Q1: What is the meaning of average? What are its types?

Ans: An average is a single value that represents the whole set of figures and all the others individual items concentrate around it. In other words, an average is single value within the range of the data that is used to represent all of the values in the series, such an average is somewhere within the range of the data, it is therefore called measures of the central tendency. Types of averages There are different kinds of average. The following are the important type: (1) Arithmetic mean: It is the most popular and widely used measure of central tendency. Generally, when we talk of average, it signifies arithmetic mean. It is generally known as mean. It is defined as the value which is obtained by adding all the items of a series and dividing this total by the number of items. Merits of arithmetic mean: (1) It is easy to calculate and simple to understand. (2) It is based on all the observations. (3) It is capable of further algebraic treatment (4) It is rigidly defined. (5) It is a calculated value and not based on the position of the series. (6) Good basis for comparison. Demerits of arithmetic mean: (1) It cannot be calculated in open ended series. (2) It cannot be determined for one missing term. (3) It cannot be used in qualitative data. (4) It can be a figure which does not exist in data. (5) It cannot be ascertained graphically. Properties of arithmetic mean: (1) The sum of the squares of deviations taken from the mean is always minimum. (2) The sum of deviations of items from the mean is equal zero. (3) The mean of all the sums or deference of corresponding items in two series is equal to the sums of the mean of two series. (4) The mean is independent of origin i.e. AM is not affected by any change in origin. (5) If the original series replaced by the actual mean than the sum of the items will remain sane.

(6) If there are two or more series with their respective mean and number of observations we can find the combined mean by using the combined formula. Geometric mean: It is a mathematical average. The geometric mean is defined as the nth root of the product of all the n value of the variable. If there are two items is a series, we take the squares root. If there are three items, we take the cube root and so on. Special uses of Geometric mean: (1) Geometric mean is generally used to find the average percentage increases in population, prices, sales, production or national income etc. (2) As geometric mean measures relative change, it finds special application in index numbers. (3) This average is most suitable when large weights have to be given to small items and small weights to large items. Merits of Geometric mean: (1) It is rigidly defined. (2) It is based on all the items of the series. (3) It is suitable for further algebraic treatment. (4) It gives less weight to large items. (5) It possesses the merits of sampling stability. (6) It is the best measure of rations of change. (7) It is least affected by extreme items. Demerits: (1) It is difficult to calculate as one has to make use of logs and antilog to calculate geometric mean. (2) Geometric mean cannot be calculated unless the values of all the items are known. (3) It may be a value which does not exist in the series. (4) If values of any one item are zero, then geometric mean will also become zero. Again if one item has negative value, GM becomes indeterminate. Harmonic mean: The harmonic mean is a mathematical average. It is based on the reciprocal of the items. The harmonic mean of a series is defined as the reciprocal of the arithmetic average of the reciprocal of the values of its various items. Merits of harmonic mean: (1) It is rigidly defined. (2) It is based on all the observation in the given data. (3) It is capable of further algebraic treatment.

(4) In problem relating to time and rates, it gives better result than other averages. Demerits: (1) It is difficult to understand and calculate. (2) It gives more weight to small items. This is not a desirable feature. (3) Its value cannot be computed when there are both positive and negative items in as series or when one or more items are zero. Median: Median is another important measure of central tendency. It is a positional average. Median is defined as the middle value of the series when arranged either in acceding on descending order. It is a value which divides the arranged series into two equal parts in such a way that the number of observation smaller than the median is equal to the number greater than it. In the words of Connor, The median is that value of the variables which divides the group into two equal parts, one part comprising all values greater and the other values less than the median. Merits of median: (1) It is easy to understand. (2) It is easy to locate or compute. (3) It is not affected by extreme items. (4) Median can be located graphically. (5) It minimizes the total absolute deviations. Demerits: 1) It requires the arrangements of data in ascending/descending order. 2) It is not based on all items of the observations. 3) It is not capable of algebraic treatment. Its formula cannot be extended to calculate combined median of two or more related groups. 4) It is affected by sampling fluctuations than the value of mean. Q. What is Mode? What are its merits and demerits. Mode: mode is often said to be that value in the series which occur most frequently or which has the greater frequency. But it is not exactly true for every frequency distribution. Rather it is the value around which the items tend to concentrate most heavily. It is also called the most typical or fashionable value of

