QUANTITATIVE TECHNIQUES FOR

BUSINESS DECISIONS
(MCM1C03)

STUDY MATERIAL

I SEMESTER
CORE COURSE

M.Com.
(2019 Admission onwards)

UNIVERSITY OF CALICUT
SCHOOL OF DISTANCE EDUCATION
CALICUT UNIVERSITY P.O.
MALAPPURAM - 673 635, KERALA

190603
School of Distance Education
University of Calicut

Study Material
First Semester

M.Com.
(2019 Admission onwards)

CORE COURSE:
MCM1C03: QUANTITATIVE TECHNIQUES FOR
BUSINESS DECISIONS.

Prepared by:
VINEETHAN T.
Assistant Professor
Department of Commerce
Govt. College, Madappally.

Scrutinized by:
Dr. E.K. SATHEESH
Professor
Department of Commerce & Management Studies
University of Calicut.

Disclaimer
"The author(s) shall be solely responsible
for the content and views expressed in this
book"
 CONTENTS

Chapter
Description Page No.
No.
Introduction to Quantitative
1 1 - 14
Techniques
2 Correlation Analysis 15 - 40
3 Regression Analysis 41 - 60
4 Probability Distributions 61 - 64
5 Binomial Distribution 65 - 72
6 Poisson Distribution 73 - 79
7 Normal Distribution 80 - 90
8 Exponential Distribution 91 - 92
9 Uniform Distribution 93
10 Statistical Inferences 94 - 126
11 Chi-Square Test 127 - 144
12 Analysis of Variance 145 - 165
13 Non-parametric Tests 166 - 192
14 Sample Size Determination 193 - 197
15 Statistical Estimation 198 - 202
16 Softwares for Quantitative Methods 203 - 215
 MCM1C03 : QUANTITATIVE TECHNIQUES FOR BUSINESS DECISIONS

CHAPTER 1
INTRODUCTION TO QUANTITATIVE
TECHNIQUES
Quantitative technique is a very powerful tool with the
help of which, the business organizations can augment their
production, maximize profits, minimize costs, and production
methods can be oriented for the accomplishment of certain pre
– determined objectives. Quantitative techniques are used to
solve many of the problems that arise in a business or
industrial area. A large number of business problems, in the
relatively recent past, have been given a quantitative
representation with considerable degree of success. All this has
attracted the business executives, public administrators alike
towards the study of these techniques more and more in the
present times.
Managerial activities have become complex and it is
necessary to make right decisions to avoid heavy losses.
Whether it is a manufacturing unit, or a service organization,
the resources have to be utilized to its maximum in an efficient
manner. The future is clouded with uncertainty and fast
changing, and decision- making – a crucial activity – cannot be
made on a trial-and-error basis or by using a thumb rule
approach. In such situations, there is a greater need for
applying scientific methods to decision-making to increase the
probability of coming up with good decisions. Quantitative
Technique is a scientific approach to managerial decision-
making. The successful use of Quantitative Technique for

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management would help the organization in solving complex

problems on time, with greater accuracy and in the most
economical way.
Definitions
Since Quantitative technique is a practical
methodological technique, there is no precise definition for the
term. Quantitative techniques are defined as “those statistical
techniques which lead to numerical analysis of variables,
affecting a decision situation, and evaluation of alternative
strategies to attain objectives of organizations.”
Quantitative techniques involves “ transformation of a
qualitative description of a decision situation, into
quantitative format, identifying of variables, setting out
alternative solutions and supplementing decision making, by
replacing judgment and intuition.”
Quantitative techniques may be described as those
techniques “which provide decision maker, with a systematic
and powerful tool of analysis, based on quantitative and
numeric data relating to alternative option.”
Thus quantitative techniques are a set of techniques
involving numerical formulation of a decision situation and
analysis of variables, so as to arrive at alternative solutions,
leading to optimal decision.
Classification of quantitative techniques
Quantitative techniques are a set of methods used to
quantitatively formulate, analyze, integrate and decide problems or

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issues. They are broadly classified into three –mathematical

techniques, statistical techniques and programming techniques.
Mathematical techniques
They are quantitative techniques in which numerical data are
used along with the principles of mathematics such as integration,
calculus etc. They include permutations, combinations, set theory,
matrix analysis, differentials integration etc.
Permutations and combinations
Permutation is mathematical device of finding possible
number of arrangements or groups which can be made of a certain
number of items from a set of observations. They are groupings
considering order of arrangements.
Combinations are number of selections or subsets which can
be made of a certain number of items from a set of observations,
without considering order. Both combinations and permutations help
in ascertaining total number of possible cases.
Set theory
It is a modern mathematical device which solves the various
types of critical problems on the basis of sets and their operations
like Union, intersection etc.
Matrix Algebra
Matrix is an orderly arrangement of certain given numbers or
symbols in rows and columns. Matrix analysis is thus a
mathematical device of finding out the results of different types of
algebraic operations on the basis of relevant matrices. This is useful
to find values of unknown numbers connected with a number of
simultaneous equations.

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Differentials
Differential is a mathematical process of finding out changes
in the dependent variable with reference to a small change in the
independent variable. It involves differential coefficients of
dependent variables with or without variables.
Integration
It is a technique just reversing the process of differentiation.
It involves the formula f(x) dx where f(x) is the function to be
integrated
Statistical techniques
They are techniques which are used in conducting statistical
inquiry concerning a certain phenomenon. They include all the
statistical methods beginning from the collection of data till
interpretation of those collected data. Important statistical techniques
include collection of data, classification and tabulation, measures of
central tendency, measures of dispersion, skewness and kurtosis,
correlation, regression, interpolation and extrapolation, index
numbers, time series analysis, statistical quality control, ratio
analysis, probability theory, sampling technique, variance
analysis, theory of attributes etc.
Programming techniques
These techniques focus on model building, and are widely
applied by decision makers relating to business operations. In
programming, problem is formulated in numerical form, and a
suitable model is fitted to the problem and finally a solution is
derived. Prominent programming techniques include linear
programming, queuing theory, inventory theory, theory of games,
decision theory, network programming, simulation, replacement
non linear programming, dynamic programming integer

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programming etc.

Functions of Quantitative Techniques:

The following are the important functions of quantitative
techniques:
1. To facilitate the decision-making process
2. To provide tools for scientific research
3. To help in choosing an optimal strategy
4. To enable in proper deployment of resources
5. To help in minimizing costs
6. To help in minimizing the total processing time required
for performing a set of jobs
Quantitative and qualitative approaches
Decision making is the process of selecting optimal
alternative from among several alternatives, subject to states of
nature. While analyzing a situation for such a selection, two
approaches can be adopted – quantitative approach and
qualitative approach
Quantitative approach
This approach involves generation and analysis of data
in numerical form. Data obtained as per quantitative approach
can be subjected to rigorous quantitative analysis in a formal
fashion. This will reveal almost all inherent characteristics of
the variable under study.
Quantitative approach may further be subdivided into
inferential, experimental and simulation approaches. The purpose of
inferential approach is to form a data base to infer characteristics or

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relationships of variables. Required data would be usually obtained

through field survey.
Experimental approach is characterized by much greater
control over the study environment, and in this case variables are
manipulated to observe their effect on other variables.
Simulation approach involves the construction of an artificial
environment or model within which relevant information and data
can be generated. This permits an observation of dynamic behavior
of the system or sub system under modeled conditions. The term
simulation, in the context of business, means building of a model,
that represents the structure of a dynamic process or operation.
Qualitative approach
Qualitative approach is concerned with subjective
assessment of attitudes, opinions and behavior. Decision making in
such situations is a function of decision maker’s insight and
impressions. Such an approach generates results either in non-
quantitative form or in a form which cannot be subjected to rigorous
quantitative analysis. For example, opinion that a person may be
good or bad
Basically, the techniques of focus group interviews,
projective techniques and depth interviews use qualitative approach
for decision making.
Generally there are four non quantitative techniques of
decision making
Intuition – decision making on intuition is characterized by
inner feelings of the decision maker. It is purely subjective
Facts –It follows the rule that decision should be based on facts, and
not on feelings.

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Experiences – Experience is the most valuable asset, if used

logically. Decisions should be based on precedence.
Opinion – in decision making, expert opinions can be relied
on. In fact, this is widely used by all levels of managers.
However, even qualitative approach may be transformed into
quantitative form, in practical studies. This is achieved through
measurement and scaling. Measurement is assigning numbers or
values to concepts or phenomena. Scaling refers to placing a
concept or characteristic on the appropriate position of a measured
scale. For example, Marital status of a person may be : (single)1 ,
(married)2, (divorced)3 (widowed)4. Here qualitative or non
quantitative data is logically converted into quantitative data.

Significance of quantitative decisions

Quantitative Techniques have proved useful in tackling
managerial decision problems relating to business and industrial
operations. Quantitative decisions are considered significant on the
following grounds.
Simplifies decision making
Quantitative techniques simplify the decision making
process. Decision theory enables a manager to select the best course
of action. Decision tree technique refines executive judgment in
systematic analysis of the problem, these techniques permit
scientific decision making under conditions of risk and uncertainty.
Decision problems such as manpower planning ,demand forecasting,
selection suppliers, production capacities, and capital requirements
planning can be more effective tackled using quantitative techniques.
Scientific analysis
It provides a basis for precise analysis of the cause and effect

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relationship. They make it possible to measure the risks inherent, in

business by providing an analytical and objective approach. These
techniques reduce the need for intuition and objective approach. In
this way quantitative techniques enable managers to use logical
thinking in the analysis of organizational problems,
Allocation of resources
They are very helpful in the optimum deployment of
resources. For example, Programme Evaluation and Review
Techniques enable a manager to determine the earliest and the
latest times for each of the events and activities involved in a project.
The probability of completing the project by a specified date can be
determined. Timely completion of the project helps to avoid time
and cost overruns. Similarly, linear programming technique is very
useful in optimal allocation of scarce resources, production
scheduling and in deciding optimal assignments.
Profit maximization
Quantitative techniques are invaluable in assessing the
relative profitability of alternative choices and identifying the most
profitable course of action. What should be the relative mix of
different products, which site to choose for location out of
alternative sites, which arrangement of orders in terms of time and
quantity, will give maximum profits. Such question can be
answered with the help of quantitative techniques.
Cost minimization
Quantitative techniques are helpful in tackling cost
minimization problems. For example waiting line theory enables a
manager to minimize waiting and servicing costs. Their techniques
help business managers in taking a correct decision through analysis
of feasibility of adding facilities.

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Forecasting
Quantitative techniques are useful in demand forecasting.
They provide a scientific basis of coping with the uncertainties of
future demand. Demand forecasts serve as the basis for capacity
planning. Quantitative technique enables a manager to adopt the
minimum risk plan.
Inventory control
Inventory planning techniques help in deciding when to buy
and how much to buy. It enables management to arrive at
appropriate balance between the costs and benefits of holding stocks.
The integrated production models technique is very useful in
minimizing costs of inventory, production and workforce.
Statistical quality controls help us to determine whether the
production process is under control or not.
Applications of quantitative techniques in business
operations
Quantitative techniques are widely applied for solving
decision problems of routine operations of business organizations. It
is especially useful for business managers, economist, statisticians,
administrators, technicians and others in the field of business,
agriculture, industry services and defense. It has specific
applications in the following functional areas of business
organizations.
Planning
In planning, quantitative techniques are applied to determine
size and location of plant, product development, factory
construction, installation of equipment and machineries etc.
Purchasing
Quantitative techniques are applied in make or buy

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decisions, vendor development, vendor rating, purchasing at

varying prices, standardization and variety reduction, logistics
management.
Manufacturing
Quantitative techniques address questions like product mix,
production planning, quality control, job sequencing, and optimum
run sizes.
Marketing
Marketing problems like demand forecasting, pricing
competitive strategies, optimal media planning and sales
management can be solved through application appropriate
quantitative techniques.
Human resource management
Quantitative techniques supports decision making relating to
man power planning with due consideration to age, skill, wastage
and recruitment , recruitment on the basis of proper aptitude, method
study , work measurement, job evaluation, development of incentive
plans, wage structuring and negotiating wage and incentive plan
with the union.
Research and Development
Quantitative techniques are helpful in deciding research
issues like market research, market survey, product innovation,
process innovations, plant relocation, merger and acquisitions etc.

Classification of quantitative techniques

Quantitative techniques are a set of methods used to
quantitatively formulate, analyze, integrate and decide problems or
issues. They are broadly classified into three –mathematical
techniques, statistical techniques and programming techniques.

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Mathematical techniques
They are quantitative techniques in which numerical data are
used along with the principles of mathematics such as integration,
calculus etc. They include permutations, combinations, set theory,
matrix analysis, differentials integration etc.
Permutations and combinations
Permutation is mathematical device of finding possible
number of arrangements or groups which can be made of a certain
number of items from a set of observations. They are groupings
considering order of arrangements.
Combinations are number of selections or subsets which can
be made of a certain number of items from a set of observations,
without considering order. Both combinations and permutations help
in ascertaining total number of possible cases.
Set theory
It is a modern mathematical device which solves the various
types of critical problems on the basis of sets and their operations
like Union, intersection etc.
Matrix Algebra
Matrix is an orderly arrangement of certain given numbers or
symbols in rows and columns. Matrix analysis is thus a
mathematical device of finding out the results of different types of
algebraic operations on the basis of relevant matrices. This is useful
to find values of unknown numbers connected with a number of
simultaneous equations.
Differentials
Differential is a mathematical process of finding out changes
in the dependent variable with reference to a small change in the

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independent variable. It involves differential coefficients of

dependent variables with or without variables.
Integration
It is a technique just reversing the process of differentiation.
It involves the formula f(x) dx where f(x) is the function to be
integrated
Statistical techniques
They are techniques which are used in conducting statistical
inquiry concerning a certain phenomenon. They include all the
statistical methods beginning from the collection of data till
interpretation of those collected data. Important statistical techniques
include collection of data, classification and tabulation, measures of
central tendency, measures of dispersion, skewness and kurtosis,
correlation, regression, interpolation and extrapolation, index
numbers, time series analysis, statistical quality control, ratio
analysis , probability theory, sampling technique, variance
analysis, theory of attributes etc.
Programming techniques
These techniques focus on model building, and are widely
applied by decision makers relating to business operations. In
programming, problem is formulated in numerical form, and a
suitable model is fitted to the problem and finally a solution is
derived. Prominent programming techniques include linear
programming, queuing theory, inventory theory, theory of games,
decision theory, network programming, simulation, replacement
non linear programming, dynamic programming integer
programming etc.

Quantification of qualitative data

In most cases, information is born in the form of qualitative

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description of situations. This may be quantified. Such quantification

leads to following favorable out comes
1. It attracts readers’ attention to patterns in the information
2. It helps to memorize and stacking of information
3. It assists in timely retrieval of data.
4. It supports efficient decision making.

Limitations of Quantitative Techniques:

Even though the quantitative techniques are inevitable in
decision-making process, they are not free from short comings. The
following are the important limitations of quantitative techniques:
1. Quantitative techniques involves mathematical models,
equations and other mathematical expressions
2. Quantitative techniques are based on number of
assumptions. Therefore, due care must be ensured while
using quantitative techniques, otherwise it will lead to
wrong conclusions.
3. Quantitative techniques are very expensive.
4. Quantitative techniques do not take into consideration
intangible facts like skill, attitude etc.
5. Quantitative techniques are only tools for analysis and
decision-making. They are not decisions itself.
REVIEW QUESTIONS:
1. Define Quantitative Techniques.
2. Explain the classification of quantitative techniques.
3. Explain the significance of quantitative decisions.

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4. What are the uses of quantitative techniques in Business?

5. Explain the qualitative approach in decision making.
6. What are the important limitations of quantitative
techniques?

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CHAPTER 2
CORRELATION ANALYSIS

Meaning and Definition of Correlation

Correlation analysis is an attempt to examine the
relationship between two variables. It analyses the association
between two or more variables. It is a bi-variate analysis.
According to Croxton and Cowden, “when the
relationship is of quantitative nature, the appropriate statistical
tool for discovering and measuring the relationship and
expressing it in a brief formula is known as correlation”
According to A.M.Tuttle, “Correlation is an analysis of
the co-variation between two or more variables.”
According to Ya-Lun-Chou, “Correlation analysis is an
attempt to determine the degree of relationship between
variables.”
Correlation analysis helps to know the direction of
relationship as well as the degree of relationship exists
between two or more variables.
Types of Correlation
I. Positive and Negative Correlation
(a) Positive Correlation: If two variables move in the
same direction, then the correlation is called positive. For
example, price and supply are positively correlated. When
price goes up, supply goes up and vice versa.

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(b) Negative Correlation: If two variables move in the

opposite direction, then the correlation is called negative. For
example, price and demand are negatively correlated. When
price goes up, demand falls down and vice versa.
II. Simple, Partial and Multiple Correlation
(a) Simple Correlation: In a correlation analysis, if there
are only two variables, then the correlation analysis is called
simple correlation. For example, the relationship between
weight and height, price and demand, price and supply, etc.
(b) Partial Correlation: When there are more than two
variables and we study the relationship between any two
variables only, assuming other variables as constant, it is called
partial correlation. For example, the study of the relationship
between rainfall and agricultural produce, without taking into
consideration the effects of other factors such as quality of
seeds, quality of soil, use of fertilizer, etc.
(c) Multiple 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 the case of
multiple correlation. Suppose there are three variables, namely
x, y and z. The correlation between x and (y & z) taken
together is multiple correlation. Similarly, the relation between
y and (x & z) taken together is multiple correlation. Again, the
relation between z and (x & y) taken together is multiple
correlation.

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III. Linear and Non-linear Correlation

(a) Linear Correlation: When the amount of change in
one variable leads to a constant ratio of change in the other
variable, the relationship is called linear correlation. For
example, if price falls down by 10%, it leads to a fall in supply
by 12% each time, it is linear correlation. When we plot the
data on graph, we will get a straight line. Here, the relationship
between the variables may be expressed in the form of y = ax
+ b.
(b) Non-linear Correlation: When the amount of change
in one variable does not lead to a constant ratio of change in
the other variable, the relationship is called non-linear
correlation. When we plot the data on graph, we never get a
straight line. Therefore, non-linear correlation is also called
curvi-linear correlation.
IV. Logical and Illogical Correlation
(a) Logical Correlation: When the correlation between
two variables is not only mathematically defined but also
logically sound, it is called logical correlation. For example,
correlation between price and demand.
(b) Illogical Correlation: When the correlation between
two variables is mathematically defined but not logically
sound, it is called illogical correlation. For example,
correlation between availability of rainfall and height of
people. This type of correlation is also known as Spurious
correlation or Non-sense correlation.

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Methods of Studying Correlation

The various methods for studying correlation can be
classified into two categories. They are:
I. Graphic Methods:
(1) Scatter diagram method
(2) Correlation Graph method
II. Mathematical Methods:
(1) Karl Pearson’s Product Moment Method
(2) Spearman’ Rank Correlation Method
(3) Concurrent Deviation Method
Graphic Methods:
Scatter Diagram Method
This is a simple method for analysing correlation
between two variables. One variable is shown on the X- axis
and the other on the Y-axis. Each pair of values is shown on
the graph paper using dots. When all the pairs of observations
are plotted as dots, the relationship exists between the
variables is analysed by observing how the dots are scattered.
If the dots show an upward or downward trend, then the
variables are correlated. We may interpret the scatter diagram
as follows:
(a) If all the dots are lying on a straight line from left bottom
corner to the right upper corner, there is perfect positive
correlation between variables.
(b) If all the dots are lying on a straight line from left upper

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corner to the right bottom corner, there is perfect negative

correlation between variables.
(c) If all the dots are plotted on a narrow band from left
bottom corner to the right upper corner, there is high
degree of positive correlation between variables.
(d) If all the dots are plotted on a narrow band from left upper
corner to the right bottom corner, there is high degree of
negative correlation between variables.
(e) If all the dots are plotted on a wide band from left bottom
corner to the right upper corner, there is low degree of
positive correlation between variables.
(f) If all the dots are plotted on a wide band from left upper
part to the right bottom part, there is low degree of
negative correlation between variables.
(g) If the plotted dots do not show any trend, the variables are
not correlated.
Correlation Graph Method
In correlation graph method, separate curves are drawn
for each variable on the same graph. The relationship between
the variables is interpreted on the basis of the direction and
closeness of the curves. If both the curves move in the same
direction, there is positive correlation and if they are moving in
opposite directions, there is negative correlation between the
variables.
Mathematical Methods:
Under mathematical methods, the correlation between

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variables is studied with the help of a numerical value obtained

using an appropriate formula. This numerical value is called
coefficient of correlation. Coefficient of correlation explains
both the direction as well as degree of relationship exists
between the variables.
Degree of Correlation:
The degree of correlation can be classified as follows:
(a) Perfect Positive Correlation: When coefficient of
correlation is +1
(b) Perfect Negative Correlation: When coefficient of
correlation is –1
(c) High Degree of Positive Correlation: When coefficient of
correlation lies between + 0.75 and + 1
(d) High Degree of Negative Correlation: When coefficient
of correlation lies between – 0.75 and –1
(e) Moderate Degree of Positive Correlation: When
coefficient of correlation lies between + 0.5 and + 0.75
(f) Moderate Degree of Positive Correlation: When
coefficient of correlation lies between – 0.5 and – 0.75
(g) Low Degree of Positive Correlation: When coefficient of
correlation lies between 0 and + 0.33
(h) Low Degree of Negative Correlation: When coefficient
of correlation lies between 0 and – 0.33
(i) No Correlation: When coefficient of correlation is zero.

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Karl Pearson’s Product Moment Method

This is the popularly used method for analysing
correlation. This method is designed by a reputed Statistician,
Prof. Karl Pearson and therefore, it is generally known as
Pearsonian Coeffiecient of Correlation. Karl Pearson’s
coefficient of correlation is denoted by ‘r’ Under this method,
coefficient of correlation is computed by usin any one of the
following formulae:
εxy
r =
√εx2 εy2
where x = deviations of X values from its actual mean
y = deviations of X values from its actual mean

OR
nεdxdy – (εdx . εdy)
r =
√nεdx2 – (εdx)2 nεdy2 – (εdy)2

where n = number of pairs of observations

dx = deviations of observations (variable x) from
assumed mean
dy = deviations of observations (variable y) from
assumed mean

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OR
nεXY – (εX . εY)
r =
√nεX2 – (εX)2 nεY2 – (εY)2

where n = number of pairs of observations

X = Given values of variable X
Y = Given values of variable Y
Qn: From the following data compute product moment
correlation coefficient and interpret it:

X 57 42 40 38 42 45 42 44 40 46 44 43
Y 10 26 30 41 29 27 27 19 18 19 31 29

Sol:

Computation of Product Moment Correlation Coefficient

dx = dy=
X Y Dxdy dx2 dy2
(x --45) (y—25)
57 10 12 -15 -180 144 225
42 26 -3 1 -3 9 1
40 30 -5 5 -25 25 25
38 41 -7 16 -112 49 256
42 29 -3 4 -12 9 16
45 27 0 2 0 0 4
42 27 -3 2 -6 9 4

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44 19 -1 -6 6 1 36
40 18 -5 -7 35 25 49
46 19 1 -6 -6 1 36
44 31 -1 6 -6 1 36
43 29 -2 4 -8 4 16
εdx εdy εdxdy εdx2 εdy2
= -17 =6 = -317 =277 = 704

nεdxdy – (εdx . εdy)

r =
√nεdx2 – (εdx)2 nεdy2 – (εdy)2

2 2
r = (12 x -317) – (-17 x 6) / √[(12 x 277) – (-17) ] [(12 x 704) – (6) ]

= –3804 – –102 / [√3324 – 289] [8448 – 36]

= – 3702 / √3035 x 8412 = – 14208 / √25530420
= – 3702 / 5052.76 = – 0.733
There is a high degree of negative correlation between
x and y.
Properties of Coefficient of Correlation
1. Coefficient of correlation lies between – 1 and + 1
2. It is a pure numerical value independent of the units of
measurement.
3. It does not change with reference to the change of
origin or change of scale.

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4. It is the geometric mean of the two regression coefficients

5. It is computed by using a well defined formula.
6. Coefficient of correlation between x and y and that
between y and x are same.
Probable Error
Probable error is a statistical device used to measure
the reliability and dependability of the value of correlation
coefficient. When the numerical value of probable error is
added to and subtracted from the value of correlation
coefficient, we get two limits within which the population
parameter is expected to lie.
Probable Error (P.E) = 0.6745 x Standard Error
Probable Error (P.E) = 0.6745 x [(1 – r2)/ √n]

where n= number of pairs of observations;

r = correlation coefficient.
Uses of Probable Error
1. Probable error can be used to measure the reliability and
dependability of coefficient of correlation
2. It helps to determine the limits within which population
parameter is expected to lie.
3. With the help of P.E, coefficient of correlation can be
interpreted more accurately:
(a) If ‘r’ is less than P.E, there is no evidence of
correlation.

