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UGANDA MANAGEMENT INSTITUTE

DPAM 2014/2015

Philip Odida: 14/DPAM/000/KLA/EVE/0040


Module: Quantitative Methods in Decision Making
Module lecture:

Kimbugwe Hassan, Consultant,

Uganda Management Institute

Individual Coursework:

7th November, 2014

The following data represents the monthly income (Shs 000) of 80 randomly selected
villagers after a poverty reduction exercise had been carried out in Goma sub-county. Before
the exercise, those in charge of the poverty reduction program had carried out a baseline
survey and established that, on average, the monthly income was Shs 26,500 per month.
Table 1.

Sample data collected from Goma sub-county.


22
16
40
15
27
49
22
17
25
14

i.

23
33
23
14
29
23
34
21
20
24

10
24
38
24
24
16
31
21
21
21

17
10
29
22
45
24
29
24
39
38

39
47
25
52
28
23
22
35
41
23

54
31
37
13
45
23
43
37
44
28

33
42
22
48
21
29
15
19
39
53

47
22
12
27
44
13
32
36
23
37

Simple random sampling and purposive sampling techniques will be employed for
selection of the sample size. These sampling methods will be as follows: To begin
with, four groups different parish will be randomly sampled for the study from Goma
Sub County. Then purposive sampling will be to select respondents. As for the simple
random sampling, the lottery technique will be used. Simple random sampling method
is appropriate because every item in the population has a calculable or known chance
of being included in the sample. This will end up giving reliable data for decision
makers.
The hypothetical illustration below shows the use of Slovins formula in determining
the minimum sample size, assuming that the population is made up of 80,000
respondents.
The Slovins formula was used to determine the minimum sample size.

n=

N
1+Na2

Where:
N=Target population
n=Sample size
1

=0.05 that is the level of significance


n=

80
1 + 80 (0.05)

80

1 + 80 (0.0025)
n

80
1 + 0.5075

53

The sample size was selected from the study categories. Table 1 shows the distribution of
population and sample size.
ii.

Frequency distribution table for randomly selected villagers in Goma sub-county


.

Class
10 19
20 29
30 39
40 49
50 - 59

Tally
IIII IIII IIII
IIII IIII IIII IIII IIII IIII IIII
IIII IIII IIII I
IIII IIII II
III

F
14
35
16
12
3
80

iii.

Computation of measures of central tendencies and measures of dispersions

Class
10 19
20 29
30 39
40 49
50 - 59
-

Tally
IIII IIII IIII
IIII IIII IIII IIII IIII IIII IIII
IIII IIII IIII I
IIII IIII II
III

F
14
35
16
12
3
80

X
14.5
24.5
34.5
44.5
54.5

fx
203
857.5
552
534
163.5
2,310

fx2
2,943.5
21,008.72
19,044
23,763
8,910.75
75,669.97

cf
14
49
65
77
80

The Mean of the sample () is derived from the following equation:


fx
f
2,310
=
80
= 28.875
=

The Median of the sample (Md) is derived from the following equation:

Formula for median is given as


(
L+

N
cfb)
2
)x C
fm

The median class is that which lies 1/2th the population,


median class is class 20 - 29
L = 19.5
N
=
2

80
= 40
2

Cfb = 14
fm = 35
C = 10
Substituting:

80
2

therefore

Median = L +

= 19.5 +

= 19.5 +

N
cfb)
2
xc
fm

80
14 )
2
35

x 10

(40 14)
35

x 10

Md = 26.93
-

The Mode of the frequency distribution is derived from the following equation:
1
xC
1+ 2
Modal Class is class 20-29
L = 19.5
1 = 35-14 = 21
2 = 35-16 = 19
C = 10
L+

Modal monthly income = 19.5 +


= 19.5 +

21
x 10
21+19

21
x 10
40

Mo = 24.75
Generally, in a frequency distribution, the values cluster around a central value. This
property of concentration of the values around a central value is called Central Tendency. The
central value around which there is concentration is called measure of central tendency
(measure of location, average).
The mean, median and mode of the frequency distribution is 28.91, 26.93, 24.75
respectively. The median of the class calculated in the above exercise (26.93), is closest to the
result of the baseline survey that established that on average, the monthly income of the 80
randomly selected villagers in Goma sub-county was 26,500 shillings.

Desired qualities of an ideal measure of central tendency.