distribution because it is the value which has the greatest frequency density in its immediate neighborhood. It is usually denoted by M. Merits of mode: The mode is a measure which actually indicates what many people incorrectly believe the arithmetic mean indicates. 1) It is not affected by extremes values. 2) Its values can be determined in open-end distribution without ascertaining the class-limits. 3) Its values can be determined graphically. 4) It indicates the point of maximum concentration in case of highly skewed or non-normal distributions. Demerits: In case of modal/multi modal series, mode cannot be determined. It is not capable of further algebraic treatment. It is not based on all the items of series. It is not rigidly defined measure different formula gives somewhat different answers. Its values are affected significantly by the size of the class interval. Meaning:Skewness means asymmetricity of the distribution of a statistical series. It is opposite to the symmetrical nature of a series. The word skewness refers to lack of symmetry. Nonnormal or asymmetrical distribution is called skew distribution. Skewness measures the degree of departure from symmetry and reveals the direction of scatteredness of the item. It gives us an idea about the shape of the frequency curve. Lack of symmetry or skewness in frequency distributions is due to the existence of a longer tail on one side (either to the left or to the right), which has no counterpart on the other side. Definition:- According to Croxton and Cowden, When a series is not symmetrical, it is said to be asymmetrical, or skewed. Characteristics of skewness:1. It refers to the asymmetry of a statistical series. 2. It refers to the difference in values of the averages viz. Mean, Median and Mode. 3. It refers to the difference in distance between the Quartiles, and the Median. SKEWNESS

4. It may be positive, or negative. If there is more concentration in lower values it is positive, and if there is more concentration in higher values it is negative. Objectives of Skewness:1.To find out the nature, and degree of concentration of the frequency distribution of a series i.e. whether there is more concentration with the lower value, or vice versa. 2. To find out the extent to which the empirical relationship between the values of the Mean, Median and Mode i.e. 1/3 (MeanMedian), holds good. 3. To ascertain if the distribution is normal, and to determine the various measures of a normal distribution as per the requirement. Types of skewnessThere are two types of skewness:1) Positive Skewness 2) Negative Skewness
1) Positive Skewness: A series is said to have positive

skewness when the following characteristics are noticed: (i) Mean > Median >Mode. (ii) The right tail of the curve is longer than its left tail, when the data are plotted through a histogram, or a frequency polygon. (iii) The formula of Skewness and its coefficient give positive figures.
2) Negative Skewness: A series is said to have negative

skewness, when the following characteristics are noticed: (i) Mode > Median > Mean. (ii) The left tail of the curve is longer than the right tail, when the data are plotted through a histogram, or a frequency polygon. (iii) The formula of skewness and its coefficient give negative figures.

Difference between Dispersion and Skewness:1. Dispersion deals with the dispersal of the items of a series around its central value but skewness deals with the nature of distribution of a series. 2. Dispersion speaks of the amount of variation of the items from their average value but skewness speaks of the direction of the variation of the items.