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(b) If ‘r’ is more than 6 times of P.E, correlation is

significant
(c) If ‘r’ is 0.5 or more and the P.E is not much, the
correlation is considered to be significant.
Qn: Find Standard Error (S.E) and Probable Error (P.E), if r =
0.8 and number of pairs of observations = 64. Also interpret
the value of ‘r’.
Sol:
Standard Error (S.E) = 1– r2/ √n
= 1– 0.82/ √64 = 1– 0.64/8
= 0.36/8 = 0.045
Probable Error (P.E) = 0.6745 x Standard Error
= 0.6745 x 0.045 = 0.0304
r/P.E = 0.08/0.0304 = 26.32.
Since ‘r’ is more than 26.32 times of P.E, the value of
‘r’ is highly significant.
Qn: Following table shows the marks obtained by students
in two courses:

Course I 45 70 65 30 90 40 50 75 85 60
Course
35 90 70 40 95 40 60 80 80 50
II

Find coefficient of correlation and P.E. Is ‘r’

significant?

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Sol:
Computation of Product Moment Correlation Coefficient
Course Course dx = (x dy=(y—
Dxdy dx2 dy2
I (x) II (y) --60) 60)
45 35 -15 -25 375 225 625
70 90 10 30 300 100 900
65 70 5 10 50 25 100
30 40 -30 -20 600 900 400
90 95 30 35 1050 900 1225
40 40 -20 -20 400 400 400
50 60 -10 0 0 100 0
75 80 15 20 300 225 400
85 80 25 20 500 625 400
60 50 0 -10 0 0 100
εdx εdy εdxdy εdx 2
εdy2
= 10 = 40 = 3575 =3500 = 4550

nεdxdy – (εdx . εdy)

r =
√nεdx2 – (εdx)2 nεdy2 – (εdy)2

r = (10x3575)–(10x40) / √[(10 x 3500)–(10)2] [(10 x 4550) – (40)2]

= 35750 – 400 / √[35000 – 100] [45500 – 1600]

= 35350 / √34900 x 43900 = 35350 / 39142.177
= + 0.903
Probable Error (P.E) = 0.6745 x [(1 – r2)/ √n]
= 0.6745 x [1 – 0.9032)/ √10]

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= 0.6745 x [1 – 0.815)/ √10]

= 0.6745 x [0.185/ 3.162]
= 0.6745 x [0.0585] = 0.0395
r/P.E = 0.903/0.0395 = 22.86
Since coefficient of correlation is more than 22.86 of
P.E, ‘r’ is very significant.
Coefficient of Determination
Coefficient of Determination is defined as the ratio of
the explained variance to the total variance. It denoted by r2
and is usually expressed as percentage. Coefficient of
Determination explains the percentage of the variation in the
dependent variable that can be explained in terms of the
independent variable.
Coefficient of Determination = r2
Coefficient of Determination = Explained Variance/Total
Variance
Coefficient of non-determination = 1– r2.
Qn: If the coefficient of correlation between two variables is
0.85, what percentage of variation of dependent variable is
explained? Also find the coefficient of non-determination.
Sol:
Coefficient of Determination
(Percentage of explained Variance) = r2
= 0.85 x 0.85 = 0.7225 = 72.25%

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Coefficient of non-determination
= 1– r2 = 1 – 0.7225 = 2775 = 27.75%
Rank Correlation Method
When the variables cannot be measured in quantitative
terms, the coefficient of correlation can be found out by using
rank correlation method. Here ranks are to be assigned to the
individual observations. Ranks may be assigned in either
ascending or descending order. This method was designed by
Charles Edward Spearman in 1904. He suggested two
formulae for computing rank correlation coefficient. Rank
correlation coefficient if denoted by ‘R’
(1) When there is no equal rank:

6εD2
R =1 –
(n3 – n)

where D = Rank difference

n = Number of pairs of observations
(2) When there are equal ranks:

6{εD2 + [(m3-m)/12] + [(m3-m)/12] + ....}

R = 1 –
(n3 – n)

where D = Rank difference

n = Number of pairs of observations
m = Number of times a particular rank repeats
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Qn: The ranks of 6 students in two courses are given below:

Rank for Course I 6 1 5 2 4 3

Ran for Course II 3 1 4 2 5 6
Compute Spearman’s Rank Correlation Coefficient.
Sol:
Here there is no equal rank.

6εD2
R =1 –
(n3 – n)

Computation of Rank Correlation Coefficient

Rank for Course I Rank for
D ( R1 – R2 ) D2
(R1) Course I(R2)
6 3 3 9
1 1 0 0
5 4 1 1
2 2 0 0
4 5 -1 1
3 6 -3 9
εD2 = 20
6εD2
R =1 –
(n3 – n)

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= 1 – [(6 x 20)/(63–6)] = 1 – (120/210)

= 1– 0.5714 = 0.4286
Qn: From the following data, compute Spearman’s Rank
Correlation Coefficient:

x 330 332 328 331 327 325

y 415 434 420 430 424 428
Sol:
Here ranks are not given. So, at first, we have to assign ranks
to each observation:

6εD2
R =1 –
(n3 – n)]

Computation of Rank Correlation Coefficient

X Y R1 R2 D (R1 – R2) D2
330 415 4 1 3 9
332 434 6 6 0 0
328 420 3 2 1 1
331 430 5 5 0 0
327 424 2 3 -1 1
325 428 1 4 -3 9
εD2 = 20

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6εD2
R =1 – = 1
(n3 – n)]
= 1 – [(6 x 20)/(63–6)] = 1 – (120/210)
= 1– 0.5714 = 0.4286
Qn: From the following data, compute Spearman’s Rank
Correlation Coefficient:

x 80 45 55 58 55 60 45 68 70 45 85
y 82 56 50 43 56 62 64 65 70 64 90
Sol:
This is the case of equal marks.

6{εD2 + [(m3-m)/12] + [(m3-m)/12] + ....}

R = 1 –
(n3 – n)

Computation of Rank Correlation Coefficient

X Y R1 R2 D (R1 – R2) D2
80 82 10 10 0 0
45 56 2 3.5 -1.5 2.25
55 50 4.5 2 2.5 6.25
58 43 6 1 5 25
55 56 4.5 3.5 1 1

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60 62 7 5 2 4
45 64 2 6.5 -4.5 20.25
68 65 8 8 0 0
70 70 9 9 0 0
45 64 2 6.5 -4.5 20.25
85 90 11 11 0 0
εD2 = 79

6{79 + [(33 - 3)/12] + [(23 - 2)/12] + [(23 - 2)/12] + [(23 - 2)/12]}

R = 1−
(113 − 11)

6 [79 + (2+0.5+0.5+0.5)]
=1 –
1320
= 1 – [6(79 + 3.5) ÷ 1320] = 1 – (495/1320)
= 1– (0.375) = 0.625
Concurrent Deviation Method
This is a simple method for computing coefficient of
correlation. Here, we consider only the direction of change and
not the magnitude of change. The coefficient of correlation is
determined on the basis of number of concurrent deviations.
That is why this method is named as such. The coefficient of
concurrent deviation is denoted by rc.
The formula for computing coefficient of concurrent
deviation is:

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rc = ± √± (2c – n) / n

where c = number of concurrent deviations

n = number of pairs of signs (not the pairs of observations)
Qn: Calculate coefficient of concurrent deviation from the
following data:

x 180 182 186 191 183 185 189 196 193

y 246 240 230 217 233 227 215 195 200
Sol:
rc = ± √± (2c – n) / n
Computation of Coefficient of Concurrent Deviation
x y dx Dy Dxdy
180 246 ... ... ...
182 240 + - -
186 230 + - -
191 217 + - -
183 233 - + -
185 227 + - -
189 215 + - -
196 195 + - -
193 200 - + -
c = 0
Number of concurrent deviations = 0

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rc = ± √± (2c – n) / n
rc = ± √± (2 x 0 – 8) / 8 = ±√±(0—8)/8 = –1
There is perfect negative correlation between x and y.
PARTIAL CORRELATION
When there are more than two variables and we study
the relationship between any two variables only, assuming
other variables as constant, it is called partial correlation. For
example, the study of the relationship between rainfall and
agricultural produce, without taking into consideration the
effects of other factors such as quality of seeds, quality of soil,
use of fertilizer, etc.
Partial correlation coefficient measures the relationship
between one variable and one of the other variables assuming
that the effect of the rest of the variables is eliminated.
Suppose there are 3 variables namely x1, x2 and x3.
Here, we can find three partial correlation coefficients. They
are:
(1) Partial Correlation coefficient between x1 and x2, keeping
x3 as constant. This is denoted by r12.3
(2) Partial Correlation coefficient between x1 and x3, keeping
x2 as constant. This is denoted by r13.2
(3) Partial Correlation coefficient between x2 and x3, keeping
x1 as constant. This is denoted by r23.1
The formulae for computing the above partial
correlation coefficients are:

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r12 – r13 r23

r12.3 =
√1–r132 √1–r232

r13 – r12 r23

r13.2 =
√1–r122 √1–r232

r23 – r12 r13

r23.1 =
√1–r122 √1–r132

Qn: If r12 = 0.98, r13 = 0.44 and r23 = 0.54, find (1) r12.3,
(2) r13.2 and (3) r23.1
Sol:
(1)
r12 – r13 r23
r12.3 =
√1–r132 √1–r232
0.98 – (0.44 x 0.54)
r12.3 =
√1–0.442 √1–0.542
0.98 – 0.2376
=
√1–0.1936 √1–0.2916
= 0.7424/ (0.898 x 0.842) = 0.7424 / 0.7561 = 0.982

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(2)
r13 – r12 r23
r13.2 =
√1–r122 √1–r232
0.44 – (0.98 x 0.54)
r12.3 =
√1–0.982 √1–0.542
0.44 – 0.5292
=
√1–0.9604 √1–0.2916

= – 0.0892/ (0.199 x 0.842) = – 0.0892 / 0.1676 =

– 0.5322
3)
r23 – r12 r13
r23.1 =
√1–r122 √1–r132
0.54 – (0.98 x 0.44)
r12.3 =
√1–0.982 √1–0.442
0.54 – 0.4312
=
√1–0.9604 √1–0.1936
= 0.1088/ (0.199 x 0.898) = 0.1088 / 0.1787 = 0.6088

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MULTIPLE 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 the case of multiple
correlation. Suppose there are three variables, namely x, y and
z. The correlation between x and (y & z) taken together is
multiple correlation. Similarly, the relation between y and (x &
z) taken together is multiple correlation. Again, the relation
between z and (x & y) taken together is multiple correlation. In
all these cases, the correlation coefficient obtained will be
termed as coefficient of multiple correlation.
Suppose there are 3 variables namely x1, x2 and x3. Here,
we can find three multiple correlation coefficients. They are:
1. Multiple Correlation Coefficient between x1 on one side
and x2 and x3 together on the other side. This is denoted by
R1.23
2. Multiple Correlation Coefficient between x2 on one side
and x1 and x3 together on the other side. This is denoted by
R2.13
3. Multiple Correlation Coefficient between x3 on one side
and x1 and x2 together on the other side. This is denoted by
R3.12
The formulae for computing the above multiple
correlation coefficients are:

R1.23 = √ [r122 + r132 – 2 r12 r13 r23]÷ [1– r232]

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R2.13 = √ [r122 + r232 – 2 r12 r13 r23]÷ [1– r132]

R3.12 = √ [r132 + r232 – 2 r12 r13 r23]÷ [1– r122]

Qn: If r12 = 0.6, r23 = r13 = 0.8, find R1.23, R2.13 and R3.12 .
Sol:

R1.23 = √ [r122 + r132 – 2 r12 r13 r23]÷ [1– r232]

= √[0.62 + 0.82 – 2 x 0.6 x 0.8 x 0.8]÷ [1– 0.82]

= √[0.36 + 0.64 – 0.768]÷ [1– 0.64]

= √0.232 /0.36 = √0.6444 = 0.8028

R2.13 = √ [r122 + r232 – 2 r12 r13 r23]÷ [1– r132]

= √[0.62 + 0.82 – 2 x 0.6 x 0.8 x 0.8]÷ [1– 0.82]

= √[0.36 + 0.64 – 0.768]÷ [1– 0.64]

= √0.232 /0.36 = √0.6444 = 0.8028

R3.12 = √ [r132 + r232 – 2 r12 r13 r23]÷ [1– r122]

= √[0.82 + 0.82 – 2 x 0.6 x 0.8 x 0.8]÷ [1– 0.62]

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= √[0.64 + 0.64 – 0.768]÷ [1– 0.36]

= √0.512 /0.64 = √0.8 = 0.8944

REVIEW QUESTIONS:
1. What do you mean by correlation analysis?
2. Define correlation.
3. What is scatter diagram? What are its advantages?
4. What is coefficient of correlation? What are its properties?
5. What are the different types of correlation?
6. What do you mean by degree of correlation?
7. What is meant by positive and negative correlation?
8. What are the merits of Karl Pearson’s Coefficient of
Correlation?
9. What are the demerits of Karl Pearson’s Coefficient of
Correlation?
10. What is rank correlation?
11. What are the merits of rank correlation?
12. What are the demerits of rank correlation?
13. What is meant by correlation graph method?
14. What is concurrent deviation method?
15. What is the main drawback of concurrent deviation
method?
16. What is coefficient of determination?

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17. What do you mean by coefficient of non-determination?

18. What do you mean by linear and non-linear correlation?
19. What is multiple correlations?
20. What is partial correlation?
21. What is probable error?
22. What are the uses of probable error?
23. From the following data, find coefficient of correlation
and give interpretation:

X 200 270 400 310 340

Y 150 162 180 180 170
24. Find n, if P.E = 0.034 and r = 0.917
25. Find coefficient of correlation using Edward Spearman’s
method:

Roll No. 1 2 3 4 5 6 7 8 9 10
Marks I 45 56 39 54 45 40 56 60 30 35
Marks II 40 56 30 44 36 32 45 42 20 36

26. Compute coefficient of concurrent deviation:

X 100 110 110 120 122 125

Y 120 140 160 160 130 110

27. If r12 = 0.7, r13 = 0.61, r23 = 0.4, find r12.3, r13.2 and r 23.1
28. If r12 = 0.98, r13 = 0.44, r23 = 0.54, find R1.23, R2.13 and R3.12

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CHAPTER 3

REGRESSION ANALYSIS
Meaning and Definition of Regression Analysis
Correlation analysis helps to know whether two
variables are related or not. Once the relationship between two
variables is established, the same may be used for the purpose
of predicting the unknown value of one variable on the basis of
the known value of the other. For this purpose we have to
examine the average functional relationship exists between the
variables. This is known as regression analysis.
Regression analysis may be defined as the process of
ascertaining the average functional relationship exists between
variables so as to facilitate the mechanism of prediction or
estimation or forecasting. Regression analysis helps to predict
the unknown values of a variable with the help of known
values of the other variable. The term regression was firstly
used by Francis Galton.
Types of Regression
Regression may be classified as follows:
I. On the basis of number of variables:
(a) Simple Regression
(b) Multiple Regression
II. On the basis of Proportion of change in the variables:
(a) Liner Regression
(b) Non-liner Regression

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1. Simple Regression
In a regression analysis, if there are only two variables,
it is called simple regression analysis.
2. Multiple Regression
In a regression analysis, if there are more than two
variables, it is called multiple regression analysis.
3. Linear Regression
In a regression analysis, if linear relation exists
between variables, it is called linear regression analysis. Under
this, when we plot the data on a graph paper, we get a straight
line. Here, the relationship exists between variables can be
expressed in the form of y = a + bx. In case of linear
regression, the change in dependent variable is proportionate to
the changes in the independent variable.
4. Non-linear Regression:
In case of non-linear regression, the relation between
the variables cannot be expressed in the form of y = a + bx.
When the data are plotted on a graph, the dots will be
concentrated, more or less, around a curve. This is also called
curvi-linear regression.
Regression Line (Line of Best Fit)
Regression line is a graphical method to show the
functional relationship between two variables, namely
dependent variable and independent variable. Since regression
line helps to estimate the unknown values of dependent

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variable, based on the known values of the independent

variable, it is also called estimating line (line of average).
According to Francis Galton, “The regression lines
show the average relationship between two variables.”
Regression Equations
Regression equations are algebraic expression of
regression lines. As there are two regression lines, there are
two regression equations. They are:
(a) Regression Equation of X on Y : It shows the change in the
value of variable X for a given change in the value of
variable Y.
(b) Regression Equation of Y on X : It shows the change in the
value of variable Y for a given change in the value of
variable X.
Methods of drawing Regression Lines
There are two methods for drawing regression lines. They
are:
(a) Free hand curve method
(b) The method of least squares.
Free hand Curve Method:
This is a simple method for constructing regression
lines. Under this method, the values of paired observations of
the variable are plotted, by way of dots, on a graph paper. The
X- axis represents the independent variable and Y-axis
represents the dependent variable. After observing how the

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dots are scattered on the graph paper, we draw a straight line in

such a way that the areas of the curve above and below the line
are approximately equal. The line so drawn clearly indicates
the tendency of the original data. Since there is subjectivity,
this method is not commonly used in practice.
Qn: From the following data, draw a regression line of Y on
X:

X 10 16 24 36 48
Y 20 12 32 40 55
Sol:

Method of Least Squares

Under method of least squares, the regression line
should be drawn in such a way that the sum of the squares of
the deviations of the actual Y-values from the computed Y-
values is the least. In other words, (y – yc)2 = minimum. The
line so fitted is called line of best fit.

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Methods of Calculating Regression Equations

The following are the two important methods for
calculating regression equations:
1. Normal equation method
2. Regression coefficient method
Normal Equation Method
The General form of regression equation is:

X on Y : X = a + bY
Y on X : Y = a + bX

For finding out the constants ‘a’ and ‘b’, we have to

develop and solve certain equations, called normal equations.
Therefore, this method is called normal equation method.
The normal equations computing ‘a’ and ‘b’ in respect
of regression equation X on Y are:

εX = Na + bεY, and
εXY = aεY + bεY2

The normal equations computing ‘a’ and ‘b’ in respect

of regression equation Y on X are:

εY = Na + bεX, and
εXY = aεX + bεX2

After computing the values of the constants ‘a’ and ‘b’,

substitute them to the respective regression equations.

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Qn: From the following data, fit the two regression equations:

x 4 5 8 2 1
y 5 6 7 3 2
Sol:
Regression Equation X on Y is:
X = a + bY
The normal equations to find the values of ‘a’ and ‘b’
are:
εX = Na + bεY, and
εXY = aεY + bεY2

Computation of Regression Equations

x y Xy x2 y2
4 5 20 16 25
5 6 30 25 36
8 7 56 64 49
2 3 6 4 9
1 2 2 1 4
2 2
εX=20 εY=23 εXY=114 εX =110 εY =123

20 = 5a + 23 b .............................. (1)
114 = 23a + 123 b .......................... (2)
(1) x 23 : 460 = 115 a + 529 b ....................... (1)
(2) X 5 : 570 = 115a + 615 b ........................ (2)
(3) -- (1) : 110 = 0 + 86 b

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86 b = 110
b = 110/86 = 1.28
Substitute b= 1.2 in equation number (1)
20 = 5a + 23 x 1.28;
20 = 5a + 29.44; 5a = 20 – 29.44; 5a = – 9.44
a = -9.44/5 = – 1.89
Substitute the values of ‘a’ and ‘b’ in regression
equation X on Y:
X = – 1.89 + 1.28y
Regression Equation Y on X is:
Y = a + bX
The normal equations are:
εY = Na + bεX, and
εXY = aεX + bεX2
23 = 5a + 20b ............................. (1)
114 = 20a + 110b ............................. (2)
(1) x 4 : 92 = 20a + 80b ............................. (1)
114 = 20a + 110b ............................. (2)
(2) – (1): 22 = 0 + 30b
30b = 22
b = 22/30 = 0.73
Substitute b=0.73 in equation (1)

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23 = 5a + 20 x 0.73; 23 = 5a + 14.6
5a = 23 – 14.6 = 8.4; a = 8.4/5 = 1.68
Substitute a = 1.68 and b = 0.73 in the general form of
Y on X
Y = 1.68 + 0.73x Regression Equation X on Y : X
= – 1.89 + 1.28y
Regression Equation X on Y : Y = 1.68 + 0.73x
Regression coefficient method
Under regression coefficient method, regression
equations are developed with the help of regression
coefficients. Since there are two regression equations, two
regression coefficients are to be computed.
The regression coefficient used to find the regression
equation X on Y is “regression Coefficient of X on Y”. It is
denoted by bxy
The regression coefficient used to find the regression
equation Y on X is “regression Coefficient of Y on X”. It is
denoted by byx
The regression Equation X on Y is:

X – X̄ = bxy (Y – Ȳ )

Where X̄ = actual mean of X variable, Ȳ = actual mean of Y

variable
bxy is computed by using any one of the following
formula:
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bxy = r . (σx/σy)
where bxy = Regression Coefficient of Regression
equation X on Y
r = Coefficient of correlation
σX = Standard deviation of series X
σy = Standard deviation of series Y
OR
bxy = εxy/εy2
where bxy = Regression Coefficient of Regression
equation X on Y
x = Deviation of X values from its actual mean
y = Deviation of X values from its actual mean
OR
nεdxdy – [(εdx) (εdy)]
bxy =
nεdy2 – (εdy)2
where bxy = Regression Coefficient of Regression
equation X on Y
dx = Deviation X values from its assumed mean
dy = Deviation Y values from its assumed mean
n = Number of paired observations
OR

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nεXY – [(εX) (εY)]

bxy =
nεY2 – (εY)2
where bxy = Regression Coefficient of Regression
equation X on Y
X = Given values of X variable
Y = Given values of Y variable
n = Number of paired observations

The regression Equation Y on X is:

Y – Ȳ = byx (X – X̄ )

Where X̄ = Actual mean of X variable, Ȳ = Actual mean of Y

variable
Byx is computed by using any one of the following
formula:
byx = r . (σy/σx)
where byx = Regression Coefficient of Regression
equation Y on X
r = Coefficient of correlation
σx = Standard deviation of series X
σy = Standard deviation of series Y
OR

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byx = εxy/εx2
where byx = Regression Coefficient of Regression
equation Y on X
x = Deviation of X values from its actual mean
y = Deviation of X values from its actual mean
OR
nεdxdy – [(εdx) (εdy)]
byx =
nεdx2 – (εdx)2
where byx = Regression Coefficient of Regression
equation Y on X
dx = Deviation X values from its assumed mean
dy = Deviation Y values from its assumed mean
n = Number of paired observations
OR

nεXY – [(εX) (εY)]

byx =
nεX2 – (εX)2
where byx = Regression Coefficient of Regression
equation Y on X
X = Given values of X variable
Y = Given values of Y variable
n = Number of paired observations

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Qn: You are given the following bivariate data:

X 7 2 1 1 2 3 2 6
Y 2 6 4 3 2 2 8 4
Using regression coefficients:
(a) Fit the regression equation of Y on X and predict Y if X = 5
(b) Fit the regression equation of X on Y and predict X if Y = 20
Sol.
The regression Equation Y on X is:

Y – Ȳ = byx (X – X̄ )

Assumed mean method is used to find byx

nεdxdy – [(εdx) (εdy)]
byx =
nεdx2 – (εdx)2
Computation of Regression Equations
dx dy
X Y dxdy dx2 dy2
(X–4) (Y–3)
7 2 3 -1 -3 9 1
2 6 -2 3 -6 4 9
1 4 -3 1 -3 9 1
1 3 -3 0 0 9 0
2 2 -2 -1 2 4 1
3 2 -1 -1 1 1 1
2 8 -2 5 -10 4 25
6 4 2 1 2 4 1
εdx = εdy = εdxdy= εdx =2
εdy2=
X=24 Y=31
-8 7 -17 44 39

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8 x -17 – (-8 x 7)
byx =
8 x 44 – (-8)2
= (-136 – -56) / (352 – 64) = -80/288 = – 0.278
X̄ = εX/n = 24/8 = 3
Ȳ = εY/n = 31/8 = 3.875
The regression Equation Y on X is:
Y – 3.875 = – 0.278 (X – 3)
Y = – 0.278 X + 0.834 + 3.875 = – 0.278 X + 4.709
Y = – 0.278 X + 4.709
If X=5, Y = (-0.278 x 5) + 4.709 = -1.39 + 4.709 = 3.319
The regression Equation X on Y is:

X – X̄ = bxy (Y – Ȳ )

nεdxdy – [(εdx) (εdy)]

bxy =
nεdy2 – (εdy)2
8 x -17 – (-8 x 7)
bxy =
8 x 39 – (7)2
= (-136 – -56) / (312 – 49) = -80/263 = – 0.3042
X̄ = εX/n = 24/8 = 3
Ȳ = εY/n = 31/8 = 3.875
The regression Equation X on Y is:

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X – 3 = – 0.3042 (Y – 3.875)
X = – 0.3042 Y + 1.179 + 3 = – 0.3042Y + 4.179
X = – 0.3042Y + 4.179
If Y=20, X = (-0.3042 x 20) + 4.179 = -6.084 + 4.179
= –1.905
Properties of Regression Coefficients
1. In a bivariate data, there will be two regression
coefficients. They are bxy and byx
2. bxy is the regression coefficient of regression equation X on
Y
3. byx is the regression coefficient of regression equation Y on
X
4. Both the regression equations will have the same signs.
5. The sign of regression coefficients and correlation
coefficient will be same.
6. The geometric mean of two regression coefficients is equal
to coefficient of correlation.
√ bxy x byx = r
7. The product of two regression coefficients is equal to
coefficient of determination.
bxy x byx = r2
8. When there is perfect correlation between X and Y, then
bxy and x byx will be reciprocals of each other.
9. When the standard deviations of both the variables are

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same, then the values of regression coefficients and

correlation coefficient will be same.
10. Both the regression coefficients will not be greater than 1.
In other words, one of them can be greater than 1; or both
of them can be less than 1.
MULTIPLE REGRESSION
In multiple regression there are more than two variables.
Here, we examine the effect of two or more xIndependent
variables on one dependent variable. Suppose there are three
variables, namely, x1, x2 and x3. Here we may find three
regression equations. They are:
1. Regression equation of x1 on x2 and x3
2. Regression equation of x2 on x1 and x3
3. Regression equation of x3 on x1 and x2
Equations of regression lines are generally termed as
equations of planes of regression. Following are the formulae
for computing the above 3 regression plane equations:
1. Regression equation of x1 on x2 and x3:
(x1 – x̄ 1) = b12.3(x2 – x̄ 2) + b13.2(x3 – x̄ 3)
2. Regression equation of x2 on x1 and x3:
(x2 – x̄ 2) = b21.3(x1 – x̄ 1) + b23.1(x3 – x̄ 3)
3. Regression equation of x3 on x1 and x2:
(x3 – x̄ 3) = b31.2(x1 – x̄ 1) + b32.1(x2 – x̄ 2)
where x̄ 1, x̄ 2 and x̄ 3 are actual means of x1, x2 and x3
respectively.

