1. Range (R)
2. Quartile Deviation (Q.D)
3. Mean Deviation (M.D)
4. Standard Deviation (S.D)
Range
Range represents the differences between the values of the extremes. The range of any sample is the
difference between the highest and the lowest values in the series.
Range = Largest value Smallest value = L S
Coefficient of Range =
LS
= L+ S
Quartile deviation
Quartiles divide the total frequency in to four equal parts. The lower quartile Q1 refers to the values of
variate corresponding to the cumulative
N
Frequency 4
Q2 corresponds to the value of variate with cumulative frequency equal to.
N
2
Upper quartile Q3
1
2
(Q3-Q1)
Q3Q
Q 3 +Q1
1
Mean deviation
Mean deviation is defined as the mean of absolute deviations of the values from the central value.
For individual series, Mean deviation from Mean is calculated as:
Standard Deviation
Standard deviation is the root of sum of the squares of deviations divided by their numbers. It is also
called mean square error deviation (or) root mean square deviation.
The standard deviation is root mean square (RMS) average of all the deviations from the mean. It is
denoted by sigma ().
Ans:- b) SOLUTION:
In increasing order: - 384, 391, 407, 522, 591, 672, 733, 777, 1490, 2488
Here n = 10
Q1 = (
10+ 1
4
) th value = (
= 391 + (407-391) x
Median or Q2 = 2(
= 591 +
672592
2
Q3 = 3 (
10+ 1
4
Q3 = 777 + (
3
4
3
4
) th value
3 x 16
4
= 391 +
10+ 1
4
) th value = (
80
2
= 591+
) th value =
1490777
4
2+
= 391 + 12 = 403
5+
1
2
)th value
= 631
33
4
) = 777 +
the value = (
8+
1
4
) th value
713
4
Y
9
8
10
12
11
13
14
16
15
Y =1
08
X2
1
4
9
16
25
36
49
64
81
X 2 =28
5
XY
X 2 . Y 2
Y2
81
64
100
144
121
169
196
256
225
Y 2 =135
6
XY
9
18
30
48
55
78
98
144
135
XY =
615
r=
615
285 1356
r=
615
386460
r=
615
621 . 659
Index number represents a special case of average, in general known as weighted average. It is a special
type of average, because in a simple average, the data is homogenous having the same unit of
measurement, whereas the average variables have different units of measurement.
5. BASIS OF COMPARISON
Index numbers by their very nature are comparative. They compare changes over time or between
places or similar categories.
Q5. Business forecasting acquires an important place in every field of the economy. Explain the
objectives and theories of Business forecasting.
Ans:- BUSINESS FORECASTING
Business forecasting refers to the analysis of past and present economic conditions with the object of
drawing inferences about probable future business conditions. The process of making definite estimates
of future course of events is referred to as forecasting and the figure or statements obtained from the
process is known as forecast; future course of events is rarely known. In order to be assured of the
coming course of events, an organised system of forecasting helps. The following are two aspects of
scientific business forecasting:
1. ANALYSIS OF PAST ECONOMIC CONDITIONS
For this purpose, the components of time series are to be studied. The secular trend shows how the
series has been moving in the past and what its future course is likely to be over a long period of time.
The cyclic fluctuations would reveal whether the business activity is subjected to a boom or depression.
The seasonal fluctuations would indicate the seasonal changes in the business activity.
2. ANALYSIS OF PRESENT ECONOMIC CONDITIONS
The object of analysing present economic conditions is to study those factors which affect the
sequential changes expected on the basis of the past conditions. Such factors are new inventions,
changes in fashion, changes in economic and political spheres, economic and monetary policies of the
government, war, etc. These factors may affect and alter the duration of trade cycle. Therefore, it is
essential to keep in mind the present economic conditions since they have an important bearing on the
probable future tendency.
OBJECTIVES OF FORECASTING IN BUSINESS
Forecasting is a part of human nature. Businessmen also need to look to the future. Success in business
depends on correct predictions. In fact when a man enters business, he automatically takes with it the
responsibility for attempting to forecast the future. To a very large extent, success or failure would
depend upon the ability to successfully forecast the future course of events. Without some element of
continuity between past, present and future, there would be little possibility of successful prediction.
But history is not likely to repeat itself and we would hardly expect economic conditions next year or
over the next 10 years to follow a clear cut prediction. Yet, past patterns prevail sufficiently to justify
using the past as a basis for predicting the future.
A businessman cannot afford to base his decisions on guesses. Forecasting helps a businessman in
reducing the areas of uncertainty that surround management decision making with respect to costs,
sales, production, profits, capital investment, pricing, expansion of production, extension of credit,
development of markets, increase of inventories and curtailment of loans. These decisions are to be
based on present indications of future conditions. However, we know that it is impossible to forecast
the future precisely. There is a possibility of occurrence of some range of error in the forecast.
Statistical forecasts are the methods in which we can use the mathematical
Demerit
This method studies only the action and not the
reaction.
This method cannot be regarded as accurate
because by using statistical techniques the results
can be up to the truth but not an accurate one.
Prosperity
Decline
Depression
Improvement
Merits and Demerits of Action and Reaction Theory
Merit
Demerit
Demerit
The business events are not strictly periodic and
prediction of business cycle on the basis of
statistical method is not satisfactory.
Past conditions are given more weight age than the
present conditions.
Demerit
In this theory, forecasting is based on guess work,
not on a scientific method because the past and
present conditions are rarely found to be similar.
It is very difficult to select the past period with the
same business conditions like present.
Merit
Present conditions are preferred than past.
The effect of each factor is studied
Independently.
Forecast is nearer to the accuracy as it is based
on present conditions.
Demerit
Independent analysis of individual facts is very
difficult.
Past facts are equally important for the purpose of
forecasting, but in this method no importance is
given to past facts.
The forecasting made on the basis of this
technique cannot be regarded as reliable.
Q6. The weekly wages of 1000 workers are normally distributed around a mean of Rs. 70 and a
standard deviation of Rs. 5. Estimate the number of workers whose weekly wages will be:
(a). Between 70 and 72 (b). Between 69 and 72 (c). More than 75 (d). Less than 63
Ans: - Let X is a normal variable with parameters
M= Rs. 70 and
Than 2 =
XM
6
= Rs. 5 N= 1000
=
a) P ( 70 X 72 )
=P
X70 2
5
5
X70
5
=P
7070 X 70 7270
5
5
5
= P [ 0 5 x350 10 ]
= P [ 0 5 x 360 ]
= P [ 0 X 72 ]
= P (x = 0.4772)
Number of workers whose weekly wage will be between 70 and 72
= 1000 x 0.4772 = 477 Ans.
b) = P [ 69 X 72 ]
=P
0.2
=P
X 70
0.4
5
5
5
5
= P [ X=0.073+ X=0.554 ]
= P [ X=.2247 ]
Required number workers = 1000 0.2247 = 225 Ans.
c) P ( X 75 ) = P
X 70
3
+
5
5
= P [ X=0.2258 ]
Required number of workers = 226 Ans.
d) P ( X 63 ) = P
X 70 7263
5
5
= P [ X 1.8 ]
= P [ X=0.4641 ]
Required numbers of workers = 464 Ans.