3. Dispersion is computed both on the basis, and form of certain averages, but skewness is computed only on the basis of the averages. 4. Dispersion studies the degree of variation in the data, but skewness studies the concentration of the data. 5. Dispersion speaks of the representative character of a central value, and skewness speaks of the normally, or either of the distribution. 6. Dispersion indicates the general shape of a frequency distribution but skewness indicates how the dispersion on the two sides of the Mode varies in the arrangement of frequencies. KURTOSIS Meaning:

Kurtosis is a statistical measure which is calculated on the basis of Moments to bring about another characteristic of a series. This characteristic refers to the flatness, or peakedness of the curve obtained from a series. Thus, through the measure of Kurtosis we can know, if a distribution would give us a normal curve, a curve which is more flat than a normal one, or a curve which is more peaked than a normal curve. Different types of curves:1. Leptokurtic Curve:- It is more peaked than a normal curve. It has higher tails on the base but narrower space in the centre. 2. Mesokurtic Curve:- It is a normal one, which is neither too peaked nor too flat. Its tails on the base are neither too long nor too short, so also, it occupies a normal space in the centre. 3. Platykurtic Curve:- It is more flat-topped than a normal one. It has very short tails on the base but broader space in the centre. Usefulness of Kurtosis:1. It is used for determining the type of curve a distribution is likely to produce i.e. meso kurtic, platy kurtic or lepto kurtic. 2. It is used for selecting the suitable average for analysis of a series. If a distribution is normal one, Mean is considered as the suitable average. If the distribution is lepto kurtic, Median is found suitable, and if the

distribution is platy kurtic, Quartiles are taken to be suitable average for the analysis of the series. MOMENTS Meaning: The word Moment is a mechanical term, which is Physics, refers to a measure of force. But in statistics, it may be defined as the arithmetic average of certain power of the deviations of the items from their arithmetic mean.Accordingly, there can be Moments of various orders viz. first order, second order, third order, fourth order and so on. Uses of Moments:1. They are used to describe the central tendency of a series. 2. They are used to describe the dispersion, or scatter of items of a series. 3. They are used to describe the skewness of a series. 4. They are used to describe the kurtosis of a series. CORRELATION Meaning: Correlation refers to relationship between any two, or more variables viz. height and weight, price and demand, income and expenditure, rainfall and yield, production and employment etc. It is the relationship between two series when measured quantitatively is known as correlation. Due to this correlation, change in the value of one series brings about a change in the value of other series correspondingly. This change may be in the same or opposite directions. Definition:- According to Croxton and Cowden, If the relationship is of quantitative nature, the appropriate statistical tool to discover and measure that relation and express it in the form of a brief formula, is correlation. Types of Correlation:Positive and Negative Correlation:On the basis of the direction of the change in two variables, correlation can be positive or negative. If the change in both variables is in the same direction, the correlation is positive. In other words, if X increases, Y also increases and if X falls, Y also falls. If the change in both the variables is in the opposite direction, then the correlation is negative. In other words, if X increases Y decreases and if X decreases Y increases. Linear and Non-linear Correlation:-

If the amount of change in one variable is at a constant ratio to the change in the other variable, the correlation is linear. This relationship is represented by the equation y= a + bx. If plotted on a graph paper, a straight line is formed. And if the amount of change in one variable is not at constant ratio to the change in the other variable, the correlation is non-linear. Simple and Multiple Correlation:When there are only two variables and the relationship is studied between those two variables, it is a case of simple correlation. Relationships between height and weight, price and demand etc. are the examples of simple correlation. When there are more than two variables and we study the relationship between one variable and all the other variables taken together then it is a case of multiple correlation. Partial and Total Correlation:When there are more than two variables and the relationship between any two of the variables is studied assuming other variables as constant it is a case of partial correlation. When the correlation between the variables under study taken together at a time, is worked out, it is called total correlation. Logical and Illogical Correlation:When the correlation between two variables is not only mathematically defined but also logically sound too, it is called logical correlation. In certain cases we come across such cases of relationship of variables which are though well defined and established by statistical method of correlation coefficient, yet when tests on the logical point of view they fail to justify their relationship with each other. Importance of Correlation: 1. It helps to study the type of Association: By correlation we can know if there is any association between the two variables.
2.