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Yule’s Notation
Yule suggested that, the above equations may be
simplified by taking (x3 – x̄ 3) = X1, (x3 – x̄ 3) = X2 and (x3 –
x̄ 3) = X3. Then the equations of planes of regression are:
1. Regression equation of x1 on x2 and x3:
X1 = b12.3 X2+ b13.2 X3
2. Regression equation of x2 on x1 and x3:
X2 = b21.3 X1+ b23.1 X3
3. Regression equation of x3 on x1 and x2:
X3 = b31.2 X1+ b32.1 X2
In the above three equations, we used six regression
coefficients. Following are the formulae for computing
regression coefficients:
b12.3 = (σ1/ σ2 ) [(r12 – r13r23)/(1– r232)]

b13.2 = (σ1/ σ3 ) [(r13 – r12r23)/(1– r232)]

b21.3 = (σ2/ σ1 ) [(r12 – r23r13)/(1– r132)]

b23.1 = (σ2/ σ3 ) [(r23 – r12r13)/(1– r132)]

b31.2 = (σ3/ σ1 ) [(r13 – r23r12)/(1– r122)]

b32.1 = (σ3/ σ2 ) [(r23 – r13r12)/(1– r122)]

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Qn: If r12 = 0.7, r31 = r23 = 0.5, σ1 = 2, σ2 = 3 and σ3 = 3,

find the equation of plane of regression x1 on x2 and x3.
Sol:
Here, means of the variables are not given, and
therefore, it is convenient to write the equations of planes of
regression using Yule’s notation.
Equation of plane of regression x1 on x2 and x3 is :
X1 = b12.3X2+ b13.2X3
b12.3 = (σ1/ σ2 ) [(r12 – r13r23)/(1– r232)]
= ( 2/3) [(0.7 – 0.5 x 0.5)/(1– 0.52)]
= (2/3) [(0.7– 0.25)/(1– 0.25)]
= (2/3) [0.45/0.75] = (2/3) (0.6) = 0.4
b13.2 = (σ1/ σ3 ) [(r13 – r12r23)/(1– r232)]
= ( 2/3) [(0.5 – 0.7 x 0.5)/(1– 0.52)]
= (2/3) [(0.5– 0.35)/(1– 0.25)]
= (2/3) [0.15/0.75] = (2/3) (0.2) = 0.133
∴ X1 = 0.4X2+ 0.133X3
Qn: In a trivariate distribution, x̄ 1 =53, x̄ 2 = 52, x̄ 3 = 51, σ1 =
3.88, σ2 = 2.97, σ3 = 2.86, r23= 0.8, r31= 0.81 and r12= 0.78.
Find the linear regression equation of x1 on x2 and x3.
Sol:
Here means of the variables are given.
∴ Regression equation of x1 on x2 and x3 is:

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(x1 – x̄ 1) = b12.3(x2 – x̄ 2) + b13.2(x3 – x̄ 3)

b12.3 = (σ1/ σ2 ) [(r12 – r13r23)/(1– r232)]
= ( 3.88/2.97) [(0.78 – 0.81 x 0.8)/(1– 0.82)]
= (3.88/2.97) [(0.78– 0.648)/(1– 0.64)]
= (3.88/2.97) [0.132/0.36] = (3.88/2.97) (0.367)
= 0.4794
b13.2 = (σ1/ σ3 ) [(r13 – r12r23)/(1– r232)]
= ( 3.88/2.86) [(0.81 – 0.78 x 0.8)/(1– 0.82)]
= (3.88/2.86) [(0.81– 0.624)/(1– 0.64)]
= (3.88/2.86) [0.186/0.36] = 1.357 x 0.517 = 0.702
∴ (x1 – 53) = 0.4794(x2 – 52) + 0.702(x3 – 51)
= 0.4794 x2 – 24.929 + 0.702 x3 – 35.8
x1 = 0.4794 x2 + 0.702 x3 – 35.8– 24.929 + 53
= 0.4794 x2 + 0.702 x3 – 7.729
∴ x1 = 0.4794 x2 + 0.702 x3 – 7.729
x1 = 0.48x2 + 0.7x3 – 7.73
Qn: In a trivariate distribution, x̄ 1 =28.02, x̄ 2 = 4.91, x̄ 3 = 594,
σ1 = 4.4, σ2 = 1.1, σ3 = 80, r23= –0.56, r31= – 0.4 and r12= 0. 8.
Estimate the value of x1 when x2 = 6 and x3 = 650.
Sol:
Here, to estimate the value of x1, we have to find the regression
equation of x1 on x2 and x3.
Regression equation of x1 on x2 and x3 is:

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(x1 – x̄ 1) = b12.3(x2 – x̄ 2) + b13.2(x3 – x̄ 3)

b12.3 = (σ1/ σ2 ) [(r12 – r13r23)/(1– r232)]
= ( 4.4/1.1) [(0. 8 – - 0.56 x -0.4)/(1– -0.562)]
= (4) [(0. 8– 0.224)/(1– 0.314)]
= 4 [0.576/0.6869] = 4 x 0.84 = 3.36
b13.2 = (σ1/ σ3 ) [(r13 – r12r23)/(1– r232)]
= ( 4.4/80) [(-0.4 – 0. 8 x -0.56)/(1– -0.562)]
= 0.055 [(-0.4 – - 0.448)/(1– 0.314)]
= 0.055 [(-0.4+ 0.448)/0.686]
= 0.055 x [0.048/0.868]
= 0.055 x 0.07 = 0.00385
∴ (x1 – 28.02) = 3.36(x2 – 4.91) + 0.00385(x3 – 594)
= 3.36 x2 – 16.498 + 0.00385 x3 – 2.287
x1 = 3.36x2 + 0.00385x3 – 16.498– 2.287 + 28.02
= 3.36 x2 + 0.00385x3 + 9.235
∴ x1 = 3.36x2 + 0.00385x3 + 9.235

REVIEW QUESTIONS:
1. What do you mean by regression analysis?
2. What are the different types of regression?
3. What do you mean by linear and non-linear regressions?
4. What do you mean by line of best fit?

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5. What are the different methods for computing regression

equations?
6. What do you mean by regression lines?
7. What are the important properties of regression
coefficients?
8. What do you mean by multiple regressions?
9. Distinguish between correlation and regression analysis.
10. What do you mean by normal equation method for
computing regression equations?
11. From the following data, fit the regression equations X on
Y and Y on X:

X 102 80 100 88 84 82 90 96 97 83 79 88
Y 100 97 98 83 84 72 84 101 102 88 84 87
Also find the value of X, if Y 90 and Y if X = 105
12. In a trivariate distribution, x̄ 1 =10, x̄ 2 = 15, x̄ 3 = 12, σ1 = 3,
σ2 = 4, σ3 = 5, r23= 0.4, r31= 0.6 and r12= 0. 7. Determine the
regression equation of X1 on X2 and X3.

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CHAPTER 4
PROBABILITY DISTRIBUTIONS
(THEORETICAL DISTRIBUTIONS)

Definition
Probability distribution (Theoretical Distribution) can
be defined as a distribution obtained for a random variable on
the basis of a mathematical model. It is obtained not on the
basis of actual observation or experiments, but on the basis of
probability law.
Random variable
Random variable is a variable who value is determined
by the outcome of a random experiment. Random variable is
also called chance variable or stochastic variable.
For example, suppose we toss a coin. Obtaining of head in this
random experiment is a random variable. Here the random
variable of “obtaining heads” can take the numerical values.
Now, we can prepare a table showing the values of the
random variable and corresponding probabilities. This is called
probability distributions or theoretical distribution.
In the above, example probability distribution is :-

Obtaining of heads (X) Probability of obtaining heads P(X)

0 ½
1 ½
∑ P (X) = 1

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Properties of Probability Distributions:

1. Every value of probability of random variable will be
greater than or equal to zero. i.e., P(X) ≤0
i.e., P(X) is always non-negative value
2. Sum of all the probability values will be 1
∑P(X) = 1
Question:
A distribution is given below. State whether this distribution is a
probability distribution.

X: 0 1 2 3 4

P(X): 0.01 0.10 0.50 0.30 0.90

Solution
Here all values of P(X) are more than zero; and sum of all
P(X) value is equal to 1
Since two conditions, namely P(X) ≤0 and ∑P(X) = 1, are
satisfied, the given distribution is a probability distribution.
MATHEMATICAL EXPECTATION (EXPECTED VALUE)
If X is a random variable assuming values x1, x2,
x3,…………,xn with corresponding probabilities P1, P2,
P3,…………,Pn, then the Expectation of X is defined as x1p1+
x2p2+ x3p3+………+ xnpn.
E(X) = ∑ [x. p(x)]

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Expected Value [ i. e, E (X) ] = ∑ [x. p(x)]

Qn:
A petrol pump proprietor sells on an average Rs.
80,000/- worth of petrol on rainy days and an average of Rs.
95.000 on clear days. Statistics from the meteorological
department show that the probability is 0.76 for clear weather
and 0.24 for rainy weather on coming Wednesday. Find the
expected value of petrol sale on coming Wednesday.
There are three alternative proposals before a business man to
start a new project:-
Proposal I: Profit of Rs. 5 lakhs with a probability of 0.6 or
a loss of Rs. 80,000 with a probability of 0.4.
Proposal II: Profit of Rs. 10 laksh with a probability of 0.4
or a loss of Rs. 2 lakhs with a probability of 0.6
Proposal III: Profit of Rs. 4.5 lakhs with a probability of 0.8
or a loss of Rs. 50,000 with a probability of 0.2
If he wants to maximize profit and minimize the loss, which
proposal he should prefer?
Sol:
Here, we should calculate the mathematical expectation of
each proposal.
Expected Value E(X) = ∑ [x. p(x)]
Expected Value of Proposal I = (500000 x 0.6) + (80000 x
0.4) = 300000 – 32,000
= Rs. 2,68,000

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Expected Value of Proposal II = (10,00.000 × 0.4) +(-

2,00.000) = 400000 - 120000
= Rs: 2,80,000.
Expected Value of Proposal III = (450000 × 0.8) + ( - 50000 x
0.2) = 360000 - 10000
= Rs: 3,50,000
Since expected value is highest in case of proposal III, the
businessman should prefer the proposal III.
Classification of Probability Distribution
Following are the different types of probability distribution:
1. Binomial Distribution
2. Poisson Distribution
3. Uniform Distribution
4. Exponential Distribution
5. Normal Distribution
REVIEW QUESTIONS:
1. Define frequency distribution.
2. Define Random Variable.
3. What are the important properties of frequency distribution?
4. What is meant by Expected Value?
5. What are the different types of probability distributions?

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CHAPTER 5
BIONOMIAL DISTRIBUTION

Meaning & Definition:

Binomial Distribution is associated with James
Bernoulli, a Swiss Mathematician. Therefore, it is also called
Bernoulli distribution. Binomial distribution is the probability
distribution expressing the probability of one set of
dichotomous alternatives, i.e., success or failure. In other
words, it is used to determine the probability of success in
experiments on which there are only two mutually exclusive
outcomes. Binomial distribution is discrete probability
distribution.
Binomial Distribution can be defined as follows: “A
random variable r is said to follow Binomial Distribution with
parameters n and p if its probability function is:

P(r) = nC r prqn-r
Where, P = probability of success in a single trial q = 1 – p
n = number of trials
r = number of success in ‘n’ trials.
Assumption of Binomial Distribution
(Situations where Binomial Distribution can be
applied)
Binomial distribution can be applied when:-
1. The random experiment has two outcomes i.e., success and

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failure.
2. The probability of success in a single trial remains constant
from trial to trial of the experiment.
3. The experiment is repeated for finite number of times.
4. The trials are independent.
Properties (Features) of Binomial Distribution
1. It is a discrete probability distribution.
2. The shape and location of Binomial distribution changes as
‘p’ changes for a given ‘n’.
3. The mode of the Binomial distribution is equal to the value
of ‘r’ which has the largest probability.
4. Mean of the Binomial distribution increases as ‘n’
increases with ‘p’ remaining constant.
5. The mean of Binomial distribution is np.
6. The Standard deviation of Binomial distribution is √npq
7. The variance of Binomial Distribution is npq
8. If ‘n’ is large and if neither ‘p’ nor ‘q’ is too close zero,
Binomial distribution may be approximated to Normal
Distribution.
9. If two independent random variables follow Binomial
distribution, their sum also follows Binomial distribution.
Qn: Six coins are tossed simultaneously. What is the
probability of obtaining 4 heads?

Sol: P(r) = nC r prqn-r

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Qn: The probability that Sachin scores a century in a cricket

match is 1/3. What is the probability that out of 5 matches, he
may score century in:
(1) Exactly 2 matches
(2) No match
Sol: Here p = 1/3 , n = 5, q = 2/3

P(r) = nC r prqn-r
(1) Probability that Sachin scores centuary in exactly 2

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matches is:
P (r = 2) = 5C2 1/32 2/35-2

= 0.329

(2) Probability that Sachin scores century in no match is:

Qn: Consider families with 4 children each. What percentage

of families would you expect to have :-
(a) Two boys and two girls
(b) At least one boy

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(c) No girls
(d) At the most two girls
(a) P( having a boy) = ½
P (having a girl) = ½
n = 4
P (getting 2 boys & 2 girls) = p (getting 2 boys)
= p (r = 2) = 4C2 (½) 2 (1/2)4-2
= 4! x (1/2)2 x (½)2
(4-2)! 2!
= 4 x 3 x (1/2)4
2
= 6 x 1/16 = 6/16 = 3/8
∴ Percentage of families with 2 boys and 2 girls =
(3/8) x 100 = 37.5 % .
(b) Probability of having at least one boy:
= p (having one boy or having 2 boys or having 3 boys or
having 4 boys)
= p (having one boy) + p (having 2 boys) + p (having 3 boys)
+ p (having 4 boys)
= p (r=1) + p (r = 2) + p(r = 3) + p (r = 4)
= 4/16 + 6/16 + 4/46 + 1/16 = 15/16
∴ Percentage of families with at least one boy =
(15/16) x 100 = 93.75 %

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(c) Probability of having no girls = Probability of having 4

boys
P (r = 4) = 4C4 (½) 4 (½) 4-4 = 1 x (½ )4 = 1/16
∴ Percentage of families with at least one boy = (1/16) x 100 =
6.25 %
(d) Probability of having at the most 2 girls = P(having 2 or 1
or 0 girls)
= P(having 2 boys or 3 boys or 4 boys)
= 11/16.
∴ Percentage of families with at least one boy = (11/16) x 100
= 68.75 %

Qn: For a binomial distribution mean = 4 and variance = 12/9.

Find n.
Sol. Mean np = 4 ……………….. (1)
Variance npq = 12/9 …………… (2)
Divide (2) by (1):
We get q = 12/9 ÷ 4 = 12/36 = 1/3
∴p = 1 - 1/3 = 2/3
∴ n x 2/3 = 4, n = 4 x 3/2 = 6
n = 6
Fitting a Binomial Distribution
Steps:
1. Find the value of n, p and q

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2. Substitute the values of n, p and q in the Binomial

Distribution function of nC r prqn-r

3. Put r = 0, 1, 2, .............................. in the function nC r prqn-r

4. Multiply each of such terms by total frequency (N) to
obtain the expected frequency.
Qn: Eight coins were tossed together for 256 times. Fit a
Binomial Distribution of getting heads. Also find mean
and standard deviation.
Sol: p (getting head in a toss) = ½ , n = 8, q = ½

Binomial Distribution function is p(r) = nC r prqn-r

Put r = 0, 1, 2, 3 ......................... 8, then are get the terms of the
Binomial Distribution.

Binomial Distribution
Expected
No. of
P(x) Frequency = P(x)
Heads (x)
x 256
8C0 (1/2)0 (1/2) 8 =
0 1
1/256
8C1 (1/2)1 (1/2) 7 =
1 8
8/256
8C2 (1/2)2 (1/2) 6 =
2 28
28/256
8C3 (1/2)3 (1/2) 5 =
3 56
56/256
8C4 (1/2)4 (1/2) 4 =
4 70
70/256

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8C5 (1/2)5 (1/2) 3 =

5 53
56/256
8C6 (1/2)6 (1/2) 2 =
6 28
28/256
8C7 (1/2)7 (1/2) 1 =
7 8
8/256
8C8 (1/2)8 (1/2) 0 =
8 1
1/256
Total 256

Mean = np = 8*1/2 = 4
S.D = √npq = √8*1/2* ½ = √2 = 1.414
REVIEW QUESTIONS:
1. Define Binomial Distribution.
2. What are the important properties of Binomial
Distribution?
3. Examine whether the following statement is true:
“ For a Binomial Distribution, mean = 10 and S D = 4”
4. For a Binomial Distribution, mean = 6 and S D = √2. Find
parameters. Write down all the terms of the distribution.
*********

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CHAPTER 6
POISSON DISTRIBUTION

Meaning and Definition

Poisson distribution is a limiting form of Binomial
Distribution. In Binomial distribution, the total number of
trials is known previously. But in certain real life situations, it
may be impossible to count the total number of times a
particular event occurs or does not occur. In such cases
Poisson distribution is more suitable.
Poison Distribution is a discrete probability
distribution. It was originated by Simeon Denis Poisson.
A random variable “r” said to follow Binomial distribution if
its probability function is:

P ( r) = e –m . mr
r!

Where r = random variable (i.e., number of success in ‘n’ trials)

e = 2.7183
m = mean of Poisson distribution.
Properties of Poisson Distribution
1. Poisson distribution is a discrete probability distribution.
2. Poisson distribution has a single parameter ‘m’. When ‘m’
is known all the terms can be found out.
3. It is a positively skewed distribution.

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4. Mean and Variance of Poisson distribution are equal to

‘m’.
5. In Poisson distribution, the number of success is relatively
small.
6. Standard deviation of Poisson distribution is √m.
Practical situations where Poisson distribution can be used
1. To count the number of telephone calls arising at a
telephone switch board in a unit of time.
2. To count the number of customers arising at the super
market in a unit of time.
3. To count the number of defects in Statistical Quality
Control.
4. To count the number of bacteria per unit.
5. To count the number of defectives in a park of
manufactured goods.
6. To count the number of persons dying due to heart attack
in a year.
7. To count the number of accidents taking place in a day on
a busy road.
Qn: A fruit seller, from his past experience, knows that 3 of
apples in each basket will be defectives. What is the
probability that exactly 4 apples will be defective in a given
basket?
Sol. m = 0.03
e –m . mr
P ( r) =
r!

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∴ P ( exactly 4 apples are defective) = (e-3 . 34) / 4!

= (0.0498 x 81) /24
= 0.16807
Qn: It is known from the past experience that in a certain
plant, there are on an average four industrial accidents
per year. Find the probability that in a given year there
will be less than four accidents. Assume Poisson
distribution.
Sol:
e –m . mr
P ( r) =
r!

m=4
∴ P ( exactly 4 apples are defective) = P (r < 4)
P (r < 4) = P (r = 0 or 1 or 2 or 3)
= P (r = 0) + P (r =1) + P (r = 2) + P (r = 3)
P (r = 0) = (e-4 . 4 0) / 0! = (0.0183 x 1) / 1 = 0.0183
P (r = 1) = (e-4 . 4 1) / 1! = (0.0183 x 4) / 1 = 0.0732
P (r = 2) = (e-4 . 4 2) / 2! = (0.0183 x 16) / 2 = 0.1464
P (r = 3) = (e-4 . 4 3) / 3! = (0.0183 x 64) / 6 = 0.1952
∴ P (r < 4) = 0.0183+ 0.0732 + 0.1464 + 0.1952 = 0.4331
Qn: Out of 500 items selected for inspection, 0.2% is found to
be defective. Find how many lots will contain exactly no
defective if there are 1000 lots.

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Sol:
e –m . mr
P ( r) =
r!

m = 500 x 0.2% = 1
∴ P (r = 0) = (e -1 10) / 0! = ( 0.3679 x 1) / 1 = 0.3679
∴ No. of lots having zero defective = 0.3679 x 1000 = 368
Qn: In a certain factory producing optical lenses, there is a
small chance of 1/500 for any one lens to be defective. The
lenses are supplied in packets of 10. Use P.D to calculate the
approximate number of packets containing no defectives, one
defective, two defectives and three defective lenses
respectively in a consignment of 20,000 packets.
Sol:

e –m . mr
P ( r) =
r!

m = 10 x 1/500 = 0.02
∴ P (r = 0) = (e-0.02 x 0.02 0 ) / 0! = (0.9802 x 1) /1 = 0.9802
∴ No. of packets containing no defective lens = 0.9802 x
20000 = 19604
P (r = 1) = (e-0.02 x 0.02 1 ) / 1! = (0.9802 x 0.02) /1 = 0.0196
∴ No. of packets containing no defective lens = 0.0196 x
20000 = 392
P (r = 2) = (e-0.02 x 0.02 2 ) / 2! = (0.9802 x 0.0004) /2
= 0.00019604

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∴ No. of packets containing no defective lens = 0.00019604 x

20000 = 4
P (r = 3) = (e-0.02 x 0.02 3 ) / 3! = (0.9802 x 0.000008) /6 =
0.0000013069
∴ No. of packets containing no defective lens =
0.0000013069 x 20000 = 0
Qn: A Systematic sample of 100 pages was taken from a
dictionary and the observed frequency distribution of
foreign words per page was found to be as follows:
No. of foreign words per page (x) : 0 1 2 3 4 5 6
Frequency (f) 4 8 2 7 1 2 7 4 11
Calculate the expected frequencies using Poisson distribution.
Sol: At first, we have to know the parameter of P.D, which is
equal to the mean of the given distribution. So find the mean of
the distribution:
Mean = (εfx) / εf

x 0 1 2 3 4 5 6
f 48 27 12 7 4 1 1 N = εf = 100
fx 0 27 24 21 16 5 6 (εfx) = 99
Mean = 99/100 = 0.99
Calculation of Expected Frequencies
Expected Frequency =
X P(x) = (e-m . mx) / x!
P(x) . N
0 (e-0.99 . 0.990)/0! =(0.3716 x1)/1 0.3716 x 100 =
= 0.3716 37.16 = 37

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1 (e-0.99 . 0.991)1! =(0.3716 x 0.3716 x 100 =

0.99)/1= 0.3679 37.16 = 37
2 (e-0.99 . 0.992)2! =(0.3716 x 0.1821 x 100 =
0.98)/2= 0.1821 18.21 = 18
3 (e-0.99 . 0.993)3! =(0.3716 x 0.0601 x 100 =
0.97)/6= 0.0601 6.01 = 6
4 (e-0.99 . 0.994)4!=(0.3716 x 0.0149 x 100 =
0.96)24= 0.0149 1.49 = 2
5 (e-0.99 . 0.995)5!=(0.3716 x 0.0029 x 100 =
0.95)120= 0.0029 0.29 = 0
6 (e-0.99 . 0.996)6!=(0.3716 x 0.0005 x 100 =
0.94)720= 0.0005 0.05 = 0
Total 100

REVIEW QUESTIONS:
1. Define Poisson distribution.
2. What are the important properties of P.D?
3. What are the situations under which P D can be applied?
4. Write down the probability function of P.D. whose mean is
2. What is its variance?
5. A machine is producing 4% defectives. What is the
probability of getting at least 4 defectives in a sample of 50
=, using (a) BD and (b) PD?
6. The following table gives the number of days in a 50 day
period during which automobile accidents occurred in a
certain part of the city. Fit a Poisson distribution to the

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data:
No. of accidents 0 1 2 3 4
No. of days 19 18 8 4 1
********

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CHAPTER 7
NORMAL DISTRIBUTION

Meaning and Definition

The normal distribution is a continuous probability
distribution. It was first developed by De-Moivre in 1733 as
limiting form of binomial distribution. Fundamental
importance of normal distribution is that many populations
seem to follow approximately a pattern of distribution as
described by normal distribution. Numerous phenomena such
as the age distribution of any species, height of adult persons,
intelligent test scores of students, etc. are considered to be
normally distributed.
Definition of Normal Distribution
A continuous random variable, ‘X’, said to follow
Normal Distribution if its probability function is:

2
1 -- ½ (x-μ)/σ
P (x) = e

√2π . σ

Properties of Normal Distribution (Normal Curve)

1. Normal distribution is a continuous distribution.
2. Normal curve is symmetrical about the mean.
3. Both sides of normal curve coincide exactly.