It should be easy to understand. Its computation procedure should be simple

It should be rigidly defined

It should be based on all the values

It should not be affected too much by abnormal extreme values

It should be capable of further algebraic treatment so that it could be used in


further analysis of the data

It should be stable. That is, the measure should be such that sampling variation
in the value of the measure should be least.

Basing on these qualities, mean stands up to be the best measure of central tendency
because it is an Algebraic sum of the deviations of a set of values from their arithmetic mean
is zero. That is, Sum of the squared deviations of a set of values is a minimum when
deviations are taken around the arithmetic mean.
iv.

The data obtained in the random sample above pertain to the measures of central
tendency, which are useful for public administration and management in the sense that
they serve as a basis for analysis in a manner that can contribute to scientifically
informed decision making. In management terms, the data serves essentially as a basis
for planning, decision making with a view to reasonable resource allocation.

v.

The standard deviation () of the frequency distribution above is derived from the
following equation:
= fx2 - 2
f

Where fx2 = 75,669.97; f = 80 and = 28.875


= 75,669.97 - (28.875)2
80
Therefore, standard deviation is 10.588
5

The Coefficient of variation of the incomes in the frequency distribution is derived


from the following equation:
SD
X 100
(r)
10.588
COV =
X 100
(28.875)
COV = 36.69%
COV =

where r =

Standard Deviation is the abbreviation and (read, sigma) is the symbol. Mean square
deviation of the value from their arithmetic mean is variance.
Standard Deviation is the positive square root of variance. Karl Pearson introduced the
concept of standard deviation in 1893. Standard Deviation is also called mean square
deviation.
It is a mathematical deficiency of mean deviation to ignore negative sign. Standard
deviation possesses most of the desirable properties of a good measure of dispersion.
It is the most widely used absolute measure of dispersion. The corresponding relative
measure is coefficient of variation.
Karl Pearson gave the definition of coefficient of variation, in the perspective that like
all other relative measures of dispersion, it is a pure number. All relative measures of
dispersion are free from units of measurement such as kg., metre, litre, etc. The
variations in two or more series (groups or sets of data) are compared based on a
relative measure of dispersion. For example, a residence in Goma Sub County may
have different income at various periods. His income is quoted in Ugx. The variations
in their incomes can be compared by using any relative measure of dispersion.
Coefficient of variation is the more widely used relative measure of dispersion and the
best measure of central tendency. It is a percentage. While comparing two or more
groups, the group, which has less coefficient of variation, is less variable or more
consistent or more stable or uniform or more homogeneous.

i)

Hypothesis testing
HO: = 26,500
H1: 26,500
N = 80
= 26,500
= 28.875
SD = 10.588
= 0.05
Z = 1.96
Therefore;
Z = -
SD/N
Z =28.875 26.5
10.588/80
Z = 2.006
Comment: since the calculated value of Z as 2.006 is greater than 1.96 and falls
outside the area of acceptance bound by + or 1.96 we cannot accept the null
hypothesis

Brief Report to decision makers in Goma Sub County


This exercise was devoted to different measures used to summarize the data as well as
the measures of variation. Different measures discussed are Mean, Median and Mode.
Definition, method of computation, Interpretation and uses form the structure of the
explanation for each measure.
Generally, in a frequency distribution, the values cluster around a central value. This
property of concentration of the values around a central value is called Central
Tendency. The central value around which there is concentration is called measure of
central tendency (measure of location, average).
Generally, a simple comparison of frequency distribution is made by comparing their
measures of central tendency. For a frequency distribution, important measures of
central tendency are defined. They are: 1. Arithmetic Mean 2. Median and 3. Mode
Basing on thse qualits, mean stands up to be the best measure of central tendency
because it is an Algebraic sum of the deviations of a set of values from their arithmetic
mean is zero. That is, Sum of the squared deviations of a set of values is a minimum
when deviations are taken around the arithmetic mean. Further, the following can be
concluded:
i.
Residents from Goma Sub County have an average monthly income of
ii.
iii.

Ugx. 28,875
The income distribution is uneven having a variation of Ugx 10,588
It can be therefore concluded that there is no significance difference
between the average monthly incomes from the baseline survey of Ugx.
26,500 and that computed on Ugx. 28,875

Reference
i.

Xu, Gang. Estimating Sample Size for a Descriptive Study in Quantitative


Research . Quirks Marketing Research Review, June 1999.

ii.

William Kaberuka. (2003). Statistical techniques, a basic course for social


scientists

iii.

Chandan Sigh (2006). Business Statistics. Second revised edition