It helps to find exact degree of correlation: If there exists any correlation between two variables, may be positive or negative, we can know the degree of correlation. It also helps to know if the correlation is significant or not:- Going through the technique of probable error, we

3.

4.

conclude whether it is significant or not, comparing it with 6 probable error. It helps us to estimate the future:- As price and demand, income and savings are related directly or inversely, thus an analyst can foresee the demand, savings or investment when other variable changes according to the size of coefficient of correlation.

Limitations of Coefficient of Correlation:1. If number of terms or items is small, its value cannot be said to be significant. 2. If its value is comparatively less, nothing can be said about its significance. 3. Different formula give different value of the coefficient, hence nothing definite can be said about which value is correct for interpretation. 4. Sometimes the correlation is high because of other conditions, but its value is one i.e. perfectly positive. Methods to calculate correlation:Correlation can be measured by the following methods: Graphical Methods:Scatter diagram or Scatter diagram Method:It is one of the simplest procedures to judge correlation between two variables. One variable is taken along X-axis and other along Y-axis. The graph is known as scatter diagram. After plotting the graph between two variables, we judge the shape of the curve that different dots represent. There can be three types of relations. 1) Positive Correlation 2) Negative Correlation a)0 correlation or Zero correlation Merits and Demerits of Scatter Diagram: Merits 1.It is easy to plot even by a beginner. 2.It is very easy and simple to understand even by a single glance. 3.Abnormal values in a sample can be easily detected. 4.We can find the value of some dependent variables if unknown.

5. Values of extreme terms do not effect when correlation is calculated by this method. Demerits 1. This method depicts only if relation is positive or negative or no relation. But degree of correlation cant be predicted. 2. No mathematical or Algebric Treatment is possible to the result. 3. The method is useful only when number of terms is small i.e. it cant be applied to 3-4 terms. 4. The method is also useless when number of terms is very big i.e. in hundreds. Graphic Method:In this method separate curves are drawn for separate series. Now we compare the direction of both lines or curves. If the direction is same, we call it as positive correlation and if these curves move in opposite direction it is negative correlation. Merits and Demerits of Graphic Correlation:Merits Like scatter diagram; It is easy to plot; simple to understand; and abnormal values can easily be detected Demerits As in case of scatter diagram, it gives only a type of relation; offering no further treatment. Mathematical Methods:Karl Pearsons Coefficient of Correlation: Karl Pearson formulated perhaps the greatest formula to find the degree of correlation. He being a reputed, well known statistician, worked very hard on the theory of correlation. This formula was established in 1896. Characteristics of Karl Pearsons Coefficient of Correlation:1. Based on Arithmetic Mean and the Standard Deviation. 2. Determines the direction of relationship. 3. Establishes the Size of relationship. 4. Ideal Measure. Assumptions of Karl Pearsons Coefficient of Correlation:1. The relationship is linear. 2. Normal Distribution. 3. Related in a Casual Fashion.
(a)

Merits and Demerits of Karl Pearsons Coefficient of Correlation: Merits 1. Counts all Values. 2. More Practical and Popular. 3. Numerical Measurement of r. 4. Measures Degree of Direction. 5. Facilitates Comparison. 6. Algebraic treatment Possible. Demerits 1. Linear Relationship. 2. More time Consuming. 3. Effected by extreme items. 4. Difficult to interpret. Spearmans Coefficient of Rank Correlation:- Karl Pearsons method is applicable when variables are measured in quantitative form. But in cases where terms can only be judged in qualitative form such as poverty, beauty, honesty etc. this formula cant be applied. To overcome this difficulty, Professor Charles Spearman gave a formula by judging their ranks. It is known as Rank Correlation formula. Merits and Demerits of Rank Difference Coefficient of Correlation:Merits: 1. It is easy to calculate. 2. It is simple to understand. 3. It can be applied to any type of data. 4. This is most suitable in case there are two attributes. Demerits 1. It is only an approximate calculated measure as actual values are not used for calculations. 2. For large samples it is not convenient method. 3. Combined r of different series cannot be obtained as in case of mean and S.D. 4. It cannot be treated further algebraically.