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4. Normal curve is a bell shaped curve.

5. Mean, Median and Mode coincide at the centre of the
curve.
6. Quantities are equi-distant from median. Q3 – Q2 = Q2 – Q1
7. Normal curve is asymptotic to the base line.
8. Total area under a normal curve is 100%.
9. The ordinate at the mean divide the whole area under a
normal curve into two equal parts. (50% on either side).
10. The height of normal curve is at its maximum at the mean.
11. The normal curve is unimodel, i.e., it has only one mode.
12. Normal curve is mesokurtic.
13. No portion of normal curve lies below the x-axis.
14. Theoretically, the range of normal curve is – ∞ to + ∞ . But
practically the range is μ - 3σ to μ + 3σ.
15. Area under the normal curve is distributed as follows:
(Area property)
(a) μ ± σ covers 68.27% area
(b) μ ± σ covers 95.45% area
(c) μ ± σ covers 99.73% area

Importance or Uses of Normal Distribution

The normal distribution is of central importance because of
the following reasons:

1. The discrete probability distributions such as Binomial

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distribution and Poisson distribution tend to normal

distribution as ‘n’ becomes large.
2. Almost all sampling distributions conform to the normal
distribution for large values of ‘n’.
3. Many tests of significance are based on the assumption that
the parent population from which samples are drawn
follows normal distribution.
4. The normal distribution has numerous mathematical
properties which make it popular and comparatively easy
to manipulate.
5. Normal distribution finds applications in Statistical Quality
Control.
6. Many distributions in social and economic data are
approximately normal. For example, birth, death, etc. are
normally distributed.
Area under Standard Normal Curve
In case of normal distribution, probability is
determined on the basis of area. But the area we have to
calculate the ordinate of z – scale.
The scale to which the standard deviation is attached is
called z-scale.
Z = (x – μ) / σ
Qn: The variable, x, follows normal distribution with mean =
45 and S.D = 10. Find the probability that x ≥ 60.
Sol: μ = 45, σ = 10, x = 60

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Z = (x – μ) / σ
Z = (60 – 45) / 10 = 15/10 = 1.5

0.4332

P (x ≥ 60) means P ( z ≥ 1.5)

= 0.5 - 0.4332 = 0.0668
P (x ≥ 60) = 0.0668
Qn: The variable, x, follows normal distribution with mean =
45 and S.D = 10. Find the probability that x ≤ 40.
Sol: μ = 45, σ = 10, x = 40
Z = (x – μ) / σ
Z = (40 – 45) / 10 = -5/10 = -- 0.5

0.1915

P (x ≤ 40) means P ( z ≥ - 0.5)

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= 0.5 - 0.1915 = 0.3085

P (x ≤ 40) = 0.3085
Qn: The variable, x, follows normal distribution with mean =
45 and S.D = 10. Find the probability that 40 ≤ x ≤ 56.
Sol: μ = 45, σ = 10, x1 = 40, x2 = 56
Z = (x – μ) / σ
When x = 40, Z = (40 -- 45) / 10 = -5 / 10 = - 0.5
When x = 56, Z = (56 -- 45) / 10 = 11 / 10 = 1.1

0.1915 0.3643

P (40 ≤ x ≤ 56) means P ( z – 0.5 ≤ x ≤ 1.5)

= 0.1915 + 0.3643 = 0.5558
P (40 ≤ x ≤ 56) = 0.5558
Qn: The scores of students in a test follow normal distribution with
mean = 80 and S D = 15. A sample of 1000 students has been drawn
from the population. Find (1) probability that a randomly chosen
student has score between 85 and 95 (2) appropriate number of
students scoring less than 60.
Sol.
(1) μ = 80, σ = 15, x1 = 85, x2 = 95

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Z = (x – μ) / σ
When x = 85, Z = (85 – 80) / 15 = 5/15 = 0.333
When x = 95, Z = (95 – 80) / 15 = 15/15 = 1

0.1293 0.212

∴ P (85 ≤ x ≤ 95) = P (0.333 ≤ z ≤ 1) = 0.3413 – 0.1293 = 0.212

Probability that a student scores between 85 and 95 = 0.212
(2) P (Less than 60):
When x = 60,
Z = (x – μ)/σ = (60 -- 80)/15 = -20/15 = - 1. 333

0.0918 0.4082

P(x < 60) = P(z < -1.333) = 0.5 -- 0.4082 = 0.0918

∴ Number of students scoring less than 60 = 0.0918 x 1000 = 91.8
= 92 students

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Computation of Z-value when Area is known

Qn: In a competitive examination, 5000 candidates have
appeared. Their average mark was 62 and S.D was 12. If there
are only 100 vacancies, find the minimum marks that one
should score in order to get selection.
Sol: = 62, σ = 12
Number of vacancies = 100
Percentage of vacancies to the total number of candidates =
(100/5000) x 100 = 2% = 0.02
Area corresponds to the students who will get selection is
shown in the following normal curve:

0.02
Therefore, the area to the left of the above area of 0.02 is:
Z = (40 – 45) / 10 = -5/10 = -- 0.5

0.48

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Locate the area of 0.48 in the table and find the Z – value
corresponds to it.
The table shows the area nearest to 0.48 is 0.4798, and the
corresponding z-value is 2.05
Z = 2.05
(x – μ)/σ = 2.05
(x -- 62)/12 = 2.05, x – 62 = 2.05 x 12
x -- 62 = 24.6, ∴ x = 24.6 + 62 = 86.6
∴ The minimum marks one should score to get section
= 86.6 marks
Construction of Normal Distribution
Procedure:
1. Find the mean and S.D of the given distribution and take
them as μ and σ (parameters) of the normal distribution.
2. Take the lower limit of each class as the x values.
3. Calculate the z-value corresponding to each x-value by
using formulae z = (x—μ)/σ. Z-value of first and last
values need not be computed.
4. Find the area corresponds to z-value from the standard
normal distribution table. The area corresponds to the first
and last z-values will be 0.5.
5. Find the area of each class using the area (probability) of
respective class limits. (Take the difference in case of same
signs; and take the total in case of opposite signs)

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6. Multiply tye area of ech class by the total frequency to the

frequency of the class.
The new frequency distribution with theoretical
frequencies will be a normal approximation to the given
frequency distribution.
Qn: Fit a normal distribution to the following data:

X 10-20 20-30 30-40 40-50 50-60 60-70 70-80

f 4 22 48 66 40 16 4
Sol:
Computation of Mean and Standard deviation
Mid d
Class F d’ fd’ d’2 fd’2
point (m) (m-35)
10-20 15 4 -20 -2 -8 4 16
20-30 25 22 -10 -1 -22 1 22
30-40 35 48 0 0 0 0 0
40-50 45 66 10 1 66 1 66
50-60 55 40 20 2 80 4 160
60-70 65 16 30 3 48 9 144
70-80 75 4 40 4 16 16 64
200 180 472

x̄ = A + [(εfd’)/N] x C, x̄ = 35 + [(180/200)x10],
= 35+9 = 44
S. D = √(εfd’2 /N) - [(εfd’)/N]2 x 10 = √1.55 x 10 = 12.45
∴ μ = 44 and σ = 12.45

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Computation of Expected Frequencies

Lower Area of Expected
Z= (x—μ)/σ Area
limit class Frequency
10 -2.73 0.5000 0.0268 5
20 -1.93 0.4732 0.1046 21
30 -1.12 0.3686 0.2431 49
40 -0.32 0.1255 0.3099 62
50 0.48 0.1884 0.2171 43
60 1.29 0.4015 0.0802 16
70 2.09 0.4817 0.0183 4
80 2.89 0.5000
Total 200

Review Questions:
1. Define normal distribution.
2. What are the important properties of normal distribution?
3. Explain the importance of normal distribution.
4. Explain the procedure for construction of normal
distribution.
5. If x follows a normal distribution with mean 12 and
variance 16, find P(x≥20).
6. The weekly wages of 1000 workers are normally
distributed with mean of 70 and S.D of 5. Estimate the
number of workers whose wages lie between 69 and 72.
7. In an aptitude test administered to 900 students, the mean
score is 50 and S.D is 20. Find the number of students

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securing scores (a) between 30 and 70 (b) exceeding 65.

Find the value of the score exceeded by the top 90
students.
8. Construct a normal distribution to the following data of
marks obtained by 100 students:

Marks 60-62 63-65 66-68 69-71 72-74

No. of Students 5 18 42 27 8

*********

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CHAPTER 8
EXPONENTIAL DISTRIBUTION

Definition of Exponential Distribution

A continuous random variable, x, follows random
variable if its probability density function is :

f (x) = λ e -λx for x > 0 and λ > 0

Parameter of Exponential Distribution

The single parameter of exponential distribution is λ. If
we know λ, we can find out all the terms.
Properties of Exponential Distribution
1. The mean of Exponential distribution is = 1/λ
2. The variance of Exponential distribution is = 1/λ2
3. The first four moments of Exponential distribution are:
μ 1 = 1/λ , μ 2 = 1/λ2 , μ 3 = 2/λ3 , μ 4 = 9/λ4
4. The measure of Skewness of Exponential distribution is =
√β1 = 2
5. The measure of Kurtosis of Exponential distribution is =
β2 = 9
6. The Median of Exponential distribution is = 1/λ

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REVIEW QUESTIONS:
1. Define exponential distribution.
2. Write down the first four moments of exponential
distribution.
3. What is the skewness of exponential distribution?
4. What about the median of an exponential distribution?
5. What are the important properties of exponential
distribution?

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CHAPTER 9
UNIFORM DISTRIBUTION
Definition of Uniform Distribution
A discrete random variable, x, follows uniform
distribution if its probability density function is :

f (x) = 1/n for x = x1, x2, x3, .........................., xn

For example, when a die is thrown, let x stands for the

numbers obtained.
Then f (x) = 1/6 for x = 1, 2, 3, 4, 5, 6.
Mean of Uniform Distribution
Mean of Uniform Distribution = ε x/n
Variance of Uniform Distribution
Variance of Uniform Distribution = [ε x2/n] – [ε x/n]2
REVIEW QUESTIONS:
1. Define Uniform distribution.
2. What about the mean of uniform distribution?
3. What about the variance of uniform distribution?

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CHAPTER 10
STATISTICAL INFERENCE
Basic Concepts
Population: In statistics, ‘Population’ refers to collection of all
individuals or objects or items or things under consideration.
Finite Population: If a population contains a finite number of
objects, it is called finite population. Eg: Students in a college.
Infinite Population: If a population contains a infinite number
of objects, it is called infinite population. Eg: Stars in the sky.
Sample: A sample is a representative part of the population.
Sample size: Number of units in a sample group is called
sample size. If sample size is too small, it may not represent
the population. If it is very large, it may require more time and
money for investigation. Hence, the size of a sample should be
optimum.
Large Sample: If the size of a sample exceeds thirty, it is
called as large sample.
Small Sample: If the size of a sample does not exceed thirty, it
is called as small sample.
Parameter: It is a statistical measure derived from population
elements. If the arithmetic mean is computed from all the
elements of a population, it is a population parameter. Here it
is called population mean. Population mean is denoted by the
symbol μ. Population standard deviation is denoted by σ.

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Statistic: It is a statistical measure derived from sample

elements. If the arithmetic mean is computed from the
elements of a sample group, it is a sample statistic. Here it s
called sample mean. Sample mean is denoted by the symbol x̄ .
Sample standard deviation is denoted by ‘s’.
Statistical inference
Statistical inference refers to the process of selecting samples
and using sample statistic to draw inference or conclusion
about the population parameter or population distribution. The
two main branches of statistical inference are:
(a) Testing of Hypothesis
(b) Estimation
Testing of Hypothesis
Testing of hypothesis is the process under which a
statistical hypothesis about a population is formulated and its
validity is tested on the basis of a random sample drawn from
that population. For testing the validity of a hypothesis, a
number of tests are used. All these tests can be classified into
two categories, namely (i) parametric tests and (ii) non-
parametric tests. Z-test, t-test, Chi-square test, F-test, etc. are
commonly used statistical tests.
Procedure for testing hypothesis
(1) Set up null hypothesis and alternative hypothesis
(2) Decide the test statistic (statistical test) applicable for
testing hypothesis.

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(3) Apply the appropriate formulae for computing the value of

the test statistic.
(4) Specify the level of significance. If nothing is mentioned
about the level of significance, take 5% level o
significance.
(5) Fix the degree of freedom
(6) Locate the table value (critical value) of the test statistic at
specified level of significance
(7) Compare the calculated value of the test statistic with the
corresponding table value (critical value) and decide
whether to accept or reject the null hypothesis. If calculated
value of the test statistic is numerically less than the table
value, the null hypothesis is accepted. If calculated value of
the test statistic is numerically more than the table value,
the null hypothesis is rejected.
Hypothesis
Hypothesis is a tentative solution or assumption or
proposition about the parameter or nature of the population. It
is a logically drawn conclusion about the population.
Null Hypothesis
This is the original hypothesis. A null hypothesis is a
hypothesis which formulated for the purpose of rejection. The
term “null” refers to ‘nil’ or ‘no’ or ‘amounting to nothing’.
This hypothesis is generally set up as there is no significant
difference between the sample statistic and population
parameter. A null hypothesis is denoted by H0

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Alternative Hypothesis
Any hypothesis other than null hypothesis is called
alternative hypothesis. It is the hypothesis which is accepted
when the null hypothesis is rejected. An alternative hypothesis
is denoted by H1 or Ha
Sampling Distribution
Sampling distribution is a distribution of sample
statistic derived from various samples drawn from the same
population. Since sample statistic is a random variable,
sampling distribution is a probability distribution.
Standard Error
Standard Error (SE) of a statistic is the standard
deviation of the sampling distribution of that statistic. For
example, the Standard deviation of the sampling distribution of
the sample mean is σ/√n, where σ = population S.D. and n =
sample size. Therefore the Standard Error (SE) of sampling
distribution of mean is σ/√n .
Uses of Standard Error
(1) Standard Error is used for testing a given hypothesis.
(2) Standard Error gives an idea about the reliability of a
sample. The reciprocal of Standard Error is a measure
of reliability of the sample.
(3) Standard Error can be used to determine the confidence
limits for population values like mean, proportion and
standard deviation.

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Errors in Testing of Hypotheses

In any test of hypothesis is the decision is to accept or
to reject a null hypothesis. The decision is based on the
information supplied by the sample data. The four possibilities
of the decision are:
(1) Accepting a null hypothesis when it is true
(2) Rejecting a null hypothesis when it is false
(3) Rejecting a null hypothesis when it is true
(4) Accepting a null hypothesis when it is false
It is clear that the possibilities (1) and (2) are correct
decisions. But the possibilities (3) and (4) are errors.
Type I Error:
The error which is committed by rejecting the null
hypothesis even when it is true is called Type I error. It is
denoted by alpha (α).
Type II Error:
The error which is committed by accepting the null
hypothesis even when it is wrong is called Type II error. It is
denoted by beta (β).
When we try to reduce the possibility for one error, the
possibility for the other will be increased. Therefore, a
compromise of these two is to be ensured. Type II error is
more dangerous than Type I error.
Power of a Test
Probability for rejecting the null hypothesis when the
alternative hypothesis is true is called power of a test.

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Power of a test = 1 – P(Type II Error)

Level of Confidence
Level of confidence is the probability of accepting a
true null hypothesis.
Level of Confidence = 1 – Level of significance.
If Level of significance is 5%, Level of Confidence = 95%.
Level of Significance
Level of Significance is the probability of rejecting a
true null hypothesis. Level of Significance is denoted by alpha
(α). If nothing is mentioned about the level of significance, it is
taken as 5%.
Level of Significance (α) = 1 – level of acceptance
Acceptance Region
The area under the normal curve which represents the
acceptance of a null hypothesis (i.e; level of confidence) is
called the Acceptance Region or Acceptance Area.
Acceptance Region = 100% -- Rejection Region
Rejection Region (Critical Region)
The area under the normal curve which represents the
rejection of a null hypothesis (i.e; level of significance) is
called the Rejection Region or Critical Region.
Rejection Region = 100% -- Acceptance region
Degree of Freedom
Degree of freedom is defines as the number of

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independent observations which is obtained by subtracting the

number of constraints from the total number of observations.
Degree of freedom (d.f) = Total No. observations – No. of
constraints.
Two-tailed Test
A two tailed test is one in which we reject the null
hypothesis if the computed value of the test statistic is
significantly greater than or lower than the critical value (table
value) of the test statistic. Thus in two tailed tests the critical
region is represented by both tails. If we test the hypothesis at
10% level of significance, the size of the acceptance region is
90% and the size of the rejection region is 10% on both sises
together.

Rejection Region
One-tailed Test
One tailed test is one in which the rejection region is
located in only one tail of the normal curve. It may be at left
tail or right tail, depending on the alternative hypothesis. If the
alternative hypothesis is with ‘<’ (less than) sign, the rejection
region is placed on the left tail, and the test is called left-tailed
test. If the alternative hypothesis is with ‘>’ (more than) sign,
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the rejection region is placed on the right tail, and the test is
called right-tailed test.

Rejection Region
(Left-tailed Test)

Rejection Region
(Rigjt-tailed Test)

Critical Value (Table Value)

The critical value is the value of the test statistic which
separates the rejection region from the acceptance region. It
depends on the level of significance and degree of freedom.
When the calculated value of the test statistic is numerically
less than the critical value, the null hypothesis is accepted.
When the calculated value of the test statistic is numerically
more than the critical value, the null hypothesis is accepted.
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Parametric Tests
When testing of hypothesis is done, if some
assumptions are made about the nature of population
distribution, then the test statistic applied there is called
parametric test. There are number of parametric tests. Eg: t-
test, Z test, F test, etc.
Non-Parametric Tests
When testing of hypothesis is done, if no assumptions
are made about the nature of population distribution, then the
test statistic applied there is called non-parametric test. There
are number of non-parametric tests. Eg: Chi-square Test, Sign
tests, Signed Rank Tests, Rank Sum Tests, Run Test,
Kolmogrov Smirnov Test, etc. Since, no assumptions are made
about the nature of population, non-parametric tests are also
called distribution-free tests.
TESTING OF GIVEN POPULATION MEAN
This testing of hypothesis is used to test whether the given
population mean is true or not. In other words, it is used to
test whether there is significant difference between sample
mean and population mean.
Procedure:
1. Set up H0 and H1
H0 : There is no significant difference between sample mean
and population mean
( i.e; μ = μ0)
H1 : There is significant difference between sample mean and

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population mean
( i.e; μ ≠ μ0)
2. Decide the test statistic:
The test statistic applicable here is Z-test or t-test.
If population S.D.(i.e; σ) is known, apply Z-test
If population S.D.(i.e; σ) is unknown but sample is large, apply
Z-test
If population S.D.(i.e; σ) is unknown but sample is small,
apply t-test
3. Apply the appropriate formula for computing the value of
the test statistic:
Z / t = Difference/Standard Error
Difference = Difference between sample mean and the given
population mean
Standard Error = σ / √n ( If population S.D is known)
Standard Error = s / √n ( If population S.D is unknown, but
sample is large)
Standard Error = s / √n-1 ( If population S.D is unknown and
sample is small)
Where σ = population S.D, s = sample S.D, n = sample size
4. Specify the level of significance. If nothing is mentioned
about the level of significance, take 5%.
5. Fix the degree of freedom:
For Z-test, d.f = infinity; For t-test, d.f = n-1

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6. Locate the table value (critical value) of the test statistic at

specified level of significance and fixed degree of freedom.
7. Compare the calculated value of test statistic with the table
value and decide whether to accept or reject the null
hypothesis. If calculated value of the test statistic is
numerically less than the table value, the null hypothesis is
accepted. If calculated value of the test statistic is
numerically more than the table value, the null hypothesis
is rejected.
Qn: The mean life of random sample of 100 tyres is 15269
km. The manufacturer claims that the average life of tyres
manufactured by the company is 15200 km with SD of 1248
km. Test the validity of company’s claim.
Sol:
H0 : There is no significant difference between sample mean
and population mean
( i.e; μ = 15200)
H1 : There is significant difference between sample mean and
population mean
( i.e; μ ≠ 15200)
Since population S.D is known, the test statistic applicable
here is Z-test
Z = D/SE
D = x̄ - μ = 15269-15200 = 69
S E = σ/√n = 1248/√100 = 1248/10 = 124.8

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Z = 69/124.8 = 0.553
Level of significance = 5%
Degree of freedom = infinity (population S D is known)
Table value (Critical value) at 5 % level of significance and
infinity degree of freedom is 1.96
Since calculated value of Z is less than the critical value, H0 is
accepted. That is, there is no significant difference between
sample mean and population mean. μ = 15200. So, we may
conclude that the claim of the company is valid.
Qn: A sample of size 400 was drawn and the sample mean
was found to be 99. Test whether this sample could have come
from the normal population with mean = 100 ad S.D = 8 at 5%
level of significance.
Sol:
H0 : There is no significant difference between sample
mean and population mean
( i.e; μ = 100)
H1 : There is significant difference between sample mean and
population mean
( i.e; μ ≠ 100)
Since population S.D is known, the test statistic applicable
here is Z-test
Z = D/SE
D = x̄ - μ = 100 -- 99 = 1
S E = σ/√n = 8/√400 = 8/20 = 0.4
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Z = 1/0.4 = 2.5
Level of significance = 5%
Degree of freedom = infinity (population S D is known)
Table value (Critical value) at 5 % level of significance and
infinity degree of freedom is 1.96
Since calculated value of Z is more than the critical value, H0
is rejected. H1 is accepted. That is, there is significant
difference between sample mean and population mean. So, we
may conclude that μ ≠ 100
Qn: A random sample of 200 bottles of talcum powder gave
an average weight of
49.5 gram with a S.D of 2.1 gram. Do we accept the
hypothesis of weight per bottle is 50 gram at 1% level of
significance?
Sol:
H0 : There is no significant difference between sample mean
and population mean
( i.e; μ = 50)
H1 : There is significant difference between sample mean and
population mean
( i.e; μ ≠ 50)
Since sample is large, the test statistic applicable here is Z-test
Z = D/SE
D = x̄ - μ = 50 – 49.5 = 0.5

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S E = s/√n = 2.1/√200 = 2.1/14.142 = 0.148

Z = 0.5/0.148 = 3.378 (Calculated value)
Level of significance = 1%
Degree of freedom = infinity (population is large)
Table value (Critical value) at 1 % level of significance and
infinity degree of freedom is 2.58
Since calculated value of Z is more than the critical value, H0
is rejected. H1 is accepted. That is, there is significant
difference between sample mean and population mean. So, we
may conclude that μ ≠ 50 gram
Qn: The average life of 26 bulbs were found to be 1200 hours
with a S.D of 150 hours. Test whether these bubs could be
considered as a random sample from a normal population with
mean 1300 hours.
Sol: H0 : There is no significant difference between
sample mean and population mean
( i.e; μ = 1300)
H1 : There is significant difference between sample mean and
population mean
( i.e; μ ≠ 1300)
Since sample is small, the test statistic applicable here is t-test
t = D/SE
D = x̄ - μ = 1300 – 1200 = 100
S E = s/√n-1 = 150/√26-1 = 150/5 = 30

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t = 100/30 = 3.333 (Calculated value)

Level of significance = 5%
Degree of freedom = 26-1 = 25 (sample is small)
Table value (Critical value) at 5% level of significance and 25
degree of freedom is 2.06
Since calculated value of Z is more than the critical
value, H0 is rejected. H1 is accepted. That is, there is
significant difference between sample mean and population
mean. So, we may conclude that the bulbs could not e drawn
from the normal population with mean 1300 hours ( i.e; μ ≠
1300).
Qn: A typist claims that he can type at a speed of more than
120 words per minute. Of the 12 tests given to him, he could
perform an average of 135 words with a S.D of 40. Is his claim
valid at 1% level of significance?
Sol: H0 : There is no significant difference between
sample mean and population mean
( i.e; μ = 120)
H1 : There is significant difference between sample mean and
population mean
( i.e; μ > 120)
Here, the test One-tailed test ( Right tailed test)
Since sample is small, the test statistic applicable here is t-test
t = D/SE
D = x̄ - μ = 135 – 120 = 15

