Quantitative Methods

Student Notes

Note
This document contains the important points discussed in the pre-recorded courseware. It will help in revising the
important concepts related to Quantitative Methods course.

This Student Note is authorized for use only by Birla Institute of Technology and Science (BITS) - Pilani students. Copying or
posting of its content is an infringement of copyright.
 Quantitative Methods

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Student Notes 1.3: Numerical Measures

Numerical Measures
Graphical and Tabular presentations pictorially summarizes the entire data set.
Business may require:
• A measure that summarizes the data with a single number.
• A measure that summarizes the spread of the data with a single number.
Statistics & Parameter
If this measure summarizes a sample data, it is referred to as a Statistic
If this measure summarizes the population, it is referred to as a Parameter
• The sample mean 𝐗 ̅ is said to be a point estimator of the population mean 𝛍.
• The sample standard deviation s is said to be a point estimator of the population
standard deviation σ.
Numerical Measures: Measures of Location - I
We look at measures of central tendency - mean, mode, median.
Mean: mean is found by adding up all of the given data and dividing by the
number of data entries.
Median: The median is the middle number. First you arrange the numbers in
order from lowest to highest, then you find the middle number by crossing off
the numbers until you reach the middle. If the data is even sized then we take
average of two middle values.
Mode: The mode is the number that is repeated more often

X -2 -2 -1 0 1 5

Mean =1/6, Median = (-1+0)/2 = -0.5, Mode = -2

Y -2 -2 -1 0 1 5 5

Mean =6/7, Median = (-1+0)/2 = 0, Mode = -2, 5

̅ = ∑ xi
X ,μ= ∑ xi
n N
Means captures information all data points, so it has all information of sample.
In statistics we focus on mean, but the issue with mean is that the data point at
extreme pull the mean towards itself, hence mean may not reflect the
population. Then may be median may represent the population better.

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 Quantitative Methods

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Mean Vs Median
1. Suppose the company knows it will retain customers if the customer satisfaction
index is 6 or above (on a scale of 1 – 10.) The average index for the current survey
is 6. Should the company feel comfortable?
Suppose the scores are 3 4 4 5 5 5 6 8 10 10
Here 60% are dissatisfied, so we look at median which is 5. The company should be
worried as median is less than satisfaction index
2. The shopkeeper maintains a record of the monthly spends by its regular
customers. Would he be interested in the median spend or in the average spend?
Depending on the context we go for median or mean.
Skewness for mean and median
Suppose
Median < Mean
⇒ More than 50% of the population is to the left of the mean
⇒ The histogram may have a longer right tail. And so skewed right
Median > Mean ⇒ The histogram may be skewed left
Median = Mean ⇒ We may a symmetric distribution

3.2. Measures of Location II

We now look at additional measure of location namely quartile and percentile.

X -2 -2 -1 0 1 5

Mean =1/6, Median = (-1+0)/2 = -0.5, Mode = -2

Y -2 -2 -1 0 1 5 5

Mean =6/7, Median = (-1+0)/2 = 0, Mode = -2, 5

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 Quantitative Methods

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Quartiles X Y pth percentile:

Q3 (75%) 1 5 p
• i = (100)n
Q2 (50%) -0.5 0
Q1 (25%) -2 -2 • If i ≠ integer
xroundup(i) else
75-th percentile = (75/100) X 6 =4.5
Avg(xi, xi+1)
But 4.5 is not integer so we round upward to 5,
We then look at the 5th term which is 1,
Thus 75percentile is 1.
Measures of Dispersion:
How the data is spread?
1. The Range: Maximum Value – Minimum Value. It does not contain much information
about data set.
2. The Interquartile Range: Q3 – Q1. It gives much information of the data set.
3. The variance is a measure of variability that includes all the available information.
∑(𝑥𝑖 −𝜇)2
𝜎2 = = population variance &
𝑁
∑(𝑥𝑖 −𝑋̅)2
𝑠2 = = sample variance
𝑛−1

4. The Standard Deviation: Square Root of the Variance

Example:
2
X -2, 2, 0, 1,5
X X - Mean (X-Mean) Q1 -2
-2 -2.17 4.69 Q2 -0.5
-2 -2.17 4.69 Q3 1
-1 -1.17 1.36
Max 5
0 -0.17 0.03
Range 7
1 0.83 0.69
IQR 3 Q3-Q1=1-(-2)
5 4.83 23.36
Var 6.97
SUM 1 0 34.83
Mean 0.17 0 6.97
Std dev 2.64

VAR 6.97

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 Quantitative Methods

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Box Plot & Five-Number Summary & Outliers

FIVE NUMBER SUMMARY 5.5
X -2 -2 -1 0 1 5
Min -2
Q1 -2
Q2 -0.5
Q3 1
Max 5
-2
IQR 3 Q2-Q1 Q3-Q2
1.5*IQR 4.5
Q3+1.5*IQR
Upper Limit = 5.5
Q1 – 1.5*IQR -6.5
Lower Limit = -6.5

An outlier is any observation above the Upper Limit or below the Lower Limit.
Kentucky Derby Data: Box Plot & Five-Number Summary & Outliers

FIVE NUMBER
SUMMARY
Kentucky
X Derby
Min 119
Q1 122
Q2 124

Q3 129
Max 172

IQR 7
1.5*IQR 10.5
Q3 Upper
Q2 Limit 139.5
Q1
Lower
Limit 111.5

This box is not symmetric (Q2-Q3 much bigger than Q2-Q1) whereas previous box
plot is symmetric (Q2-Q3 = Q2-Q1).
Learning Outcome:
Measures of Location: Mean, Median, Mode, Percentiles and Quartiles
Skewness and the Mean / Median Relationship
Measures of Dispersion: Range, IQR, Standard Deviation and Variance
Boxplots and the 5-Number Summary

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 Quantitative Methods

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Questions to be considered:
Q1. What are the measures of location?
Q2. What is mean, mode median, quartile, and percentile?
Q3. Find the mean, median, mode of the following data:
78 56 68 92 84 76 74 56 68 66 78 72 66
65 53 61 62 78 84 61 90 87 77 62 88 81
Q4. The mean of one set of six numbers is 9 and the mean of a second set of eight
numbers is 12.5. Calculate the mean of the combined set of fourteen
numbers.
Q5. The mean of the numbers a, b, c, d is 8 and the mean of the numbers a, b, c, d,
e, f, g is 11. What is the mean of the numbers e, f, g?
Q6. Find the mean of the 5 numbers in term of x:
x-5, x-3, x-2, x+1, x+4.
Q7. Which measure of central tendency do we use for a given data set?
Q8. What are the measures of dispersion?
Q9. What is variance and standard deviation?
Q10. The Statistics test marks of a university are as follows: 52, 45, 25, 75, 63, 86,
72, 85, 55, 65, 70, 82, 90, 48, 68, 86, 65, 64, 78, 75, 32, 42. Find the inter quartile
range.
Q11. Find the standard deviation of the 5 numbers in term of x:
x-5, x-3, x-2, x+1, x+4.
Q12. The mean of the five numbers 6, 9, 2, x, y is 5 and the standard deviation is 6
. Find the values of x and y.

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