Meaning:

PARTIAL CORRELATION

By the term, Partial Correlation we mean the relationship between a dependent variable, and an independent variable exclusive of any other independent variable that might have effect on the value of the dependent variable. For example when we study the relationship between the dependent variable Price, and the independent variable Demand, excluding the other related and independent variables like, Money in circulation, Export, Import etc. Different orders of Coefficients:A Partial correlation coefficient can be of different orders, viz: Zero order, First order, Second order etc. which are explained as under: (a) Zero order coefficients: When the coefficient of a correlation between any two variables is determined without any regard for any other independent variable or by ignoring the effect of all other independent variables, it is called a Zero order coefficient. Such a correlation coefficient is represented by the symbol r12.0 or simply by r12 .
(b)

First order coefficient: When the coefficient of a correlation is determined by studying the correlation between any two variables keeping a third variable constant, it would be called a first order coefficient.

Second order coefficient: When the coefficient of correlation is determined by studying the correlation between any two variables keeping the two other related variables as constants it would be called a Second order coefficient. Such a correlation coefficient is denoted by the symbol r12.34. Utilities of Partial Correlation:(a) It enables us to study the effect of one independent variable on a dependent variable where there are other independent variables having the effects on the same dependent variable. (b) It provides us with a technique by which we can measure the relationship between any two variables. (c) It makes us to make a meaningful correlation analysis in the field of social sciences like, economics, commerce etc. (d) It can be used in conjunction with the simple and multiple correlations in the analysis of factors affecting variations in many kinds of phenomena.
(c)

(e) It expresses the relationship between the inter-related variables concisely in a few well defined coefficients. (f) It is quite adaptable to small amount of data like that of small samples. (g) It is immensely used in making correlation analysis in various experimental designs, where inter-related variables are to be studied.

Limitations of Partial Correlation: (a) It is based on the assumption that there lies a linear relationship between the variables between which a simple or a zero order correlation is studied for measuring a partial correlation. (b) It is based on an assumption that the independent variables have casual effects on the dependent variable. (c) It is based on an assumption that various independent variables are independent of each other, and there is no inter-action among themselves. (d) Its reliability decreases with an increase in the order of its coefficient, and a decrease in the number of pairs of the variables under study. (e) It involves a lot of assiduous calculations. (f) It involves arduous analysis, and difficult interpretations, even for the expert statisticians. Multiple Correlations: Meaning: By the term, Multiple Correlation we mean the relationship between a dependent variable, and two or more independent variables taken together. In such a correlation the combined effect of two or more independent variables on a single dependent variable is studied. For example if we study the combined effect of Price and Supply on Demand, it would amount to a multiple correlation analysis. The coefficient of a multiple correlation is represented by R1.23, R2.13, R3.12 etc. Utilities of Multiple Correlation:a) It provides all the utilities that are availed of from a partial correlation analysis. b) It reflects the combined effect of all the independent variables on a dependent variable at the same time.

c) It enables us to test the consistency of the data relating to simple correlation among the various variables. d) It helps us in understanding the movements in a dependent variable. e) It serves as a measure of goodness of fit. f) It serves as a measure of hypothesis testing in as much as its reliability can be tested at a desired degree of confidence. g) When studied in conjunction with the partial correlation analysis, it makes a very useful analysis of the relationship between the different variables. Limitations of Multiple Correlations: (a) It is based on an assumption that there lie linear relationships between the variables of zero order correlation. But in actual practice, this does not hold good in most of the cases. (b) It is based on an assumption that the independent variables are additive in nature, and that they affect the dependent variables in an independent manner. (c) It involves a lot of cumbersome calculations and vexatious interpretations. In case of higher order correlations, an expert statistician is bound to fall back upon a computer for the purpose.