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S E = s/√n-1 = 40/√12-1 = 40/√11 = 40/3.32 = 12.05

t = 15/12.05 = 1.245 (Calculated value)
Level of significance = 1%
Degree of freedom = 12-1 = 11 (sample is small)
Table value (Critical value) at 1% level of significance
and 11 degree of freedom is 2.718
Since calculated value of t is less than the critical value, H0 is
accepted. μ = 120. That is, there is no significant difference
between sample mean and population mean. So, we may
conclude that the claim of the typist that he can type at a speed
of more than 120 words is not valid.
TESTING OF SIGNIFICANCE OF THE DIFFERENCE
BETWEEN TWO SAMPLE MEANS
This testing of hypothesis is used to test whether the
difference between two sample means are significant or not. If
the difference is not significant, they are treated as equal; or we
may think that the two samples are drawn from the same
population.
Procedure:
1. Set up H0 and H1
H0 : There is no significant difference between two sample
means( i.e; μ1 = μ2)
H1 : is no significant difference between two sample means(
i.e; μ1 ≠ μ2)

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2. Decide the test statistic:

The test statistic applicable here is Z-test or t-test.
If population S.D.(i.e; σ) is known, apply Z-test
If population S.D.(i.e; σ) is unknown but sample is large, apply
Z-test
If population S.D.(i.e; σ) is unknown but sample is small,
apply t-test
3. Apply the appropriate formula for computing the value
of the test statistic:
Z / t = Difference/Standard Error
Difference = Difference between two sample means
Standard Error = √ (σ12 / n1) + (σ22 / n2) (If population
S.Ds are known)
Standard Error = √ (s12 / n1) + (s22 / n2) (If population S.D is
unknown, but samples are large)
Standard Error = √(n1s12+n2s22)/n1+n2 -2 x (1/n1 + 1/n2)
(If population S.Ds are unknown, and samples are small)
[Where σ 1= population S.D of sample 1, s1 = sample S.D of
sample1, n1 = sample size of sample 1; σ 2= population S.D
of sample 2, s2 = sample S.D of sample2, n2 = sample size of
sample 2]
4. Specify the level of significance. If nothing is
mentioned about the level of significance, take 5%.
5. Fix the degree of freedom:

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For Z-test, d.f = infinity; For t-test, d.f = n + n2 -1

6. Locate the table value (critical value) of the test
statistic at specified level of significance and fixed degree of
freedom.
7. Compare the calculated value of test statistic with the
table value and decide whether to accept or reject the null
hypothesis. If calculated value of the test statistic is
numerically less than the table value, the null hypothesis is
accepted. If calculated value of the test statistic is numerically
more than the table value, the null hypothesis is rejected.
Qn: The mean yield of wheat from District I was 210Kg per
acre from a sample of 100 plots. In another District II, the
mean yield was 200 Kg per acre from a sample of 150 plots.
Assuming that the S.D of yield of the entire State was 11 Kg,
test whether there is any significant difference between the
mean yields of the crop in the two districts.
Sol:

District I District II
n1 = 100 n2 = 150
x̄ 1 = 210 x̄ 2 = 200
σ 1 = 11 σ 2 = 11

H0 : There is no significant difference between two sample

means( i.e; μ1 = μ2)
H1 : is no significant difference between two sample means(
i.e; μ1 ≠ μ2)

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Since population S.Ds are given, the test statistic applicable

here is Z-test.
Z = Difference / S E
Difference = x̄ 1 – x̄ 2 = 210 – 200 = 10
SE = √(σ12 / n1) + (σ22 / n2) (Population S.Ds are
known. For the entire State SD is 11).

= √(112 / 100) + (112 / 150) = √1.21+0.81 = √2.02 = 1.42

Z = 10/1.42 = 7.04
Level of significance = 5%
Degree of freedom = infinity
Table value of Z at 5% level of significance and infinity
degrees of freedom = 1.96
Since the calculated value of Z is more than the table value, H0
is rejected. We accept H1. So we may conclude that there is
significant difference in the mean yields of crops in two
districts.
Qn: Electric bulbs manufactured by X Ltd. and Y Ltd. gave
the following results:

Particulars X Ltd Y Ltd

Number of bulbs used 100 100
Mean Life in Hours 1300 1248
Standard Deviation 82 93

State whether there is any significant difference in the life of

bulbs of the two makes.

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Sol: H0 : There is no significant difference between two

sample means( i.e; μ1 = μ2)
H1 : is no significant difference between two sample
means( i.e; μ1 ≠ μ2)
Since population S.Ds are unknown but samples are
large, the test statistic applicable here is Z-test.
Z = Difference / S E
Difference = x̄ 1 – x̄ 2 = 1300 – 1248 = 52
SE = √(s12 / n1) + (s22 / n2) (Population S.Ds are unknown)
= √(822 / 100) + (932 / 100) = √67.24+86.49
= √153.73 = 12.4
Z = 52/12.4 = 4.19
Level of significance = 5%
Degree of freedom = infinity
Table value of Z at 5% level of significance and infinity
degrees of freedom = 1.96
Since the calculated value of Z is more than the table value, H0
is rejected. We accept H1. (i.e; μ1 ≠ μ2). So we may conclude
that there is significant difference in the mean life of bulbs of
the two makes.
Qn: Two batches of same product are tested for their mean
life. Assuming that lives of the two products follow a normal
distribution, test the hypothesis that the mean life is same for
both the batches, given the following information:

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Batch Sample Size Mean life in hours S.D

A 10 750 12
B 8 820 14
Sol: H0 : There is no significant difference between two
sample means( i.e; μ1 = μ2)
H1 : is no significant difference between two sample
means( i.e; μ1 ≠ μ2)
Since population S.Ds are unknown and samples are
small, the test statistic applicable here is t-test.
t = Difference / S E
Difference = x̄ 1 – x̄ 2 = 820 – 750 = 70
2 2
SE = √(n1s1 +n2s2 )/n1+n2 -2 x (1/n1 + 1/n2)
(Population S.Ds are unknown and samples are small)
= √(10*122)+ (8*142) / 10+8-2) x (1/10 + 1/8)
= √3008/16 x 0.225 = √42.3 = 6.5
t = 70/6.5 = 10.77 (Calculated Value)
Level of significance = 5%
Degree of freedom = 10+8-2 = 16
Table value of t at 5% level of significance and 16 degrees of
freedom = 2.12
Since the calculated value of t is more than the table value, H0
is rejected. We accept H1. (i.e; μ1 ≠ μ2). So we may conclude
that the lives of products produced in two batches are not
same.

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Qn: In a test given to 2 groups of students, the marks obtained

were as follows:

Group I 18 20 36 50 49 36 34 49 41
Group II 29 26 28 35 30 44 46
Test whether the group means are equal.
Sol: Here we have to find the Means and S.Ds of the two
samples.

Computation of Mean and S D of two Groups

Group I Group II
X X -- x̄ (X -- x̄ )
2 X X -- x̄ (X -- x̄ )2
18 -19 361 29 -5 25
20 -17 289 26 -8 64
36 -1 1 28 -6 36
50 13 169 35 1 1
49 12 144 30 -4 16
36 -1 1 44 10 100
34 -3 9 46 12 144
49 12 144
41 4 16
εX= 1134 ε X = 238 386
333

Mean of Group I = 333/9 = 37

Mean of Group II = 238/7 = 34

S.D of Group I = √ ε (X -- x̄ )2 / n
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S.D of Group I = √ ε (X -- x̄ )2 / n
= √1134/9 = √126 = √386/7 = √55.14
H0 : There is no significant difference between two
sample means( i.e; μ1 = μ2)
H1 : is no significant difference between two sample
means( i.e; μ1 ≠ μ2)
Since population S.Ds are unknown and samples are
small, the test statistic applicable here is t-test.
t = Difference / S E
Difference = x̄ 1 – x̄ 2 = 37 – 34 = 3
SE = √(n1s12+n2s22)/n1+n2 -2 x (1/n1 + 1/n2)
(Population S.Ds are unknown and samples are small)
= √(9*126)+ (7*55.14) / 9+7-2) x (1/9 + 1/7)
= √1510.98/14 x 0.254 = √27.41 = 5.24
t = 3/5.24 = 0.573 (Calculated Value)
Level of significance = 5%
Degree of freedom = 9+7-2 = 14
Table value of t at 5% level of significance and 14 degrees of
freedom = 2.145
Since the calculated value of t is less than the table value, H0 is
accepted. (i.e; μ1 = μ2). So we may conclude that the
difference in the group means are not significant. They are
equal.

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TESTING OF SIGNIFICANCE OF THE DIFFERENCE

IN CASE OF DEPENDENT SAMPLES (PAIRED
OBSERVATIONS)
Here the observations in one sample are some way related to
the observations in the other.
Therefore they are called paired observations. The test statistic
applicable here is t-test.
Procedure:
1. Set up H0 and H1
H0 : There is no significant difference between samples
H1 : There is significant difference between samples
2. Decide test statistic:
Since the paired data are comparatively less, the test
statistic applicable here is always t-test.
3. Apply the appropriate formula for computing the value
of the test statistic.

t = d/SE

Where:

Arithmetic mean of the difference between the values

d
SE S/√n-1 [s = standard deviation of the difference]

4. Specify the level of significance. Take 5%, if nothing is

mentioned in the question.

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5. Fix the degree of freedom. d.f = n – 1 , where n= Number

of pairs of observations.
6. Locate the critical value of the test statistic (t-test) at
specified level of significance and fixed degree of freedom.
7. Compare the calculated value of test statistic with the table
value and decide whether to accept or reject the null
hypothesis. If calculated value of the test statistic is
numerically less than the table value, the null hypothesis is
accepted. If calculated value of the test statistic is
numerically more than the table value, the null hypothesis
is rejected.
Qn: The marks scored by 10 students, before and after
providing special coaching, are given in the following table:

Before 67 24 57 55 63 54 56 68 33 43
After 70 38 58 58 56 67 68 72 42 38

Test whether there is any significant difference in their

performance.
Sol: H0 : There is no significant difference between samples
H1 : There is significant difference between samples
Test statistic applicable here is t-test.

t = d/SE

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Computation of men and standard deviation of the difference

between the values
Score (Before) Score (After) Difference (d) d2
67 70 3 9
24 38 14 196
57 58 1 1
55 58 3 9
63 56 -7 49
54 67 13 169
56 68 12 144
68 72 4 16
33 42 9 81
43 38 -5 25
2
εd= 47 εd = 699

Arithmetic mean of d values = 47/10 = 4.7

S D of d values = √εd2/n -- (εd/n)2 = √699/10 -- (47/10)2
= √47.81 = 6.91
SE = 6.91/√10-1 = 6.91/3 = 2.3
t = 4.7/ 2.3 = 2.04
Level of significance = 5%
Degree of freedom = 10—1 = 9
Table value (critical value) of t at 5% level of significance and
9 degree of freedom is 2.262.

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Since the calculated value of t is less than the critical value, the
null hypothesis is accepted. So, we may conclude that there is
no significant difference in the performance of the students.
TESTING OF GIVEN POPULATION
PROPORTION
This type of testing of hypothesis is used to test whether there
is any significant difference between the sample proportion
and the given population proportion.
Procedure:
1. Set up H0 and H1 :
H0 : There is no significant difference between sample
proportion and population proportion ( i.e; H0 : P = P0)
H1 : There is significant difference between sample proportion
and population proportion ( i.e; H0 : P ≠ P0)
2. Decide the test statistic:
The test statistic applicable here is Z-test
3. Apply appropriate formulae for computing the value of Z
(i.e; calculated value):
Z = Difference / S E ie; Z = ( p -- P) / S E
Where p = sample proportion, P = Population proportion
S E = √ PQ / n
4. Decide the level of significance (Take 5%, if nothing is
mentioned in the question).
5. Fix the degree of freedom ( Infinity d.f)

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6. Locate the table value of Z at specified level of

significance and fixed degree of freedom.
7. Compare the calculated value of Z with the table value and
decide whether to accept or reject the null hypothesis. If
calculated value of Z is numerically less than the table
value, the null hypothesis is accepted. If calculated value of
Z is numerically more than the table value, the null
hypothesis is rejected.
Qn: It is found that out of 500 units of a product
produced by a machine, 30 are defectives. Test whether the
machine produces 2% defective items on an average.
Sol:
H0 : There is no significant difference between sample
proportion and population proportion ( i.e; H0 : P = 0.02)
H1 : There is significant difference between sample proportion
and population proportion ( i.e; H0 : P ≠ 0.02)
Z = ( p -- P) / S E
P = 0.02, p = 30/500 = 0.06, Q = 1 – Q =1 - 0.02 = 0.98,
n = 500
S E = √ PQ / n = √ 0.02 x 0.98 / 500 = √0.0196/500
= √0.0000392 = 0.0063
∴ Z = (0.06 – 0.02) / 0.0063 = 0.04/0.0063 = 6.349
Level of significance = 5%
Degree of freedom = infinity
Table value of Z at 5% level of significance and infinity degree

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of freedom is 1.96
Since the calculated value of Z is more than the table value,
null hypothesis is rejected. We accept alternative hypothesis.
P ≠ 0.02. So, it is not possible to think that the machine
produces 2% defective items.
TESTING OF THE SIGNIFICANCE OF THE
DIFFERENCE BETWEEN TWO SAMPLE
PROPORTIONS
This testing of hypothesis is used to test whether the
difference between two sample proportions are significant or
not. If the difference is not significant, they are treated as
equal; or we may think that the two samples are drawn from
the same population.
Procedure:
1. Set up H0 and H1
H0 : There is no significant difference between two sample
proportions( i.e; p1 = p2)
H1 : is no significant difference between two sample
proportions( i.e; p1 ≠ p2)
2. Decide the test statistic:
The test statistic applicable here is Z-test.
3. Apply the appropriate formula for computing the value of
the test statistic:
Z = Difference/Standard Error
i e; Z = p1 – p2 / SE

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where p1 and p2 are the proportions of two samples

S E = √p0q0 [(1/n1) + (1/n2)] , where p0 = (n1p1 + n2p2)/(n1 +
n2), q0= 1-- p0
4. Specify the level of significance. If nothing is mentioned
about the level of significance, take 5%.
5. Fix the degree of freedom (d f = infinity)
6. Locate the table value (critical value) of the test statistic at
specified level of significance and fixed degree of freedom.
7. Compare the calculated value of test statistic with the table
value and decide whether to accept or reject the null
hypothesis. If calculated value of the test statistic is
numerically less than the table value, the null hypothesis is
accepted. If calculated value of the test statistic is
numerically more than the table value, the null hypothesis
is rejected.
Qn: In a sample of 1000 people selected from District X, 450
were regular drinkers of coffee. In another sample of 800
people drawn from District Y, 400 were regular drinkers of
coffee. Test whether there is significant difference between the
two districts, regarding the coffee drinking habit of people.
Sol:
H0 : There is no significant difference between two districts
regarding the coffee drinking habits of people ( i.e; p1 = p2)
H1 : is There is no significant difference between two districts
regarding the coffee drinking habits of people ( i.e; p1 ≠ p2)
The test statistic applicable here is Z-test.

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Z = Difference/Standard Error
i e; Z = p1 – p2 / SE
p1 = 450/1000 = 0.45, p2 = 400/800 = 0.5
S E = √p0q0 [(1/n1) + (1/n2)] , n1 = 1000 , n2 = 800
p0 = (1000 x 0.45 + 800 x 0.5)/(1000 + 800) = 850/1800
= 0.472
q0= 1— 0.472 = 0.528
∴ SE = √0.472 x 0.528 [(1/1000) + (1/800)] = √0.249 (0.001
+ 0.00125)
= √0.249 x 0.00225 = √0.00056 = 0.0237
∴ Z = (0.5 – 0.45) / 0.0237 = 0.05/0.0237 = 2.11
Level of significance = 5%.
Fix the degree of freedom = infinity
Table value (critical value) of Z at 5% level of significance and
infinity fixed degree of freedom is 1.96
Since the calculated value of Z is more than the table value,
null hypothesis is rejected. Alternative hypothesis is accepted.
p1 ≠ p2. So, we may conclude that there is significant difference
between the two districts regarding the coffee drinking habits
of people.
REVIEW QUESTIONS:
1. What do you mean by inferential analysis?
2. What do you understand by sampling distributions?
3. What are the two branches of inferential analysis?

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4. What do you mean by hypothesis?

5. What is the difference between parameter and statistic?
6. What do you mean by Standard Error? What are its uses?
7. What are the differences between standard deviation and
standard error?
8. What do you mean by parametric tests?
9. What do you mean by non-parametric tests?
10. What is type I error?
11. What is Type II error?
12. What do you mean by power of a test
13. What is meant by critical region and acceptance region?
14. What is one tailed test?
15. What is two-tailed test?
16. What do you mean by dependent sample?
17. Explain the general procedure for testing of hypothesis.
18. A random sample of 10 bottles of filled in by an automatic
machine gave the following weights in kilogram:
2.05, 2.01, 2.04, 1.96, 2.01, 1.98, 1.99, 1.98, 2.04, 2.02
Can we accept at 5% level of significance, the claim that the
average weight of the tin is 2 Kg.
19. From the following data, test whether there is significant
difference between two samples:

Sample I 25 32 30 32 24 14 32
Sample 24 34 30 22 42 31 40 35 32 30
II

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20. In a sample of 600 people in Bihar 336 are coffee drinkers and
the rest are tea drinkers. Can we assume that both coffee and tea
are equally popular in the State at 1% level of significance?
21. In a sample of 900 men from a certain large city 675 were found
to be smokers. In a random sample of 1350 men from another
large city 675 were found to be smokers. Do the data indicate
that the cities are significantly different in respect of the
prevalence of smoking among men?
22. A sample of size 50 has S.D of 10.5. Can you contradict the
hypothesis that the population S.D. is 12?

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CHAPTER 11
CHI-SQUARE TEST

What is Chi-Square Value?

The word “Chi-square” is denoted by the symbol, χ2.
Chi-square is a value (quantity) which describes the magnitude
of the difference between observed frequencies and expected
frequencies.
Chi-Square Test
Chi-square test is a statistical test used to test the
significance of the difference between observed frequencies
and the corresponding theoretical frequencies (expected
frequencies) of a distribution, without any assumption about
the nature of distribution of the population. This is the most
popular widely used non-parametric test. It was developed by
Prof. Karl Pearson.
Uses of Chi-Square Test (Applications of Chi-Square Test)
Chi-Square test is mainly used for the following purposes:
1. Used to test goodness of fit: As a test for goodness of fit,
χ2 test can be used to test how far the theoretical
frequencies fit to the observed frequencies.
2. Used to test independence: As a test of independence, χ2
test is used to test whether the attributes of a sample are
associated or not.

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3. Used to test homogeneity: As a test of homogeneity, χ2

test is used to test whether different samples are
homogeneous as far as a particular attribute is concerned.
4. Used to test population variance: Here, Chi-square test is
used for testing the given population variance when the
sample is small. In other words, it used to test whether
there is any significant difference between sample variance
and population variance. Here, the test statistic value (Chi-
square value) is obtained by using the following formulae
(ns2/σ2).
Conditions for applying Chi-square Test
1. The total frequencies(N) must be at least 50
2. Expected frequencies of less than 5 must be pooled with
the preceding or succeeding frequency so that the expected
frequency is 5 or more.
3. The distributions should be of original units. They should
not be of proportions or percentages.
Testing of Goodness of Fit
Procedure:
1. Set up H0 and H1
H0 : There is goodness of fit between observed frequencies and
expected frequencies.
H0 : There is no goodness of fit between observed frequencies
and expected frequencies.
2. Decide the test statistic. Here, the test statistic is Chi-
Square test.

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3. Apply the appropriate formula:

χ2 = ε [(O—E)2/E]
where o = Observed frequencies and E = Expected frequencies
4. Specify the level of significance. If nothing is mentioned,
take 5% level of significance.
5. Fix the degree of freedom. Degree of freedom = n – r – 1
Where n = number of pairs of observations
r = number of parameters computed from the given data to
find the expected frequencies.
6. Obtain the table value of Chi-square at specified level of
significance and fixed degree of freedom.
7. Compare the actual value of Chi-Square with the table
value and decide whether to accept or reject the null
hypothesis. If calculated value is less than the table value,
null hypothesis is accepted and otherwise it is rejected.
Qn: The numbers of road accidents per week in a certain city
were as follows:
12, 8, 20, 2, 14, 10, 15, 6, 9, 4
Are these frequencies in agreement with the belief that
the accidents occurred were the same during the 10 week
period?
Sol:
H0 : There is goodness of fit between observed frequencies and
expected frequencies.

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H0 : There is no goodness of fit between observed frequencies

and expected frequencies.

χ2 = ε [(O—E)2/E]
Here the Observed values (Actual values) are 12, 8, 20,
2, 14, 10, 15, 6, 9 and 4.
i.e; O = 12, 8, 20, 2, 14, 10, 15, 6, 9, 4
If accidents occurred are same, then the number of accidents
per week which we may expect is 10 (i.e; the average of the
given values).
i.e; E = 10
Now we can find the value of Chi-square as follows:
Computation of Chi-square Value
Observed Expected Values
(O – E)2 (O – E)2 / E
Values (O) (E)
12 10 4 0.4
8 10 4 0.4
20 10 100 10.0
2 10 64 6.4
14 10 16 1.6
10 10 0 0.0
15 10 25 2.5
6 10 16 1.6
9 10 1 0.1
4 10 36 3.6
χ2 = 26.6

Calculated Value of χ2 = 26.6

Level of significance = 5%
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Degree of Freedom = n -- r -- = 10 – 0 -- 1 = 9
Table value of χ2 at 5% level of significance and 9 d.f is
16.919.
Since calculated value is more than the table value, null
hypothesis is rejected. We accept alternative hypothesis. So we
may conclude that the given figures do not agree with the
belief that accident occurred were same during the 10 weeks
period.
Qn: The principal of a college made a sample analysis of an
examination result of 200 students. It was found that 24
students had got first class, 62 second class, 68 third class and
the rest were failed. Are these figures commensurate with the
general examination result which is in the ratio of 2:3:3:2 for
various categories respectively.
Sol:
H0 : There is goodness of fit between the given figures and the
figures expected in general examination
H0 : There is no goodness of fit between the given figures and
the figures expected in general examination

χ2 = ε [(O—E)2/E]
Here the Observed values (Actual values) for first,
second, third and failed categoris of students are respectively
24, 62, 68 and 46.
If results are in the ratio of 2:3:3:2, then the number of students
for above categories may be expected as follows:

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First Class 200 x 2/10 40

Second Class 200 x 3/10 60
Third Class 200 x 3/10 60
Failed 200 x 2/10 40
Total 200
So the E Values are 40, 60, 60 and 40.
Now we can find the value of Chi-square as follows:

Computation of Chi-square Value

Observed Expected (O – E)2 (O – E)2 / E
Values (O) Values (E)
24 40 36 0.900
62 60 64 1.067
68 60 4 0.067
46 40 256 6.400
χ2 = 8.434

Calculated Value of χ2 = 8.434

Level of significance = 5%
Degree of Freedom = n -- r -- = 4 – 0 -- 1 = 3
Table value of χ2 at 5% level of significance and 9 d.f is 7.815.
Since calculated value is more than the table value, null
hypothesis is rejected. We accept alternative hypothesis. So we
may conclude that the given figures do not commensurate with
the general examination result which is in the ratio of 2:3:3:2.

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Testing of Independence
Procedure:
1. Set up H0 and H1
H0 : There is independence between observed frequencies and
expected frequencies.
H0 : There is no independence between observed and expected
frequencies.
2. Decide the test statistic. Here, the test statistic is Chi-
Square test.
3. Apply the appropriate formula:

χ2 = ε [(O—E)2/E]
where o = Observed frequencies and E = Expected frequencies
Here E values are obtained by using the following formula:
E Value = [(Row Total x Column Total)/Grand Total]
E Values are computed by preparing a table called
Contingency Table.
4. Specify the level of significance. If nothing is mentioned,
take 5% level of significance.
5. Fix the degree of freedom. Degree of freedom = (r – 1) x
(c – 1)
Where r = number of rows; c = number of columns
6. Obtain the table value of Chi-square at specified level of
significance and fixed degree of freedom.

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7. Compare the actual value of Chi-Square with the table

value and decide whether to accept or reject the null
hypothesis. If calculated value is less than the table value,
null hypothesis is accepted and otherwise it is rejected.
Qn: From the following data, can you say that there is relation
between the habit of smoking and literacy:

Smokers Non-smokes
Literates 83 57
Illiterates 45 68

Sol:
H0 : There is independence between smoking habit and
literacy.
H0 : There is no independence between smoking habit and
literacy.

