
s Z s co)
= 0.5
Z $ co)
+ P(-1
Z $ 0)
+ P(O s Z s 1)
+ 0.3413
= 0.8413
T h i s is shown
in
Fig.
10.7b.
-;,Lf,1----f--P( Z
Z = - 1
Fig.
Now,
to find
random
Fig.
will
10.7b:
out the
be
iess
1)->.----
Z = O
Area under Standard
probability that the

man or equal to
> -
1540
Normal
Distribution
hrs, g r a p h i c a l l y ,
it
is
represented
10.7c.
Page 263
in the
10.
Probability
Distribution:
Poisson
and
eBook
Normal
P( Z > 1.33)-+
+---r-P( Z s - 1.33)
fl=
1500
X =
Z = 0
Fig.
Here,
10.7c:
40
30
Therefore,
to
1.33
the
under
Z = 1.33
Area under Standard
1540 - 1500
1540
Normal
Distribution
1.33
30
required
the
probability
standard
is
the
normal
area
curve.
from
It
-oo
can
to
be
1540
hrs;
obtained
or
from
using
-oo
normal
probability table as follows:
P(X
1540)
P(X:
P(x
154
- J
-1500
,, 1540 - 1 5 0 0 J
30
30
P(Z s 1 . 3 3 )
P ( - oo ,;
= 0.5
Z ,;
0)
+ P ( O ,; Z ,;
+ P ( O ,; Z ,;
1.33)
1.33)
= 0. 5 + 0 . 4 0 8 2
= 0.9082
Since the area from

=
to
o. 9082.
1540
-oo t o o
is 0 . 5 , the total area from
This means that the p r o b a b i l i t y that the
hrs
is
0.9082
or
90.82%
of the
-oo to
1.33
is,
0.5
+ 0.4082
life of the component w i l l
components
will
have
life
up
to
be up
1540
hrs.
The
probability
calculated
P(X
;,,
that
the
life
of
the
components
will
be
more
than
1540
as:
1540)
1 - P(X
;,, 1540)
1 - 0.9082
= 0.0918
Page 264
hrs
is
10.
Probability
Distribution:
Poisson
and
eBook
Normal
Example 0 5 :
The
marks
scored
management
standard
by
the
institute's
deviation
students
MBA
10.
If
in
course
350
the
first
follows
students
semester
normal
appeared
accounts
distribution,
for
the
examination
with
mean
examination,
of
65
estimate
and
the
number of students scoring:
Less than 60 marks
More than 80 marks
Solution
05:
Assume that X represents the marks.

Given,
To find
65 and
<
P(X
S.D.
60)
and
(a)=
P(X
be used, which is given

Converting
Z = --=
that is,
From
P(-0.5
the
table,
0 . 1 9 1 5 and
P(O
s Z s
cr
10
X -
80-65
Z = -- =
cr
Since the curve
is
1. 5)
probabilities can
-5
= - = -0.5
10
10
P(O
for the area
from O t o
representation of these
10.7d.
15
= - = 1.5
10
symmetrical,
s Z $ 0)
the graphical
normal variable z, we g e t :
60-65
X -
For x = 80,
> 80),
in Fig.
x to standard
F o r x = 60,
10
1.5
the
probability
from
O to
-0. 5
is the
same as
O to
s Z $ 0.5)
u n d e r the
is 0 . 4 3 3 2 .
standard
That is,
P(O
normal curve, the area

$
Z $ 0.5)
from
Oto
0 . 1 9 1 5 and
0.4332
w w w . itmu niversityonl i ne.org
0. 5,
Page 2 6 5
0.5
is
10.
Probability
Distribution:
Poisson a n d
eBook
Normal
--P(Z S -0.5)--,<---+I
X = 60
= 65
Z = -0.5
Z = 0
1+--__,..P(Z 2 1. SJ--+
= 65
Fig.
1.
P(X
:5
60)
p( X : ft s 60;
P(x - 65
10.7d:
Standard
X = 80
Z
Normal
1.5
Distribution
s 60 - 65)
10
10
= P(Z s -0.5)
=
2.
P(X
P(-oo :5 Z :5
-0.5)
= 0.5
- P ( - 0 . 5 :5 Z :5 OJ
= 0.5
- P(O :5 Z :5 0 . 5 )
0.5 - 0 . 1 9 1 5
0.3085
" 80)
P( X :
p(X-65
10
= P(Z
80
2
"
-
80-65)
10
1.5)
Page 266
10.
Probability
Distribution:
= 0.5
P(O s Z s
Poisson
and
eBook
Normal
1.5)
= 0. 5 - 0 . 4 3 3 2
= 0.0668
Therefore,
As
P(X
there are
less
than
number
60
of
< 60)
350
= 0 . 3 0 8 5 and
students,
marks
students
350
who
the
x
would
P(X
> 80) = 0 . 0 6 6 8
expected
0.3085
have
=
got
number of students
who
108 (approximately.)
more
than
80
marks
would
Similarly,
=
350
have
obtained
the
expected
0.0668
(approximately.)
Page 267
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I n t r o d u c t i o n to

Business Mathematics and

Uses of Mathematics and

Basic Types of Matrices

Basic Operations of Matrices

Main Operations of Matrices: Transpose of a Matrix

Main Operations of Matrices:

Measures of Central Tendency

Central Tendency or Average

Characteristics of a Good Average

Various Measures of Central Tendency

Significance of Measures of Dispersion

Choice of a Suitable Measure of Dispersion

Pearson's Coefficient of Correlation

Rank Correlation and

Spearman's Rank Correlation

Applications of Regression Analysis

Assumptions of Linear Regression

Properties of Coefficient of Determination

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Business Forecasting and Time Series Analysis

Random or Irregular Variation

Decomposition of a Time Series

Analysis of Time Series

Applications of Bayes' Theorem

Properties and Applications of B i n o m i a l Distribution

Mean and Variance of Binomial Distribution

10. Probability Distribution:

Applications of Normal Distribution

the Area u n d e r a Normal Curve

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the techniques of gathering

List the uses of mathematics and

Identify the advantages of mathematics and

List the applications of statistics

List the limitations of statistics

Recognize various functions of variables and

Describe calculus and

its fundamental operations

interpretation of results. T h i s chapter introduces the role of mathematics and

After reading t h i s chapter,

With the requisite

representation, data analysis and

help managers to deal with short-term and

is useful for various levels of management.

1 . 2 Uses of Mathematics and Statistics

statistical techniques facilitate rational,

of economics, social science, e n g i n ee r i n g , and

Advantages of Mathematics and Statistics

also to make financial decisions.

costs, work-in-progress costs,

Business statistics aids in decision m a k i n g .

Statistics is useful for regular and

sales forecasting, financial analysis,

sales, distribution costs, etc.

accounts a u d i t i n g , discount calculation,

production and operations management,

help in simplifying day-to-day

problems of functional management.

lot of data and

take decisions accordingly,

to apply various statistical

statistics in an array of fields.