Unit - IV

Statistics for Business

Dr. Revathy M
Head of Mathematics
KPR College of Arts Science and
Research
Time series
A time series is a collection of observations
made sequentially in time.

Uses:
The analysis of time series helps to know the
past conditions.
It helps in assessing the present
achievements.
It helps to predict reliably.
It facilitates comparison.
It formwarns
Components
Long term effect:
 Secular trend

Short term variations:

 Seasonal fluctuations
 Cyclical fluctuations
 Irregular Variations.
Secular Trend
Graphic Method
Method of semi averages
Method of moving averages
Method of least squares
Graphic Method
Draw the trend line by graphic method and
estimate the production in 2003.
Year : 1995 1996 1997 1998
1999 2000 2001
Production: 20 22 25 26
25 27 30
Method of semi averages
The sales in tonnes of a commodity varied
from 2010 to 2021 as under:
280, 300 ,280, 280, 270, 240, 230, 230,
220, 200, 210, 200.
Fit a trend line by the method of semi-
averages. Estimate the
sales in 2022.
Problem
Draw a trend line by the method of semi
averages.
Year Production
2015 90
2016 110
2017 130
2018 150
2019 100
2020 150
2021 200
Method of moving averages
Period of Moving averages is an odd
number.
Period of Moving averages is an even
number.
Problem
Calculate 5 yearly moving average of
number of students in a commerce college
as shown by the following figures.
Year No. of students
1987 332
1988 311
1989 357
1990 392
1991 402
1992 405
1993 410
1994 427
1995 405
1996 438
Problem
Calculate 3 yearly moving average
determine the trend and short term
fluctuation.
Year Production
1987 21
1988 22
1989 23
1990 25
1991 24
1992 22
1993 25
1994 26
1995 27
1996 26
Problem
Calculate 4 yearly moving average
determine the trend and short term
fluctuation.
Year Production
1987 464
1988 515
1989 518
1990 467
1991 502
1992 540
1993 557
1994 571
1995 586
1996 612
 Problem
 Calculate 6 yearly moving average determine the trend and
short term fluctuation.
Year EPS
(Y)
1985 10
1986 12
1987 13
1988 15
1989 14
1990 14
1991 16
1992 18
1993 22
1994 24
1995 26
1996 29
1997 25
1998 21
1999 25
2000 27
Method of Least squares
Fit a straight Line trend equation to the
following data by the method of least
squares and estimate the value of sales for
the year 1985.
Year Sales
1979 100
1980 120
1981 140
1982 160
1983 180
Problems
Year: 1994-95 95-96 96-97
97-98 98-99
EPS : 12.72 16.88 16.55
21.39 18.94
Year: 99-00 2000-01 2001-02
EPS: 13.74 12.67 13.95
Seasonal Fluctuation
Method of simple averages
Method of Moving averages
Ratio – to – trend method
Method of link relatives
 Method of simple averages
Seasonal Index = Seasonal Average x100
Grand Average

Total of seasonal indices = 100 x Number of

seasons

Seasonal Index of each season = Seasonal Total

x no of seasons x100
Total of
seasonal totals
Problem
Assuming no trend in the series, calculate
seasonal indices for the following data:
Quarter
Year I II III IV
1994 78 66 84 80
1995 76 74 82 78
1996 72 68 80 70
1997 74 7 84 74
1998 76 74 86 82
Index Numbers
An index number is a statistical measure
designed to show changes in a variable or a
group of related variables with respect to
time, geographic location or other
characteristics such as income, profession,
etc.
Characteristics
Index numbers are a special type of
averages.
Index numbers are percentages.
Index numbers indicate the percentage of
change which is not possible otherwise.
Index numbers are meant for comparisons.
 Uses
Index numbers provide scope for comparisons.
Index numbers are economic barometer's.
Index numbers are the pulse of an economy.
Index numbers serve as guide.
Index numbers measure the purchasing power of
money.
Purchasing power of one rupee = 100/price index
Index numbers help to calculate real wages.
Real wages = (money wage x 100)/(Price index or
cost of
living
index)
Index numbers are deflators.
Index numbers are useful to formulate policies.
Methods
 Formula
p0 – price of a commodity in the base year.
p1 – price of a commodity in the current year.
q0 – quantity of a commodity in the base year.
q1- quantity of a commodity in the current
year.
p – price of commodity.
q – quantity of a commodity.
V or W – weight of a commodity.
I or P – price relative or price index number of
a commodity.
Q – quantity relative or quantity index
number of a commodity
Contd…
Contd…
Problem
From the following data construct an index
for 1995 taking 1994 as base:
Commodities A B C
D E
Price in 1994 (Rs.) 50 40 80
110 20
Price in 1995 (Rs.) 70 60 90
120 20
Problem
Compute (i) Laspeyre’s (ii) Paasche’s and
(iii) Fisher’s index numbers.
Price Quantity
Item Base Current Base Current year
year year year
A 6 10 50 50
B 2 2 100 120
C 4 6 60 60
D 10 12 30 25
Problem
It is stated that Marshall-Edgeworth index
number is a good approximation to the
ideal index number. Verify, using the
following data:2000 2001
Commod Price Quantity Price Quantity
ity
A 2 74 3 82
B 5 125 4 140
C 7 40 6 33
Problem
Using fisher’s ideal formula, compute price
and quantity index number for 1999 with
1996 as base year, given the following:
Commodity A Commodity B Commodity C
Year Price Quantit Price Quanti Price Quanti
y ty ty
(Rs.) (Kg.) (Rs.) (Kg.) (Rs.) (Kg.)
1996 5 10 8 6 6 3
1999 4 12 7 7 5 4
Weighted Averages of
relatives method
Problem
Calculate the index number of prices for
1998 on the basis of 1995 from the data
given below:
Commodit Weights Price Price
y (1995) (1998)
A 40 16 20
B 25 40 60
C 5 2 3
D 20 5 7
E 10 2 4
Tests of consistency and
adequacy
Circular Test
Circular test is an extension of the time
reversal test.
P01xP12xP20= 1
Fisher’s formula does not satisfy this test.
The simple aggregative method, GM of
relatives method and Kelly’s formula satisfy
this test.
 Chain Base
Chain index = (current year link relative x
Preceding year
chain
index) / 100
Current year FBI = (current year CBI x
Preceding year FBI)/100
Cost of living index
Cost of living index number shows the
impact of changes in the prices of a
number of commodities and services on a
particular class of people in the current
year in comparison with the base year.

Cost of living index is also known as

consumer price index.
Formulas
Problem