χ2 = ε [(O—E)2/E]
Here the Observed values (Actual values) are 83, 57, 45 and
68.
The E Values corresponding to the above ‘O’ values can be
found out by preparing a 2 X 2 contingency table:

2 X 2 Contingency Table
Smokers Non-smokes Total
(140 x 125) /
[(83+57) x 253
Literates 140
(83+45)] /253 = 71
= 69

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(113 x 125) /
(113 x 128) /253
Illiterates 253 113
= 57
= 56
Total 128 125 253
So, the E values are 71, 69, 57 and 56.

Computation of Chi-square Value

Observed Expected
(O – E)2 (O – E)2 / E
Values (O) Values (E)
83 71 144 2.03
57 69 144 2.09
45 57 144 2.53
68 56 144 2.57
χ2 = 9.22
Calculated Value of χ2 = 9.22
Level of significance = 5%
Degree of Freedom = (2 – 1) x (2 – 1) = 1 x 1 = 1
Table value of χ2 at 5% level of significance and 1 d.f is 3.841.
Since calculated value is more than the table value, null
hypothesis is rejected. We accept alternative hypothesis. So we
may conclude that there is no independence between smoking
habit and literacy. In other words, smoking habit and literacy
are related.
Qn: In a sample study about the tea drinking habit in a town,
following data are observed in a sample of size 200.

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46%nwerenmale, 26% were tea drinkers and 17% were male

tea drinkers.
Is there any association between gender and tea habits?
Sol:
H0 : There is independence between gender and tea drinking
habits.
H0 : There is no independence between gender and tea drinking
habits.

χ2 = ε [(O—E)2/E]
Here all the Observed values (Actual values) are not
directly given in the question. So, we have to find the missing
figures with the help of a 2 x 2 contingency table:

2 X 2 Contingency Table ( ‘O’ values)

Non-tea
Tea drinkers Total
drinkers
(200 x 17) / 100 (200 x 46)/100
Male 58
= 34 = 92
Female = 18 90 = 108
(200 x 26) / 100
Total 148 200
= 52

“O” values are 34, 58, 18 and 90.

The E Values corresponding to the above ‘O’ values can be
found out by preparing a 2 X 2 contingency table:

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2 X 2 Contingency Table ( ‘E’ values)

Tea drinkers Non-tea drinkers Total
Male (92 x 52) / 200 = 24 (92 x 148) / 200 = 68 92
Female (108 x 52)/200 = 28 (108 x 148)/200 = 80 108
Total 52 148 200

So, the ‘E’ values are 24, 68, 28 and 80.

Computation of Chi-square Value

Observed Expected
(O – E)2 (O – E)2 / E
Values (O) Values (E)
34 24 100 4.17
58 68 100 1.47
18 28 100 3.57
90 80 100 1.25
χ2 = 10.46

Calculated Value of χ2 = 10.46

Level of significance = 5%
Degree of Freedom = (2 – 1) x (2 – 1) = 1 x 1 = 1
Table value of χ2 at 5% level of significance and 1 d.f is 3.841.
Since calculated value is more than the table value, null
hypothesis is rejected. We accept alternative hypothesis. So we
may conclude that there is no independence between gender
and smoking habit. In other words, gender and smoking habit
are closely associated.

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Testing of Homogeneity
Procedure:
1. Set up H0 and H1
H0 : There is homogeneity between the samples on the basis of
the attribute.
H0 : There is no homogeneity between the samples on the basis
of the attribute.
2. Decide the test statistic. Here, the test statistic is Chi-
Square test.
3. Apply the appropriate formula:

χ2 = ε [(O—E)2/E]
where o = Observed frequencies and E = Expected frequencies
Here ‘E’ values are obtained by using the following formula:
‘E’ Value = [(Row Total x Column Total)/Grand Total]
‘E’ Values are computed by preparing a table called
Contingency Table.
4. Specify the level of significance. If nothing is mentioned,
take 5% level of significance.
5. Fix the degree of freedom. Degree of freedom = (r – 1) x
(c – 1)
Where r = number of rows; c = number of columns
6. Obtain the table value of Chi-square at specified level of
significance and fixed degree of freedom.

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7. Compare the actual value of Chi-Square with the table

value and decide whether to accept or reject the null
hypothesis. If calculated value is less than the table value,
null hypothesis is accepted and otherwise it is rejected.
Qn: In a diet survey the following results were obtained:
Hindus Muslim
No. of families drinking tea 124 16
No. families not drinking tea 56 10
Is there any difference between the communities in the matter
of tea drinking?
Sol:
H0 : There is homogeneity between communities in the matter
of tea drinking.
H0 : There is no homogeneity between communities in the
matter of tea drinking.

χ2 = ε [(O—E)2/E]
Here the Observed values (Actual values) are 124, 16, 56, and
10
The ‘E’ values corresponding to the above ‘O’ values
can be found out by preparing a 2 X 2 contingency table:
2 X 2 Contingency Table
Smokers Non-smokes Total
No. of
(140 x 180) /206 =
families (140 x 26)/206= 18 140
122
drinking tea

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No. of
families not (66 x 180) /206 = 58 (66 x 26) / 206 = 8 66
drinking tea
Total 180 26 206
So, the ‘E’ values are 122, 18, 58 and 8.

Computation of Chi-square Value

Observed Expected
(O – E)2 (O – E)2 / E
Values (O) Values (E)
124 122 4 0.033
16 18 4 0.222
56 58 4 0.069
10 8 4 0.500
χ2 = 0.824
Calculated Value of χ2 = 0.824
Level of significance = 5%
Degree of Freedom = (2 – 1) x (2 – 1) = 1 x 1 = 1
Table value of χ2 at 5% level of significance and 1 degree of
freedom is 3.841.
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is
homogeneity between communities in the matter of tea
drinking.
Testing of Variance
Procedure:
1. Set up H0 and H1

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H0 : There is no significant difference between sample variance

and population variance.
H1 : There is significant difference between sample variance
and population variance.
2. Decide the test statistic. Here, the test applicable is Chi-
square test.
3. Apply the appropriate formula for computing the value of
test statistic.
χ2 = ns2/σ2 , where n = sample size, s2 = sample variance, σ2
= population variance.
4. Specify the level of significance. Take 5%, unless specified
otherwise.
5. Fix the degree of freedom. d.f = n –1.
6. Locate the table value of Chi-square at specified level of
significance and fixed degree of freedom.
7. Compare the actual value of Chi-Square with the table
value and decide whether to accept or reject the null
hypothesis. If calculated value is less than the table value,
null hypothesis is accepted and otherwise it is rejected.
Qn: A sample is drawn from a population which follows
normal distribution. The size of sample and S.D are
respectively 10 and 5. Test whether this is consistent with the
hypothesis that the S D of the population is 5.3
Sol:
H0 : There is no significant difference between sample S.D and
population S.D. (i.e; H0 : S.D of population = 5.3)

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H1 : There is significant difference between sample S.D and

population S.D. (i.e; H1 : S.D of population ≠ 5.3)
The test applicable is Chi-square test.
χ2 = ns2/σ2 , where n = 10, s2 = 52, σ2 = 5.32
= (10 x 52)/5.32 = 250/28.09 = 8.899
Specify the level of significance. Take 5%, unless specified
otherwise.
Fix the degree of freedom. d.f = 10 –1 = 9
Table value of Chi-square at 5% level of significance and 9
degree of freedom is 16.919
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is no
significant difference between sample S.D and population S.D.
The population S.D = 5.3
Qn: A sample group of 10 students are selected randomly
from a class. Their weights (in K.g) are 49, 40, 53, 38, 52, 47,
48, 45, 55, and 43. Can we say that the population variance is
20 Kg?
Sol:
H0 : There is no significant difference between sample variance
and population variance. (i.e; H0 : Variance of population =
20)
H0 : There is significant difference between sample variance
and population variance. (i.e; H0 : Variance of population ≠ 20)
The test applicable is Chi-square test.

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χ2 = ns2/σ2
Here, n = 10, σ2 = 20, Sample variance is to be computed
from the given data.

Computation of sample variance ( s2)

2
Weight ( X ) (X -- x̄ ) (X -- x̄ )
49 2 4
40 -7 49
53 6 36
38 -9 81
52 5 25
47 0 0
48 1 1
45 -2 4
55 8 64
43 -4 16
εX = 470 ε (X -- x̄ )2= 280

x̄ = 470/10 = 47.

Sample Variance (s2) = [ε (X -- x̄ )

2
]/n = 280/10 = 28.

χ2 = (10 x 28)/20 = 280/20 = 14.

Level of significance = 5%
Degree of freedom. (d.f) = 10 –1 = 9
Table value of Chi-square at 5% level of significance and 9
degree of freedom is 16.919

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Since calculated value is less than the table value, null

hypothesis is accepted. So we may conclude that there is no
significant difference between sample variance and population
variance. ∴ The population variance = 20 Kg.
REVIEW QUESTIONS:
1. What do you mean by Chi-square value?
2. What are the important uses of Chi-square test?
3. What do you mean by goodness of fit?
4. Explain the procedure for testing goodness of fit.
5. What do you mean by contingency table?
6. What are the important conditions for applying Chi-square
test?
7. A die is thrown 150 times with the following results:

No. turned up 1 2 3 4 5 6
Frequency 19 23 28 17 32 31
Test the hypothesis that the die is unbiased.
8. Following data are given:

Education
Gender
Middle High School College Total
Male 52 10 20 82
Female 44 12 26 82
Total 96 22 46 164

Can you say that education depends on gender?

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CHAPTER 12
ANALYSIS OF VARIANCE

Meaning of Analysis of Variance

The testing of hypotheses so far discussed consists of
different sample groups which do not exceed two. If there are
three or more sample groups, the testing of equality of them
cannot be done in any of the methods which have already been
discussed. The testing of significance of the difference among
three or more samples is generally done by using the technique
of analysis of variance. In case of analysis of variance, as part
of testing procedure, we have to prepare a separate statement
called Analysis of Variance Table or ANOVA Table.
Therefore, this type of testing of hypothesis is also called
analysis of variance. The test statistic used for Analysis of
Variance is F-test. F-test is a parametric test.
Types of Analysis of Variance
There are two types of Analysis of variance. They are:
1. One-way classification of data (One way analysis of
variance)
2. Two-way classification of data (Two way analysis of
variance)
One-way classification of data (One way analysis of
variance)
In one way classification, observations are classified
into different groups on the basis of a single criterion. Suppose

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we want to study about the yield of a particular crop. You

know there are number of factors which influence the
productivity of crops. If we undertake this study to know the
effect of quality of seed on the yield of crop, it is called one-
way analysis of variance. Here yield of crops based on
different seed must be given in columns. In other words, in
case of one way analysis of variance, the samples must always
be in columns.
Types of variances in One-way ANOVA
1. Variance between samples (Columns): This is the net
result of the variation different sample means from grand
mean. Grand mean is the mean of all the observations
coming under all sample groups.
2. Variance within the sample: This is the net result of
variations different items of the sample from the respective
sample means.
3. Variance about the sample: This is the sum of the
variance between samples and the variance within the
sample.
Proforma of One-way ANOVA Table

One-way ANOVA Table

Source
Sum of Degree of Mean Sum
of F-Ratio
Squares Freedom of Squares
variation
Between MSC = [F= Larger
SSC = C–1
Samples SSC/(C–1) variance ÷

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Smaller
variance]
Within MSE = F = MSC ÷
SSE = N–C MSE, or
Sample SSE/(N–C)
F = MSE ÷
MSC
Total SST = N –1

SSC = Sum of Squares between Columns (Samples)

SSE = Sum of Square within Column (Sample)
SST = Sum of Square Total
MSC = Mean Sum of Squares between Columns (Samples)
MSE = Mean Sum of Squares within Column (Sample)
C = Number of Columns (Samples)
Procedure for carrying out One-way Analysis of
variance
1. Set up H0 and H1.
H0 : There is no significant difference between samples
H1 : There is significant difference between samples
2. Decide the test statistic:
Test statistic applicable here is F-test
3. Apply the appropriate formula for computing the value of
F-test.
F = Larger Variance ÷ Smaller Variance, i.e; MSC÷MSE
or MSE÷MSC

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(i) Find SST.

SST = Sum of square of all items – (T2/N)
Where T = Total of all observations, N = Total Number of
observations
(T2/N) is generally called correction factor
(ii) Find SSC.
SSC = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ........... – (T2/N)
Where εx1= sum of items in the first column
εx2= sum of items in the second column
n1 = number of items in the first column
n2 = number of items in the second column
(iii) Draw one-way ANOVA Table and enter the values of
SST and SSC
(iv) Find the value of SSE. SSE = SST – SSC
(v) Find the degree of freedom in the third column as
indicated in the proforma.
(vi) Find MSC. MSC = SSC ÷ (C–1)
(vii) Find MSE. MSE = SSE ÷ (N–C)
(viii) Find F–Ratio.
F= Larger variance ÷ Smaller variance; [i.e; F= MSC÷MSE, or
F= MSE÷MSC]
4. Specify the level of significance. Take 5% if nothing is
mentioned.

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5. Fix the degrees of freedom. Here we have to fix a pair of

d.f.
If ‘F’ is obtained by using F= MSC÷MSE, then pair of df is (d
f of MSC, d f of MSE)
If ‘F’ is obtained by using F= MSE÷MSC, then pair of df is (d
f of MSE, d f of MSC)
6. Obtain table value of F at specified level significance and
fixed degree of freedom.
7. Compare the Calculated value of F with the Table value,
and decide whether to accept or reject the null hypothesis.
If calculated value is less than the table value, H0 is
accepted. If calculated value is more than the table value,
H0 is rejected.
Qn: Four varieties of a crop was grown on 3 plots, and the
following yield was obtained. You are required to test whether
there is significant difference in the productivity of seeds:

Variety of Seeds
Plot
P Q R S
I 10 7 8 5
II 9 7 5 4
III 8 6 4 4
Sol:
H0 : There is no significant difference in the productivity of
seeds.
H1 : There is significant difference in the productivity of seeds.
Test Statistic applicable here is F-test
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F = Larger Variance ÷ Smaller Variance, i.e; MSC÷MSE

or MSE÷MSC
SST = 102 + 72 + 82 + 52 + 92 + 72 + 52 + 42 + 82 + 62 + 42 + 42
– (T2/N)
= 100+49+64+25+81+49+25+16+64+36+16+16 – (772/12)
= 541 – (5929/12) = 541 – 494 = 47
SSC = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + .......... – (T2/N)
= [(10+9+8)2÷3]+[(7+7+6)2÷3]+[(8+5+4)2÷3]+[(5+4+4)2÷3] –
(T2/N)
= (729/3) + (729/3) + (729/3) + (729/3) – (772/12)
= (1587/3) – 494 = 529 – 494 = 35

One-way ANOVA Table

Source
Sum of Degree of Mean Sum
of F-Ratio
Squares Freedom of Squares
variation
MSC = [F= Larger
Between C – 1= 4 –1 SSC/(C–1) variance ÷
SSC = 35
Samples =3 35/3 = Smaller
11.67 variance]
F = MSC ÷
MSE = MSE, or
Within N–C = 12 – SSE/(N–C)
SSE = 12
Sample 4=8 = 11.67/1.5=
12/8 = 1.5 7.78
N –1= 12-
Total SST = 47
1=11
Level of significance = 5%
Degree of freedom = (3,8)

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Table value of F at 5% level of significance and (3,8)

degrees of freedom is 4.07
Since calculated value of F is more than the table value, H0
is rejected. We accept alternative hypothesis. So we may
conclude that there is significant difference in the productivity
of three varieties of seeds.
Qn: The following table shows the yield of 3 varieties.
Perform analysis of variance and test whether there is
significant difference between varieties:
Plots
Varieties
A B C D E
I 30 27 42
II 51 47 37 48 42
III 44 35 41 36

Sol:
Here, we are asked to test whether there is significant
difference between varieties. But varieties are given in rows,
not in columns. In one way ANOVA, the samples must be in
columns. Therefore, we have to rearrange the given data so as
to bring the samples in columns as shown below:
Varieties
Plots
I II III
A 30 51 44
B 27 47 35
C 42 37 41
D 48 36
E 42

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H0 : There is no significant difference in the productivity of

varieties.
H1 : There is significant difference in the productivity of
varieties.
Test Statistic applicable here is F-test
F = Larger Variance ÷ Smaller Variance, i.e; MSC÷MSE
or MSE÷MSC
SST = 302 + 512 + 442 + 272 + 472 + 352 + 422 + 372 + 412 +
482 + 362 + 422 – (T2/N)
= 900+2601+1936+729+2209+1225+1764+1369+1681+
2304+1296+1764– (4802/12)
= 19778 – 19200 = 578
SSC = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ..........– (T2/N)
= [(30+27+42)2÷3]+[(51+47+37+48+42)2÷5]+
[(44+35+41+36)2÷4] – (4802/12)
= (9801/3) + (50625/5) + (24336/4) – (19200)
= 3267 + 10125 + 6084 – 19200 = 19476 – 19200 = 276
One-way ANOVA Table
Source Degree
Sum of Mean Sum of
of of F-Ratio
Squares Squares
variation freedom
Between SSC=
3-1=2 MSC=276/2=138
Samples 276
F=138/33.56
Within
SSE=302 12-3=9 MSE=302/9=33.56 = 4.112
Sample
Total SST=578 12-1=11
Level of significance = 5%

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Degree of freedom = (2,9)

Table value of F at 5% level of significance and (2,9)
degrees of freedom is 4.26
Since calculated value of F is more than the table value, H0
is accepted. So we may conclude that there is no significant
difference in the productivity of three varieties.
Two-way classification of data (Two way analysis of
variance)
In two way classification, observations are classified
into different groups on the basis of two criteria. Consider the
example mentioned in one-way classification. If we study the
effect of both the quality of seeds and the type of fertilizers on
the productivity of crop, the data are to be classified on the
basis of two criteria, namely type of seed and type of fertilizer.
This is called two-way analysis of variance. In case of two-
way analysis of variance, we need not make any kind of
rearrangement in the given data. Since two criteria are
considered, here, there will be two sets of hypotheses.
Types of variances in Two-way ANOVA
1. Variance between samples (Columns): This is the net
result of the variation different sample means (in respect of
columns) from grand mean. Grand mean is the mean of all
the observations coming under all sample groups.
2. Variance between rows: This is the net result of the
variation different sample means (in respect of rows) from
grand mean. Grand mean is the mean of all the
observations coming under all sample groups.
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3. Variance within the sample (Residual): This is the net

result of variations different items of the sample from the
respective sample means.
4. Variance about the sample: This is the sum of the
variance between columns, variance between rows and the
variance within the sample (residual)
Proforma of Two-way ANOVA Table

One-way ANOVA Table

Source Degree
Sum of Mean Sum
of of F-Ratio
Squares of Squares
variation Freedom
Between MSC = FC = MSC ÷
SSC = c–1
Columns SSC/(c–1) MSE, or
Between MSR = = MSE ÷ MSC
SSR = r–1
Rows SSR/(r–1)
FR = MSR ÷
Within (c – 1)x MSE=SSE/ MSE, or
SSE = = MSE ÷ MSR
Sample (r – 1) (c-1)x(r–1)

Total SST = N –1

SSC = Sum of Squares between Columns

SSR = Sum of Squares between Rows
SSE = Sum of Square within Samples
SST = Sum of Square Total
MSC = Mean Sum of Squares between Columns
MSR = Mean Sum of Squares between Rows

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MSE = Mean Sum of Squares within Samples

c = Number of Columns
r = Number of Rows
Procedure for carrying out Two-way Analysis of variance
1. Set up H0 and H1.
H0 : There is no significant difference between samples (in
respect of columns)
H1 : There is significant difference between samples (in
respect of columns)
H0 : There is no significant difference between samples (in
respect of rows)
H1 : There is significant difference between samples (in
respect of rows)
2 Decide the test statistic:
Test statistic applicable here is F-test
3 Apply the appropriate formula for computing the values of
F ratios.
FC = Larger Variance ÷ Smaller Variance. i.e; MSC÷MSE
or MSE÷MSC
FR = Larger Variance ÷ Smaller Variance. i.e; MSR÷MSE
or MSE÷MSR
(i)Find SST.
SST = Sum of square of all items – (T2/N)
Where T = Total of all observations, N = Total Number of
observations

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(T2/N) is generally called correction factor

(ii)Find SSC.
SSC = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ............– (T2/N)
Where εx1= sum of items in the first column
εx2= sum of items in the second column
n1 = number of items in the first column
n2 = number of items in the second column
(iii)Find SSR.
SSR = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ............ – (T2/N)
Where εx1= sum of items in the first row
εx2= sum of items in the second row
n1 = number of items in the first row
n2 = number of items in the second row
(iv)Draw one-way ANOVA Table and enter the values of SST,
SSC and SSR
(v)Find the value of SSE. SSE = SST – (SSC+SSR)
(vi)Find the degree of freedom in the third column as indicated
in the proforma.
(vii)Find MSC. MSC = SSC ÷ (c–1)
(viii)Find MSR. MSR = SSR ÷ (r–1)
(ix)Find MSE. MSE = SSE ÷ [(c–1) x (r–1)]
(x)Find F–Ratios (i. e; FC and FR)
FC= Larger variance ÷ Smaller variance; [i.e; F= MSC÷MSE,

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or F= MSE÷MSC]
FR= Larger variance ÷ Smaller variance; [i.e; F= MSR÷MSE, or F=
MSE÷MSR]
4. Specify the level of significance. Take 5% if nothing is
mentioned.
5. Fix the degrees of freedom. Fix a pair of d.f. in respect of
FC and FR.
6. Obtain table value of FC and FR at specified level
significance and fixed degree of freedom.
7. Compare the Calculated value of Fc with the Table value,
and decide whether to accept or reject the null hypothesis.
If calculated value is less than the table value, H0 is
accepted. If calculated value is more than the table value,
H0 is rejected.
8. Compare the Calculated value of FR with the Table value,
and decide whether to accept or reject the null hypothesis.
If calculated value is less than the table value, H0 is
accepted. If calculated value is more than the table value,
H0 is rejected.
Qn: Following table shows the yield of crops using 3 varieties
of seeds:
Varieties of Seeds
Plots
P Q R
I 6 7 8
II 4 6 5
III 8 6 10
IV 6 9 9

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Test whether there is significant difference in the productivity

of varieties of seeds. Also test the significance of the
difference between plots.
Sol:
H0 : There is no significant difference in the productivity of
varieties of seeds.
H1 : There is significant difference in the productivity of
varieties of seeds.
H0 : There is no significant difference in the productivity of
plots.
H1 : There is no significant difference in the productivity of
plots.
Test statistic applicable here is F-test
F = Larger Variance ÷ Smaller Variance
FC = Larger Variance ÷ Smaller Variance. i.e; MSC÷MSE
or MSE÷MSC
FR = Larger Variance ÷ Smaller Variance. i.e; MSR÷MSE
or MSE÷MSR
SST = Sum of square of all items – (T2/N)
= 62 + 42 + 82 + 62 + 72 + 62 + 62 + 92 + 82 + 52 + 102 +
92 – (842/12)
=36+16+64+36+49+36+36+81+64+25+100+81– (7056/12)
= 624 – 588 = 36
SSC = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ........... – (T2/N)

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= (242 /4) + (282/4) + (322/4) – 588

= (576/4) + (784/4) + (1024/4) – 588
= (2384/4) – 588 = 596 – 588 = 8
SSR = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ............ – (T2/N)
= (212 /3) + (152/3) + (242/3) + (242/3) – 588
= (441/3) + (225/3) + (576/3) + (576/3) – 588
= (1818/3) – 588 = 606 – 588 = 18

One-way ANOVA Table

Source
Sum of Degree of Mean Sum
of F-Ratio
Squares Freedom of Squares
variation
Between MSC = 8/2 = FC = MSC ÷
SSC =8 3 – 1= 2
Columns 4 MSE
Between SSR MSR = 18/3 = = 4/1.67 =
4–1=3 2.395
Rows =18 6

(3 – 1)x(4 FR = MSR ÷
Within SSE – 1) MSE=10/6 = MSE
Sample =10 1.67
=6 = 6/1.67 =
3.593
SST
Total 12 –1 = 11
=36

Between Columns:
Calculated value of FC = 2.396
Level of Significance = 5%
Degrees of freedom = (2,6)
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Table value of FC at 5% level of significance and (2,6)

degrees of freedom = 5.14
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is no
significant difference in the productivity of three varieties of
seeds.
Between Rows:
Calculated value of FR = 3.593
Level of Significance = 5%
Degrees of freedom = (3,6)
Table value of FC at 5% level of significance and (3,6)
degrees of freedom = 4.76
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is no
significant difference in the productivity of plots.
Coding Method
In analysis of variance, while preparing ANOVA table
(both one-way and two-way), at first, we have to find the
values of SST, SSC, SSR, etc. But, if the individual
observations of the given data are of large values, the
computation of SST, SSC, SSR, etc becomes a tedious task.
So, as to avoid this complication, we may apply coding
method. Coding method refers to the addition, subtraction,
multiplication and division of individual observations of the
given data by a constant. The addition, subtraction,
multiplication or division of all the individual items by a
constant will not affect the value of F.

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Qn: The following table shows the number of units of a

product produced by 5 workers using 4 different types of
machines:

Machines
Workers
P Q R S
I 44 38 47 36
II 46 40 52 43
II 34 36 44 32
IV 43 38 46 33
V 38 42 49 39
You are required to test:
(1) Whether there is significant difference in the mean
productivity of machines.
(2) Whether there is significant difference in the mean
productivity of workers.
Sol:
Let us apply coding method by subtracting 45 from each
observation of the given data. Then we get;

Machines
Workers
P Q R S
I -1 -7 2 -9
II 1 -5 7 -2
III -11 -9 -1 -13
IV -2 -7 1 -12
V -7 -3 4 -6

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H0 : There is no significant difference in the productivity of

machines.
H1 : There is significant difference in the productivity of
machines.
H0 : There is no significant difference in the productivity of
workers.
H1 : There is no significant difference in the productivity of
workers.
Test statistic applicable here is F-test
F = Larger Variance ÷ Smaller Variance
FC = Larger Variance ÷ Smaller Variance. i.e; MSC÷MSE
or MSE÷MSC
FR = Larger Variance ÷ Smaller Variance. i.e; MSR÷MSE
or MSE÷MSR
SST = Sum of square of all items – (T2/N)
= -12 + 12 + -112 + -22 + -72 + -72 + -52 + -92 + -72 + -32 + 22 +
72+ -12 + 12 + 42 + -92+ -22 + -132 + -122 + -62– (-802/20)
=1+1+121+4+49+49+25+81+49+9+4+49+1+1+16+81+4+169
+144+36– (6400/20)
= 894 – 320 = 574
SSC = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ............ – (T2/N)
= (-202 /5) + (-312/5) + (132/5) + (-422/5) – (- 802/20)
= (400/5) + (961/5) + (169/5) + (1764/5) – 320
= (3294/5) – 588 = 658.8 – 320 = 338.8

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SSR = [(εx1)2/n1] + [(εx1)2/n1] + [(εx1)2/n1] + ............ – (T2/N)

= (-152 /4) + (12/4) + (-342/4) + (-202/4) + (-122/4) – (-802/20)
= (225/4) + (1/4) + (1156/4) + (400/4) + (144/4) – 320
= (1926/4) – 320 = 481.5 – 320 = 161.5

One-way ANOVA Table

Source of Sum of Degree of Mean Sum of
F-Ratio
variation Squares Freedom Squares
MSC = FC = MSC ÷
Between SSC
4 – 1= 3 338.8/3 = MSE
Columns =338.8
112.93 = 112.93/6.142
MSR = = 18.387
Between SSR
5–1=4 161.5/4 =
Rows =161.5
40.375 FR = MSR ÷
MSE
(4 – 1) x = 40.375/6.142
Within SSE = (5 – 1) MSE=73.7/12
Sample 73.7 = 6.142 = 6.574
= 12

SST
Total 20 –1 = 19
=574

Between Columns:
Calculated value of FC = 18.387
Level of Significance = 5%
Degrees of freedom = (3,12)
Table value of FC at 5% level of significance and (3,12)
degrees of freedom = 3.49

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Since calculated value is more than the table value, null

hypothesis is rejected. Alternative hypothesis is accepted. So
we may conclude that there is significant difference in the
mean productivity of machines.
Between Rows:
Calculated value of FR = 6.574
Level of Significance = 5%
Degrees of freedom = (4,12)
Table value of FC at 5% level of significance and (4,12)
degrees of freedom = 3.26
Since calculated value is more than the table value, null
hypothesis is rejected. Alternative hypothesis is accepted. So
we may conclude that there is significant difference in the
mean productivity of workers.
REVIEW QUESTIONS:
1. What do you mean by analysis of variance?
2. Explain the two types of analysis of variance.
3. What are the different types of variances in case of one
way analysis of variance?
4. What are the different types of variances in case of two
way analysis of variance?
5. Draw the proforma of one way ANOVA table.
6. Draw the proforma of two way ANOVA table.
7. Explain the hypothesis testing procedure in case of one

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way ANOVA.
8. Explain the hypothesis testing procedure in case of two
way ANOVA.
9. What do you mean by coding method in analysis of
variance?
10. Following table shows the scores attained by trainees under
three different instructional methods:

Methods Scores
I 84 71 84 76 85
II 85 76 88 86 90
III 81 68 73 71 82
Test whether there is significant difference in the
scores under three methods.
11. A company had 4 salesmen P,Q,R and S, each of whom
was sent for a period of one moth to three types of areas,
namely, urban area, rural area and semi-urban area. The
sales (in thousand rupees) achieved by the salesmen are
shown in the following table:

Salesmen
Area
P Q R S
Urban 80 80 60 100
Rural 30 30 70 30
Semi-urban 70 40 50 80
Carry out an analysis of variance and interpret the results.

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CHAPTER 13
NON-PARAMETRIC TESTS
Meaning:
A test which is not concerned with testing of
parameters is called Non-parametric test. Non-parametric test
does not make any assumption about the nature of distribution.
Therefore, non-parametric tests are called distribution-free
tests.
Situation where non-parametric tests are used
1. When hypothesis does not involve population parameter
2. When observations are not accurate as required for a
parametric test.
3. When the researcher thinks that parametric test is not
applicable.
Assumptions of Non-parametric tests
1. Samples are drawn randomly
2. Sample observations are independent
3. Observations are measured on ordinal or nominal scale
4. The variable is continuous
5. The probability density function of population is
continuous
Advantages of Non-parametric tests
1. It is very simple and easy to apply the non-parametric tests

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2. They can be applied when the observations are measured

on ordinal or nominal scale
3. There is no assumption about the nature of population
distribution
4. They can be used even if the sample is small
5. They have wide application in Psychometry, Sociology,
Educational Statistics, etc.
Drawbacks of Non-parametric tests
1. They can be used only if the observations are measured on
ordinal or nominal scale.
2. They cannot be used for estimating population parameters
3. The application of all non-parametric tests is not very
simple.
Types of Non-parametric tests
1. Chi-square Test
2. Sign Tests
3. Signed Rank Test (Wilcoxon Matched Pairs Test)
4. Rank Sum Tests
5. One Sample Runs Test (Wald Wlfowitz’ Runs Test)
6. Kolmogrov - Smirnov Test (K-S Test)
Sign tests
t-test is generally used when sample is small and there
is an assumption that the population is normal. Therefore,
when sample is small but it is not possible to make an

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assumption about the nature of population distribution, t-test

cannot be applied. In such a case sign test is used. In sign test,
to find the value of test statistic, we use the proportion of signs
(+ve or -ve signs), not the numerical magnitude. That is why,
the test is known as sign test. There are two types of sign tests.
They are (a) One sample sign test and (b) Two sample sign
test.
One sample sign test
One sample sign test is used to test whether the sample
belongs to a particular population.
Procedure:
1. Set up null and alternative hypotheses:
H0: There is no significant difference between sample mean
and population mean (i.e; μ = μ0)
H1: There is significant difference between sample mean and
population mean ( i.e; μ = μ0)
2. Decide the test statistic. The test statistic applicable is one
sample sign test.
3. Use the appropriate formula for computing the value of test
statistic
Test statistic = (p – P)/SE, where P = ½
p = proportion of + signs, (+ or – signs for each observation is
determined by subtracting 5 from each of them)
S E = √(PQ)/n where n = Total number of signs, Q = 1 – P
4. Specify the level of significance. Take 5%, if not
mentioned.
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5. Degree of freedom = infinity

6. Locate the table value of t-test.
7. Compare the calculated value with table value and decide
whether to accept or reject the hypothesis. If calculated
value is less than the table value, null hull hypothesis is
rejected and otherwise, it is rejected.
Qn: Mr. A had to wait for following time (in minutes) for bus
in 15 occasions:
9, 5, 6, 8, 3, 9, 8, 10, 7, 2, 6, 6, 7, 10 and 7 minutes. Use the
sign test at 5% level of significance to test the claim of bus that
on the average Mr A has to wait 5 minutes.
Sol:
H0: There is no significant difference between sample mean
and population mean (i.e; μ = 5)
H1: There is significant difference between sample mean and
population mean ( i.e; μ ≠ 5)
The test statistic applicable is one sample sign test.
Test statistic = (p – P)/SE where p = proportion of + signs,
P=½
S E = √(PQ)/n
Computation of proportion of + signs (p):

Waiting time (x) (X – 5)

9 +
5 .

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Waiting time (x) (X – 5)

6 +
8 +
3 –
9 +
8 +
10 +
7 +
2 –
6 +
6 +
7 +
10 +
7 +
No. of + signs = 12

Total number of signs (n) = 14

Total number of + signs = 12
Proportion of + signs (p) = (12/14) = 0.857
P = 0.5, Q = 1- 0.5 = 0.5
S E = √(0.5 x 0.5)/14 = √0.25/14 = √0.01786 = 0.1336
Test statistic = (0.857 – 0.5)/0.1336 = 2.672
Level of significance = 5%

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Degree of freedom = infinity

Table value of ‘t’ at 5% level of significance and infinity
degrees of freedom is 1.96
Since calculated value is more than the table value, null
hypothesis is rejected. We accept alternative hypothesis. So we
may conclude that there is significant difference between
sample mean and population mean ( i.e; μ ≠ 5).
Two sample sign test (Paired sample sign test)
Two sample sign test is used to test whether two
populations are identical. In case of two sample sign test, each
pair is replaced by +ve or --ve sign. If first vale in a pair is
larger, assign + ve sign to that pair, and otherwise assign – ve
sign. Procedure the procedure is same as in the case of one
sign test.
Qn: The following are the scores obtained by 2 students in
different tests:

Student I 7 10 14 12 6 9 11 13 7 6 10
Student II 10 13 14 11 10 7 15 11 10 9 8

Use the sign test at 1% level of significance to test the

null hypothesis that on an average the two students are
identical.
Sol:
H0: There is no significant difference between students ( i.e;
performance of the students are identical)

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H1: There is significant difference between students

The test statistic applicable is two sample sign test.
Test statistic = (p – P)/SE where p = proportion of + signs,
P=½
S E = √(PQ)/n
Computation of proportion of + signs (p):

Student I Student II Sign for

(x) (y) difference
7 10 +
10 13 +
14 14 .
12 11 –
6 10 +
9 7 –
11 15 +
13 11 –
7 10 +
6 9 +
10 8 –
No. of +
6
signs =

Total number of signs (n) = 10

Total number of + signs =6
Proportion of + signs (p) = (6/10) = 0.6

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P = 0.5, Q = 1- 0.5 = 0.5

S E = √(0.5 x 0.5)/10 = √0.25/10 = √0.025 = 0.1581
Test statistic = (0.6 – 0.5)/0.1581 = 0.1/0.1581 = 0.633
Level of significance = 1%
Degree of freedom = infinity
Table value of ‘t’ at 1% level of significance and infinity
degrees of freedom is 2.576
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that the students
are identical in their performance.
Signed Rank Test (Wilcoxon Matched Pairs Test)
Signed Rank Test is another important non-parametric
test used to test whether matched paired samples are identical
or not. Here we use the signed ranks for testing. Wilcoxon
Matched Pairs Test is used differently depending upon
following two situations:
(a) When the number of matched pairs ≤ 25, and
(b) When the number of matched pairs > 25.
Signed Rank Test (When the number of matched pairs
≤ 25)
Here, we find the difference of matched pairs and assign them
ranks. Then ranks are classified into two categories based on
their respective signs. Then take the sun of two categories of
ranks. The minimum of the two is considered as the value of
test statistic.

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Procedure:
1. Set up null and alternative hypotheses:
H0: There is no significant difference between samples
H1: There is significant difference between samples
2. Decide the test statistic. The test statistic applicable here is
Wilcoxon matched pairs test ( i.e; Wilcoxon’s T test)
3. Use the appropriate formula for computing the value of test
statistic (Wilcoxon’s T test)
T = Sum of Positive Ranks or Sum of Negative Ranks,
whichever is less.
4. Specify the level of significance. Take 5%, if not
mentioned.
5. Degree of freedom = n-1
6. Locate the table value of Wilcoxon’s T test.
7. Compare the calculated value with table value and decide
whether to accept or reject the hypothesis. If calculated
value is less than the table value, null hull hypothesis is
rejected and otherwise, it is rejected.
Qn: The following table shows the details of number of units
of a product produced by two workers. Test whether there is
significant difference between the performances of the workers
using Wilcoxon matched pairs test.
Worker
73 43 47 53 58 47 52 58 38 61 56 56 43 55 65 75
P
Worker
51 41 43 41 47 32 24 58 43 53 52 57 44 57 40 68
Q

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Sol:
H0: There is no significant difference between samples
H1: There is significant difference between samples
Decide the test statistic. The test statistic applicable here is
Wilcoxon matched pairs test ( i.e; Wilcoxon’s T test)
T = Sum of Positive Ranks or Sum of Negative Ranks,
whichever is less.
Difference Ranks Ranks
Worker Worker Rank
(d) ldl of +ve of –ve
P Q of ldl
(P – Q) values values
73 51 22 22 13 13
43 41 2 2 2.5 2.5
47 43 4 4 4.5 4.5
53 41 12 12 11 11
58 47 11 11 10 10
47 32 15 15 12 12
52 24 28 28 15 15
58 58 0 0 - -
38 43 -5 5 6 - -6
61 53 8 8 8 8
56 52 4 4 4.5 4.5
56 57 -1 1 1 -1
34 44 -10 10 9 -9
55 57 -2 2 2.5 -2.5
65 40 25 25 14 14
75 68 7 7 7 7
Total of Signed Ranks 101.5 18.5
The calculated value of T = 101.5 or 18.5 whichever is lower.

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∴ T value = 18.5
Level of significance = 5%
Degree of freedom = n-1, (n= number of vlues who have
either + or –ve sign)
N = 15
Table value of Wilcoxon’s T test at 5% level of significance
and 15 df = 25
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is no
significant difference in he performances of workers are P and
Q.
Signed Rank Test (When the number of matched pairs >
25)
Here, we find the difference of matched pairs and assign them
ranks. Then ranks are classified into two categories based on
their respective signs. Then take the total of two categories of
ranks. The test statistic is Z test.
Procedure:
1. Set up null and alternative hypotheses:
H0: There is no significant difference between samples
H1: There is significant difference between samples
2. Decide the test statistic. The test statistic applicable here is
Wilcoxon matched pairs test ( i.e; Z test)
3. Use the appropriate formula for computing the value of test
statistic (Z test)

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Z = [(T – μ)/σ ] where T = Sum of Positive Ranks or Sum of

Negative Ranks, whichever is less; μ = [n(n+1)]/4;
σ = √ [n(n+1)(2n+1)]/24
4. Specify the level of significance. Take 5%, if not
mentioned.
5. Degree of freedom = infinity
6. Locate the table value of Z.
7. Compare the calculated value with table value and decide
whether to accept or reject the hypothesis. If calculated
value is less than the table value, null hull hypothesis is
rejected and otherwise, it is rejected.
Qn: The following are the marks obtained by 26 students
before and after giving a special coaching to them:
Marks (before) : 70, 35, 21, 16, 75, 63, 70, 54, 77, 82, 68, 19,
13, 72, 78, 17, 24, 3, 45, 80, 15, 20, 58, 65, 35, 52.
Marks (after) : 79, 62, 90, 37, 35, 14, 26, 32, 90, 54, 85, 44, 83,
90, 92, 32, 34, 28, 34, 79, 35, 32, 62, 63, 30, 68.
Use the signed rank test to test at whether there is significant
difference in the marks of students before and after providing
special coaching (∝ = 5%).
Sol:
H0: There is no significant difference in the marks of students
before and after giving special coaching.
H1: There is no significant difference in the marks of students
before and after giving special coaching.

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The test statistic is Wilcoxon matched pairs test ( i.e; Z test)

Z = [(T – μ)/σ ] where T = Sum of Positive Ranks or Sum of
Negative Ranks, whichever is less; μ = [n(n+1)]/4;
σ = √ [n(n+1)(2n+1)]/24
Ranks Ranks
Marks Marks Difference Rank
ldl of +ve of –ve
(before) (after) (d) of ldl
values values
70 79 -9 9 6 6
35 62 -27 27 20 20
21 90 -69 69 25 25
16 37 -21 21 17 17
75 35 40 40 22 22
63 14 49 49 24 24
70 26 44 44 23 23
54 32 22 22 18 18
77 90 -13 13 10 10
82 54 28 28 21 21
68 85 -17 17 14 14
19 44 -25 25 19 19
13 83 -70 70 26 26
72 90 -18 18 15 15
78 92 -14 14 11 11
17 32 -15 15 12 12
24 34 -10 10 7 7
35 28 7 7 5 5
45 34 11 11 8 8
80 79 1 1 1 1
15 35 -20 20 16 16

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Ranks Ranks
Marks Marks Difference Rank
ldl of +ve of –ve
(before) (after) (d) of ldl
values values
20 32 -12 12 9 9
58 62 -4 4 3 3
65 63 2 2 2 2
35 30 5 5 4 4
52 68 -16 16 13 13
Total of Signed Ranks 128 223

T = 128 (128 or 223, whichever is low)

μ = [n(n + 1)]/4, = 26(26+1)/4 = (26 x 27)/4 = 702/4 = 175.5
σ = √[n(n+1)(2n+1)]/24 = √[26(26+1)(52+1)]/24 =
√(26 x 27 x 53)/24
= √37206/24 = √1550.25 = 39.373
∴ Z = (128 – 175.5)/39.373 = – 47.5/39.373 = – 1.21
= 1.21 (numerically)
Level of significance = 5%
Degree of freedom = infinity
Table value of Z at 5% level of significance and infinity degree
of freedom = 1.96
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is no
significant difference in the performances of students before
and after giving special coaching.

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Rank Sum Tests

Rank sum tests are another type of tests used for testing
whether the populations are identical. Here, various samples
are taken together and then ranks are assigned. There are two
important types of rank sum tests. They are (a) Wilcoxon-
Mann-Whitney Test (U- test), and (b) Kruskal – Wallis Test (
H- test).
Wilcoxon-Mann-Whitney Test (U- test):
This method is used when there are two group of
samples. The testing procedure is:
1. Set up null and alternative hypotheses:
H0: There is no significant difference between two samples
H1: There is significant difference between two samples
2. Decide the test statistic. The test statistic applicable here is
Wilcoxon Mann Whitney test ( i.e; U- test)
3. Use the appropriate formula for computing the value of test
statistic (Z test)
Test Statistic = [(μ–U)/SE ]
where μ = (n1.n2)/2
U = U1 or U2 whichever is less.
U1 = n1.n2 + [n1(n1+1)]/2 – R1
U2 = n1.n2 + [n2(n2+1)]/2 – R2
R1 = Rank sum of Sample I
R2 = Rank sum of Sample II

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n1 = Number of observations in Sample I

n2 = Number of observations in Sample II
SE= √ [n1.n2 (n1+ n2+1)]/12
4. Specify the level of significance. Take 5% unless specified
otherwise.
5. Fix the degrees of freedom. df = infinity
6. Locate the table value of test statistic (i.e; Z test) at
specified level of significance and fixed degrees of
freedom.
7. Compare the calculated value with table value and decide
whether to accept or reject the hypothesis. If calculated
value is less than the table value, null hull hypothesis is
rejected and otherwise, it is rejected.
Qn: Apply Wilcoxon- Mann-Whitney Test to test whether the
following samples come from populations with same mean
(i.e; they are identical):
Sample I 54 39 70 58 47 40 74 49 74 75 61 79
Sample
45 41 62 53 33 45 71 42 68 73 54 73
II
Sol:
H0: There is no significant difference between two samples
(i.e; they are identical)
H1: There is significant difference between two samples (i.e;
they are not identical)
The test statistic is Wilcoxon Mann Whitney test ( i.e; U- test)

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Value of Test Statistic = [(μ–U)/SE ]

where μ = (n1.n2)/2
U = U1 or U2 whichever is less.
U1 = n1.n2 + [n1(n1+1)]/2 – R1
U2 = n1.n2 + [n2(n2+1)]/2 – R2
R1 = Rank sum of Sample I
R2 = Rank sum of Sample II
SE= √ [n1.n2 (n1+ n2+1)]/12

Computation of Rank Sums

Values of Samples Rank
together (ascending Rank
order) Sample I Sample II
33 1 1
39 2 2
40 3 3
41 4 4
42 5 5
45 6.5 6.5
45 6.5 6.5
47 8 8
49 9 9
53 10 10
54 11.5 11.5

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Computation of Rank Sums

Values of Samples Rank
together (ascending Rank
order) Sample I Sample II
54 11.5 11.5
58 13 13
61 14 14
62 15 15
68 16 16
70 17 17
71 18 18
73 19.5 19.5
73 19.5 19.5
74 21.5 21.5
74 21.5 21.5
75 23 23
79 24 24
Rank Sum R1=167.5 R2=132.5

U1 = 12 x 12 + [12(12+1)]/2 – 167.5 = 144 + 78 – 167.5

= 54.5
U2 = 12 x 12 + [12(12+1)]/2 – 132.5 = 144 + 78 – 132.5
= 89.5
U = 54.5 or 89.5 whichever is lower, ∴ U = 54.5

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μ = (12 x 12)/2 = 144/2 = 72

SE = √[(12 x 12)(12 +12 + 1)]/12 = √(144 x 25)/12
= √300 = 17.32
∴ Test Statistic = (72 – 54.5)/17.32 = 17.5/17.32 = 1.011
Level of significance = 5%.
Degrees of freedom = infinity
Table value of test statistic (i.e; Z test) at 5% level of
significance and infinity degrees of freedom = 1.96
Since calculated value is less than the table value, null
hypothesis is accepted. So we may conclude that there is no
significant difference between two samples. Both the samples
come from populations with the same mean.
Kruskal – Wallis Test ( H- test):
Here, we tests whether three or more independent sample
groups come from the population having the same mean.
The testing procedure is:
1. Set up null and alternative hypotheses:
H0: There is no significant difference between samples
H1: There is significant difference between samples
2. Decide the test statistic. The test statistic applicable here is
Kruskal – Wallis test ( i.e; H- test)
3. Use the appropriate formula for computing the value of test
statistic.
Test Statistic H = [12/n(n+1)] x [εR12/n1+ εR22/n2)+....] –3(n+1)

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R1 = Rank sum of Sample I

R2 = Rank sum of Sample II
n1 = Number of observations in Sample I
n2 = Number of observations in Sample II
4. Specify the level of significance. Take 5% unless specified
otherwise.
5. Fix the degrees of freedom. df = c–1
6. Locate the table value of test statistic (i.e; Chi-square test)
at specified level of significance and fixed degrees of
freedom.
7. Compare the calculated value with table value and decide
whether to accept or reject the hypothesis. If calculated
value is less than the table value, null hull hypothesis is
rejected and otherwise, it is rejected.
Qn: the sales figures of 4 salesmen are given below:

Salesmen Sales (Rupees in thousands)

P 171 182 157 148 162
Q 152 175 202 168 176
R 160 155 139 146 166
S 179 142 197 170 158

Test whether 4 salesmen have performed equally. Use

Kruskal-Wallis Test at 1%.
Sol:
H0: There is no significant difference between salesmen
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H1: There is significant difference between salesmen

The test statistic applicable here is Kruskal – Wallis test ( i.e;
H- test)
Use the appropriate formula for computing the value of test
statistic.
Test Statistic H = [12/n(n+1)] x [εR12/n1+ εR22/n2)+.......] – 3(n+1)
R1 = Rank sum of Sample I
R2 = Rank sum of Sample II
n1 = Number of observations in Sample I
n2 = Number of observations in Sample II

Computation of Rank Sums

Sales figures of Ranks of Salesmen
4 salesmen
Rank
(ascending P Q R S
order)
139 1 1
142 2 2
146 3 3
148 4 4
152 5 5
155 6 6
157 7 7
158 8 8
160 9 9

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Computation of Rank Sums

Sales figures of Ranks of Salesmen
4 salesmen
Rank
(ascending P Q R S
order)
162 10 10
166 11 11
168 12 12
170 13 13
171 14 14
175 15 15
176 16 16
179 17 17
182 18 18
197 19 19
202 20 20
Rank Sums R1=53 R2=68 R3=30 R4=59

H = [12/(n(n+1))] x [(εR12/n1)+ (εR22/n2)+........... ] – 3(n+1)

= 12/(20 x 21) x [(532/5)+(682/5)+(302/5)+(592/5) – 3(20+1)
= (12/420) x (561.8+924.8+180+696.2) – 63
= (0.02857 x 2362.8) – 63 = 67.5052 – 63 = 4.5052
Level of significance = 1%
Degree of freedom = 4 – 1 = 3

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Table value of Chi-square at 5% level of significance and 3 d.f

= 11.341
Since calculate vale is less than table value, null hypothesis is
accepted. So we may conclude that there is no significant
difference between 4 salesmen. Their performance are equal.
One Sample Runs Test (Wald Wolfiwitz’ Runs Test)
Runs test is used to test the randomness of a sample on
the basis of the order in which the observations are taken. A
‘run’ is a succession of identical items. This test was designed
by Wald Wolfowitz. The testing procedure is:
1. Set up null and alternative hypotheses:
H0: There is randomness
H1: There is no randomness
2. Decide the test statistic. The test statistic applicable here is
Z-test.
3. Use the appropriate formula for computing the value of test
statistic.
Z = (r – μ)/σ
where r = Number of runs; μ = [2n1n2/(n1+n2)] + 1
σ = √[2n1n2(2n1n2–n1–n2)]/ (n1+n2)2(n1+n2–1)
n1 = Number of first item in all the runs together
n2 = Number of second item in all the runs together
4. Specify the level of significance. Take 5% unless specified
otherwise.

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5. Fix the degrees of freedom. df = infinity

6. Locate the table value of Z at specified level of
significance and infinity degrees of freedom.
7. Compare the calculated value with table value and decide
whether to accept or reject the hypothesis. If calculated
value is less than the table value, null hull hypothesis is
rejected and otherwise, it is rejected.
Qn: Test the randomness of following arrangement of students
(Boys and Girls) in a class:
B,G,B,G,B,B,B,G,B,G,B,B,B,G,G,B,B,B,B,G,G,B,G,B,B,B,G,
B,B,B,G,G,G,B,G,B,B,B ,G,B,G,B,B,B,B,G,G,B
Sol:
H0: There is randomness
H1: There is no randomness
The test statistic applicable here is Z-test.
Use the appropriate formula for computing the value of test
statistic.
Z = (r – μ)/σ
r = Number of runs
μ = [2n1n2/(n1+n2)] + 1
σ = √[2n1n2(2n1n2–n1–n2)]/ (n1+n2)2(n1+n2–1)
n1 = Number of first item in all the runs together
n2 = Number of second item in all the runs together

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B,/G,/B,/G,/B,B,B,/G,/B,/G,/B,B,B,/G,G,/B,B,B,B,/G,G,/B,/G,
/B,B,B,/G,/B,B,B,/G,G,G,/B,/G,/B,B,B,/G,/B,/G,/B,B,B,B,/G,
G,/B/
Number of runs (r) = 27
n1= 30
n2= 18
μ = [2n1n2/(n1+n2)] + 1 = [2 x 30 x 18/(30+18)] + 1
= (1080/48)+1 = 22.5 + 1 = 23.5
σ = √[2n1n2(2n1n2–n1–n2)]/ (n1+n2)2(n1+n2–1)
= √[2 x 30 x 18(2*30*18 – 30–18)]/ [(30+18)2(30+18–1)]
= √1080(1080-30-18)/(482 * 47) = √(1080 x 1032)/108288
= √1114560/108288 = √10.2926 = 3.208
∴ Z = (27 – 23.5)/3.208 = 3.5/3.208 = 1.091
Level of significance = 5%
Degree of freedom = infinity
Table value of Z at 5% level of significance and infinity
d f = 1.96
Since calculate vale is less than table value, null hypothesis is
accepted. So we may conclude that the arrangement is made at
random.

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REVIEW QUESTIONS:
1. What do you mean by non-parametric tests?
2. What are the situations under which non-parametric tests
are applied?
3. What are the important assumptions of non-parametric
tests?
4. What are the important merits of non-parametric tests?
5. What are the important drawbacks of non-parametric tests?
6. What are the different types of non-parametric tests?
7. Distinguish between parametric tests and non-parametric
tests.
8. What do you mean by one sample sign test?
9. Explain the hypothesis testing procedure under one sample
sign test.
10. Explain the hypothesis testing procedure under two sample
sign test.
11. What do you mean by Wilcoxon matched pairs test?
12. Explain the hypothesis testing procedure of Wilcoxon
matched pairs test.
13. What is meant by Wilcoxon Mann Whitney U-test?
14. Explain the hypothesis testing procedure of Wilcoxon
Mann Whitney U-test.
15. What is meant by Kruskal-Wallis H-test?
16. Explain the hypothesis testing procedure of H-test.

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17. What do you mean by one sample runs test?

18. Explain the hypothesis testing procedure under one sample
runs test.
19. The following are the measurements of the breaking
strength of a certain commodity:
173, 187,163, 172, 166, 163, 165, 160, 189, 161, 171, 158,
151, 169, 162, 163, 139, 172, 165 and 148. Use sign test to
test the null hypothesis that mean breaking strength of the
commodity is 160.
20. A driver buys petrol either at station X or at station Y. the
following arrangement shows the order of the stations from
which the driver bought petrol over a certain period of
time:
X, X, X, Y, X,Y, X,Y, X, Y, Y, Y, X, Y, Y, Y, X, Y, Y, X,
Y, X, Y, X, Y, Y, X, Y, Y, X, X,Y, X, Y, Y, Y, X, Y, X,
X, X, Y, X, X, Y, X, X, X, X, Y.

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CHAPTER 14
SAMPLE SIZE DETERMINATION

Determination of size of sample is very important. If

the sample size is very large, it will be very difficult to manage
the data. But, if the size is too small, the sample will not
represent the population, and the conclusion drawn may not be
correct. Therefore, the size of sample must be optimum.
Following are some of the important formulae
commonly used for determining sample size:
A. Sample Size Determination While Estimating
Population Mean When Population is Infinite
Sample Size (n) = (Zσ/e)2
where n = sample size, Z = table value, σ = S D of
population
e = allowable difference between population mean and sample
mean.
Qn: From the details given below, determine the sample
size for estimating population mean:
(a) Population S D = 15
(b) Confidence level = 99%
(c) Estimate should be within 6 units of the population mean.
Sol:
n = (Zσ/e)2

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Population S D (σ) = 15
Allowable difference (e) = 6
Value of Z at 1% level of significance and infinity d f = 2.576
∴ n = [(2.576 x 15)/6]2 = (38.64/6)2 = 6.442 = 41.474
= 41
B. Sample Size Determination While Estimating
Population Mean When Population is Finite
Sample Size (n) = [Z2Nσ2] / {[(N-1)e2] + [Z2σ2]}
where Z = table value of Z; N = Size of population; σ = S D
of Population
e = allowable difference between population mean and sample
mean.
Qn: From the details given below, determine the sample size
for estimating population mean:
(a) Population size = 5000
(b) Variance of the population = 4
(c) Estimate should be within 0.4 units of the true value of the
population mean
(d) Desired level of confidence = 99%
Sol:
n = [Z2Nσ2] / {[(N-1)e2] + [Z2σ2]}
Population Sixe (N) = 5000
Population S D = √4 = 2
Allowable difference (e) = 0.4
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Value o at 1% level of confidence and infinity df = 2.576

∴ n = [2.5762 * 5000*22 ] / {[(5000-1)0.42] + [2.5762*22]}
= (6.6358*5000*4) / (799.84 + 26.543) = 132716/826.383
= 160.599 = 161
C. Sample Size Determination While Estimating
Population Proportion When Population is Infinite
Sample Size (n) = [Z2pq/ e2]
where Z = Table value of Z
p = sample proportion; q = (1 – p)
e = allowable difference between population proportion and
sample proportion.
Qn: It is decided to draw a sample from a population to
estimate the percentage of defectives within 2% of the true
value with 95.5% confidence, on the basis of 3% defective in
the sample. What should be the sample size?
Sol:
n = [Z2pq/ e2]
p = 3% = 0.03; q = 1 – 0.03 = 0.97
e = 2% = 0.02
Value of Z at 4.5% level of significance and infinity df = 2.005
∴ n = [(2.0052 *0.03*0.97)/0.022] = 0.116983/0.0004
= 292.457
n = 292

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D. Sample Size Determination While Estimating

Population Proportion When Population is Finite
Sample Size (n) = [Z2Npq] / {[(N-1)e2] + [Z2pq]}
Where Z = Table value of Z; p = sample proportion;
q = (1 – p)
N = Size of population
e = allowable difference between population proportion and
sample proportion.
Qn: It is decided to draw an optimal sample from a population
of 5000 units to estimate the percentage of defectives on the
basis of 3% defectives in the sample within 0.05 units of its
true value. Level of confidence desired is 95%.
Sol:
Sample Size (n) = [Z2Npq] / {[(N-1)e2] + [Z2pq]}
N = 5000
p = 3% = 0.03
q = (1 – 0.03) = 0.97
e = 0.05
Table Value of Z at 5% level of confidence and infinity
df = 1.96
∴ n = [1.962*5000*0.03*0.97] /{[(5000-1)0.052] +
[1.962*0.03*0.97]}
= 558.9528/(12.4975 + 0.111791) = 558.9528/12.6093
= 44.33 = 44.

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REVIEW QUESTIONS:
1. What do you mean by sample size?
2. What are the important formulae used for determining
sample size while estimating population mean?
3. What are the important formulae used for determining
sample size while estimating population proportion?

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CHAPTER 15
STATISTICAL ESTIMATION

Statistical estimation is one of the important branches

of Statistical inferences. It is concerned with estimation of
population parameters with the help of samples drawn from
that population. The accurate value of population parameter
can be computed only by an exhaustive study of the
population. But, it is infeasible to collect date from each and
every element of the population. Therefore, we estimate that
population parameters through sample. This is the actual
process of statistical estimation.
Two types of estimates are generally used for
estimating population parameter. They are (a) Point Estimate
and (b) Interval Estimate.
Point Estimation
If a single statistic is used as an estimate of an
unknown parameter, it is called point estimate of that
parameter. Eg; when the particular value of the sample mean is
called the “estimate”, sample mean is called the “estimator”.
Properties of a good Estimator:
1. An estimator should be unbiased
2. An estimator should be consistent
3. An estimator should be efficient
4. An estimator should be sufficient

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Methods used for Point Estimation:

1. Method of maximum likelihood
2. Method of moments
3. Method of minimum variance
4. Method of least squares
5. Method of minimum chi-square
6. Method of inverse probability
Interval Estimation
An estimate which suggests the lowest and highest
values within which population parameter is expected to lie,
they are called the interval estimates. Here, the two limits
(lower and upper) give an interval.
Qn: from the following data, find the limits within which
population mean may lie:
Sample size = 100; Sample mean = 45; Sample S.D = 15
Sol:
x̄ = 45; S = 15; n = 100
Here, since the sample is large, the test statistic = Z test
Z = Difference / SE
Degrees of freedom = infinity
The table value of Z at 5% level of significance and infinity
d f = 1.96
Z = [x̄ ± μ] /[s/√n]

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1.96 = [45 ± μ]/ [15/√100]

∴95% Confidence limits of population mean =
45 ± (1.96 x 1.5)
95% Confidence limits of population mean = 45 ± 2.94
95% Confidence limits of population mean = 42.06 and
47.94
Qn: Estimate the limits within which population mean lie at
95% level of confidence:
n = 25, x̄ = 4800, s = 500
Sol:
t = Difference / SE
Degrees of freedom = n-1 = 25-1 = 24
The table value of t at 5% level of significance and 24
d f = 2.064
t = [x̄ ± μ] /[s/√n-1]
2.064 = [4800 ± μ]/ [500/√25-1]
2.064 = [4800 ± μ]/ [500/√24]
2.064 = [4800 ± μ]/ 102.06
∴95% Confidence limits of population mean =
4800 ± (2.064 x 102.06)
95% Confidence limits of population mean =
4800 ± 210.65
95% Confidence limits of population mean = 4589.35 and
5010.65

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Qn: Out of a sample of 500 items drawn from a population,

2% were found to be defective. Estimate the proportion of
population defectives at 95% confidence level. Also find
number of expected defectives in the daily production of
60,000 units.
Sol:
Sample proportion of defectives (p) = 2% = 0.02
Confidence level = 95%
Degrees of Freedom = infinity
95% Confidence limits of population proportion = p ±
(Z x SE)
Here, SE = √(pq/n) = √(0.02 x 0.98)/500
= √0.0196/500 = 0.006261
95% Confidence limits of population proportion = 0.02
± (1.96 x 0.006261)
= 0.02 ± 0.012272
= 0.007728 and 0.032272
Expected number of defectives = 0.007728x60000;
0.032272 x 60000
= (463.68 , 1936.32)
= (464, 1936)

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REVIEW QUESTIONS:
1. What do you mean by statistical estimation?
2. What are the two types of estimation?
3. What do you mean by Point Estimation?
4. What are the various methods used for point estimation?
5. What is meant by Interval Estimation?
6. Distinguish between Estimate and Estimator.
7. What are the important characteristics (properties) of a
good estimator?
8. Distinguish between point estimation and interval
estimation.
9. A random sample of 50 people from a population showed
incomes with a mean = 50000 and Standard Deviation =
6000. Estimate the population mean with 95% and 99%
confidence level.
10. In a sample of 500 units of a commodity from a large
consignment, 40 units were considered defective. Estimate
the percentage of defective in the whole consignment and
limits within which the percentage will probably lie.

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CHAPTER 16
SOFTWARES FOR QUANTITATIVE
METHODS

Microsoft Excel: An Introduction

The aim of this chapter is to provide an introduction to
using Microsoft Excel for quantitative data analysis within the
context of a business and management research project. It
covers some of the key features of Excel that are particularly
useful when doing a research project. Further it gives
information on the use of Excel to apply various analysis
techniques discussed in various chapters. The information are
presented here on the assumption that you are already familiar
with the basics of using Excel such as how to create
worksheets, enter data, use of formulae and functions, create
charts (graphs), print and work, etc. If you have never used
Excel, there are many textbooks to get you started.
Alternatively, you may find that Excel training or support
material is available in your institution. There are also various
websites, including Microsoft’s Office Support area
(http://office.microsoft.com/en-001/support/?CTT=97) that
offers advice to get you started.
Why use Excel?
With so many specialist software packages available,
why use Excel for statistical analysis? Convenience and cost
are two important reasons: many of us have access to Excel on

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our own computers and do not need to source and invest in

other software. Another benefit, particularly for those new to
data analysis, is to remove the need to learn a software
program as well as getting to grips with the analysis
techniques. Excel also integrates easily into other Microsoft
Office software products which can be helpful when preparing
reports or presentations.
What you can do with Excel?
As a spreadsheet, Excel can be used for data entry,
manipulation and presentation but it also offers a suite of
statistical analysis functions and other tools that can be used to
run descriptive statistics and to perform several different and
useful inferential statistical tests that are widely used in
business and management research. In addition, it provides all
of the standard spreadsheet functionality, which makes it
useful for other analysis and data manipulation tasks, including
generating graphical and other presentation formats. Finally,
even if using customised statistical software, Excel can be
helpful when preparing data for analysis in those packages.
Limitations of Excel
Even though it has wide applications and usage in data
analysis, Excel is not free from limitations. It remains first and
foremost a spreadsheet package. Inevitably it does not cover
many of the more advanced statistical techniques that are used
in research. More surprisingly, it lacks some common tools
(such as box plots) that are widely taught in basic statistics.
There is also concern amongst some statisticians over the

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format of specific output in some functions. The extensive

range of graph (chart) templates is also criticised for
encouraging bad practice in data presentation through
inappropriate use of colour, 3-D display, etc. Despite these
limitations Excel remains a very valuable tool for quantitative
data analysis as you will see.
Quantitative data analysis tools in Excel
Excel includes a large number of tools that can be used
for general data analysis. Here our primary concern is those
that are relevant to the statistical and related analysis
techniques introduced in earlier chapters. Four sets of tools are
particularly useful:
(1) Statistical functions:
Excel offers a broad range of built-in statistical
functions. These are used to carry out specific data
manipulation tasks, including statistical tests. An example is
the AVERAGE 1 function that calculates the arithmetic mean
of the cells in a specified range. A list of Excel functions
referred to in this and other guides is included in Appendix A
along with instructions on how to access them.
(2) Data Analysis Tool Pak:
The Data Analysis Tool Pak is an Excel add-in. It
contains more extensive functions, including some useful
inferential statistical tests. An example is the Descriptive
Statistics routine that will generate a whole range of useful
statistics in one go. An introduction to loading and using the

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Tool Pak add-in is included at Appendix B. The ToolPak is not

available in Excel for Mac. See Appendix B for an alternative.
(3) Charts:
Excel’s in-built charts (graphs) cover most of the chart
types introduced in Chapter 13 and are invaluable in data
exploration and presentation. We illustrate their use in Chapter
13 and also in the other guides.
(4) Pivot tables
Pivot tables provide a way of generating summaries of
your data and organising data in ways that are more useful for
particular tasks. They are extremely useful for creating
contingency tables, cross-tabulations and tables of means or
other summary statistics. A brief introduction to creating pivot
tables is given in the guide Data exploration in Excel:
univariate analysis.
Preparing Excel for analysis
Before starting, check that your Data Analysis ToolPak
has been loaded. Do this by selecting the Data tab; the Data
Analysis command should appear in Analysis group on the
right-hand side of the ribbon.
Setting up your data for analysis
Typically there are two options for getting your data
into Excel:
1. Import the data in a suitable format from, for example, an
online survey tool.
2. Enter the data manually.

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If you are going to enter your data manually use a

single worksheet to hold all the data in your dataset and set up
the worksheet with variables (questions) as the columns and
the cases (e.g. respondents) as the rows. An individual cell,
therefore, contains a respondent’s answer to a specific
question.
Allocate column headers
In the first row, give each column a simple, informative
header that will be easy to understand when entering data or
reviewing output. Avoid just using question numbers (e.g. Q1,
Q2, etc.) as these can be confusing if you have a large number
of questions. Instead, use a simple naming system. A variable
measuring customer satisfaction, for example, could be headed
CSat: easy to remember and not likely to be confused during
analysis. Ensure each header is unique (this will facilitate
subsequent analysis and avoid confusion when interpreting
output).
Allocate each case a unique ID
If they do not have one already, allocate each case in
the dataset a unique numerical identifier (ID). The easiest way
to do this is simply to number them consecutively from 1
through to n (where n is the number of cases). For clarity, it is
best to put the ID as the first column in the worksheet. Giving
each respondent a unique ID aids in sorting and tracking
individual responses when (for example) cleaning the data or
checking outliers. A simple, consecutive number ID system
also makes it easy to reorder the data if needed. If you are

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transferring data from paper copies of a questionnaire, it is

useful to write the ID number onto the paper copy to make it
easier to check any errors.
Entering your data
Once the spreadsheet is set up, simply enter the data
into the appropriate cell as required. Numerical data can be
entered as numbers, other data, such as Likert scale data, may
need to be coded .With nominal data you have two options:
Enter the values as words (e.g. male/female), appropriately
abbreviated if required (e.g. m/f). Ensure you are consistent
in spelling and format as Excel will treat each variation as
a different value.
Enter the re-coded numerical values (e.g. 0/1 for
male/female), ensuring you keep a record in a code book
(Chapter 13). A worksheet in the workbook is a useful
place to record details of your variables and to store your
code book as shown in Figure 3.
Which to do depends on your analysis needs. Some
tools in Excel (e.g. pivot tables) work well with text and
generate meaningful output but some analysis tasks may
require numerically coded data. If you are exporting your data
to another software package, check the format required by that
package. In some cases, it may be helpful to have both
formats. You can do this by creating a copy of the column
containing the original data, then selecting the new column and
using Home > Find & Select > Replace to replace the original

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values with the new ones. Ensure you give the new column a
unique header.
Importing data
If you are importing the data from another electronic
file, check that the layout is suitable (i.e. respondents as rows,
variables as columns), add or modify variable names if
required, add respondent ID if needed and check that the data
has imported correctly.
Managing your data
Once you have created your dataset, ensure that you
back it up in a secure place, not on your PC or laptop. If you
make any changes to your master dataset, record those changes
and create a duplicate back-up.
Give files a meaningful name. It is also helpful to date them as
this makes it easier to track back if you need to do so.
Worksheet tabs can also be named to help you manage your
data.
Preparing your data
Once your data are entered you can follow the steps in
Chapter 13 to prepare your data for analysis. If you need to
carry out data transformation, such as recoding variables or
calculating summated scores, do so now. (Hint: you can use
functions such as SUM and AVERAGE to help you with
creating summated scales.) If you are creating new variables
during data transformation ensure they are given unique
column headers.

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Example statistical functions

Function name Description
Returns the arithmetic mean (average) of
AVERAGE
the given numbers
Returns the right-tailed probability for the
CHISQ.DIST.RT
chi squared distribution
Returns the p-value for the chi-squared test
CHISQ.TEST
of association
Returns the margin of error for a
CONFIDENCE.T
confidence interval for the mean
Counts the number of cells in a range that
COUNT
contain numbers
Counts the number of cells in a range that
COUNTIF
meet a given condition
KURT Returns the kurtosis of a dataset
Returns the maximum value of the given
MAX
numbers
MEDIAN Returns the median of the given numbers
Returns the minimum value of the given
MIN
numbers
MODE.SNGL Returns the mode of the given numbers
Returns the Pearson correlation coefficient
PEARSON
(r) of two variables

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Function name Description

SKEW Returns the skewness of a dataset
Returns the standard deviation of the given
STDEV.P
numbers, based on the population
Returns the standard deviation of the given
STDEV.S
numbers, based on a sample
Returns the variance of the given numbers,
VAR.P
based on the population
Returns the variance of the given numbers,
VAR.S
based on a sample

Using a function
We will introduce specific functions in the other guides
but the following example of applying the AVERAGE
function to calculate the mean age in the sample dataset in
Figure 2 illustrates their use:
Select the cell in which you wish the calculation to be
placed (Hint: if you are using the same worksheet as your
dataset, avoid cells that are immediately adjacent to your
data).
Select Formulas > More Functions > Statistical >
AVERAGE to open the Function Argument dialogue box
SPSS (Statistical Package for Social Sciences)
SPSS (Statistical package for social sciences) is the set
of software programs that are combined together in a single
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package. The basic application of this program is to analyze

scientific data related with the social science. This data can be
used for market research, surveys, data mining, etc.
With the help of the obtained statistical information,
researchers can easily understand the demand for a product in
the market, and can change their strategy accordingly.
Basically, SPSS first store and organize the provided data, then
it compiles the data set to produce suitable output. SPSS is
designed in such a way that it can handle a large set of variable
data formats.
How SPSS Helps in Research & Data Analysis?
SPSS is revolutionary software mainly used by
researchers which help them process critical data in simple
steps. Working on data is a complex and time consuming
process, but this software can easily handle and operate
information with the help of some techniques. These
techniques are used to analyze, transform, and produce a
characteristic pattern between different data variables. In
addition to it, the output can be obtained through graphical
representation so that a user can easily understand the result.
Read below to understand the factors that are responsible in
the process of data handling and its execution.
1. Data Transformation: This technique is used to convert the
format of the data. After changing the data type, it integrates
same type of data in one place and it becomes easy to manage
it. You can insert the different kind of data into SPSS and it
will change its structure as per the system specification and

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requirement. It means that even if you change the operating

system, SPSS can still work on old data.
2. Regression Analysis: It is used to understand the relation
between dependent and interdependent variables that are stored
in a data file. It also explains how a change in the value of an
interdependent variable can affect the dependent data. The
primary need of regression analysis is to understand the type of
relationship between different variables.
3. ANOVA( Analysis of variance): It is a statistical approach
to compare events, groups or processes, and find out the
difference between them. It can help you understand which
method is more suitable for executing a task. By looking at the
result, you can find the feasibility and effectiveness of the
particular method.
4. MANOVA( Multivariate analysis of variance): This
method is used to compare data of random variables whose
value is unknown. MANOVA technique can also be used to
analyze different types of population and what factors can
affect their choices.
5. T-tests: It is used to understand the difference between two
sample types, and researchers apply this method to find out the
difference in the interest of two kinds of groups. This test can
also understand if the produced output is meaningless or
useful.
This software was developed in 1960, but later in 2009,
IBM acquired it. They have made some significant changes in
the programming of SPSS and now it can perform many types

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of research task in various fields. Due to this, the use of this

software is extended to many industries and organizations,
such as marketing, health care, education, surveys, etc.
Advantages of SPSS:
The advantages of using SPSS as a software package
compared to other are:
• SPSS is comprehensive statistical software.
• Many complex statistical tests are available as a built in
feature.
• Interpretation of results is relatively easy.
• Easily and quickly displays data tables.
• Can be expanded.
Limitations of SPSS:
Following are the important limitations of SPSS:
• SPSS can be expensive to purchase for students.
• Usually involves added training to completely exploit all
the available features.
• The graph features are not as simple as of Microsoft
Excel.

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SPSS Windows and Files

SPSS statistics has three main windows and a menu bar
at the top. These allow to:
(1) See your data
(2) See your statistical output
(3) See any programming commands you have written.
Each window corresponds to a separate type of SPSS file.
Students are directed to acquaint with the application of
SPSS in performing testing of hypotheses.
REVIEW QUESTIONS:
1. What is Microsoft Excel?
2. What are the important quantitative data analysis tools in
Microsoft excel?
3. List the various statistical functions which can be
performed in Microsoft excel.
4. What are the important limitations of Microsoft excel?
5. What is SPSS?
6. How does SPSS help in research and data analysis?
7. What are the advantages of SPSS?
8. What are the important limitations of SPSS?

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