F242
F242
F242
Central Tendency
In this chapter, a description is provided that will help you in studying the
measures of central tendency which is a numerical method that explains the data
with the help of arithmetic mean, median and mode.
Mean
3 Median and Quartiles
3 Mode and Determination of
Mode
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Arithmetic Mean
This is a most commonly used measure of central
tendency. It is defined as sum of the values of all observations
divided by the number of observations and is usually
denoted by X .
The arithmetic mean is the amount secured by dividing
the sum of value of the items in a series by their
numbers.
H. Secrist
Sx
Qx =
n
nx = SX
SX
n
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82
Solution
or
Arithmetic mean
X=
X 1 + X 2 + X 3 +...+ X n
n
30 + 40 + 45 + 68 + 48 231
X=
=
X = 46.2
5
5
S dx
n
A = Assumed mean
dx = Deviation of A from individual
observations ( X - A)
n = Number of observations
X =A+
Where,
Then,
SX
n
(c)
(d)
10
15
20
25
30
dx = ( X - A )
A=
-11
7
-5
3
-2
-1
0
1
4
14
Sdx = -10
50
54
56
58
59
60
61
62
65
751
A = Assumed mean
d x = ( X - A)/c
c = Common factor
n = Number of observations
Where,
1
2
3
4
5
6
7
8
9
10
N = 10
N = 10, S dx = -10
S dx
( -10)
X =A+
= 61 +
= 61 - 1 = 60
10
n
Now,
ne
dx = ( X - A )
`
X
-29
19
A = 15
-10
10
-5
15
20
+5
25
+10
30
+15
N =6
d x =
dx
(c = 5)
c
-2
-3
-1
0
+1
+2 +6
+3
dx = +3
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N=6, d' x = 3
Sd x
3
\ X = A+
c X = 15 + 5
n
6
15
= 15 + 2 .5 = 17.5
X = 15 +
6
Hence, required arithmetic mean = 17.5
Hence,
A. Discrete Series
Sfdx
Sf
dx = ( X - A )
(A = 62)
64
+2
63
18
+1
64
63
62
61
60
59
62
12
18
12
61
-1
60
-2
59
-3
(in acre)
Solution
X
64
63
62
61
60
59
Sf = 60
(f)
8
18
12
9
7
6
Sf = 60
X=
512
1134
744
549
420
354
SfX = 3713
SfX 3713
=
= 61.88 acre
Sf
60
x
+16
+34
+18
0
-9
-14 - 41
-18
Sfdx = -7
Now,
X = A+
Sfdx
Sf
X = 62 +
( -7 )
60
X = 62 + ( - 0.12)
X = 61 .88 acre
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(iii) Step Deviation Method This method is used where
the difference of size of items is equal. This method
makes the calculation more easy. In this method,
deviations are divided by a common factor denoted
by c. The following steps are used to calculate the
arithmetic mean by step deviation method.
(a) Consider an assumed mean ( A). Preferably
mid-value of a series.
(b) Take deviations from assumed mean i.e.,
dx = ( X - A) and divide the deviation by
dx
common factor indicated by C then d ' x =
c
X -A
=
C
(c) Multiply each deviation by its corresponding find
frequency i.e., find fd x .
(d) Take the sum of product of deviations and
frequencies. i.e., find fd ' x
(e) Substitute the values in the following formula to get
required arithmetic mean,
Sfd x
c
Sf
Where, d x = Deviations from assumed mean by
step deviation
c = Common factor, A = Assumed mean
Sf = Sum of frequencies
X =A+
10
20
30
40
50
x=
( = 30)
(f)
4
5
3
2
5
Sf = 19
-20
-10
0
10
20
X -A
c
c = 10
d x =
-2
-1
0
1
2
fd 'x
-8
-5
0
2
10
Sfd= -1
ne
Here,
A = 30, c = 10, Sf = 19, Sfd x = -1
On putting these values in the formula, we get
Sfd x
c
X = A+
Sf
X = 30 +
( -1)
10
19
= 30 - 0053
.
10 = 30 - 053
. = 29.47
Hence, required arithmetic mean = 29.47
B. Continuous Series
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85
30-4
0
40-5
0
10
15
16
Solution
= (m A )
(f)
1020
15
-30
1020
15
30
2030
25
-20
2030
25
175
3040
10
35
-10
3040
10
35
350
4050
15
45
4050
15
45
675
5060
20
55
10
5060
20
55
1100
6070
16
65
20
6070
16
65
1040
7080
75
30
7080
75
450
f = 76
Sfm = 3820
Sfm
Sf
3820
X=
= 5026
.
76
Hence, required arithmetic mean = 50.26
Now,
X=
Sfdm
Sf
Sf = 76
400
76
0
+200
+320 700
180
Sfdm = 400
Now, X = A +
X = 45 +
-60
-140 - 300
-100
Sfdm
Sf
X = 45 + 5.26 = 50. 26
Sfd m
c
Sf
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Example 9. Calculate mean marks of the following
students using step deviation method
0-10 10-20 20-30 30-40 40-50 50-60 60-70
5
12
15
25
Solution
(f)
dm
c
A = 35
c = 10
0-10
-30
-3
10-20
12
15
-20
-2
20-30
15
25
-10
-1
30-40
25
35
40-50
45
10
50-60
55
20
60-70
65
30
Sf = 70
fd m
-15
-24 - 54
-15
0
+8
+6 + 20
+6
5
100 + X 5
=
5
60 5 = 100 + X 5
Sfd m = -34
Now,
X = A+
Sfd m
c
Sf
X = 35 +
( -34 )
10
70
X = 35 + ( -4.86)
ne
X = 35 - 4.86 = 30.14
Hence, required arithmetic mean = 30.14
300 = 100 + X 5
Solution
20
27
33
54
16
48
90
30
(f)
12
8
16
48
90
30
8
Sf = 200
96
320
1296
2970
30 Y
432
SfX = 5114 + 30Y
1260 = 30Y Y =
30
Hence, the missing value of the variate is 42.
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Sfd m
4
c = 25 + 10 = 25 + 1.33 = 26.33
f
30
Hence, required arithmetic mean = 26.33
Now, X = A +
10
20
30
40
50
30
27
20
10
(Morethan)
Solution
20
10
30
20
40
25
50
28
60
30
dm
dm = m A d m =
c
( A = 25)
(c = 10)
(m)
fd m
0-10
10-20
20-30
3
103 = 7
2010 = 10
5
15
25
-20
-10
0
-2
-1
0
- 6
-7 - 13
30-40
40-50
50-60
2520 = 5
2825 = 3
3028 = 2
35
45
55
10
20
30
1
2
3
5
6 17
f = 30
Sfd m = +4
dm =
(f)
f.d m
c = 10
-6
0-10
30 - 27 = 3
20
10-20
27 - 20 = 7
15
-10
-1
- 13
-7
25 = A
0
5
6 17
20-30 20 - 10 = 10
30-40
10 - 5 = 5
35
10
40-50
5 -2 = 3
45
20
50-60
55
30
f = 30
Now,
Sfd m = 4
Sfd m
C
Sf
4
= 25 + 10
30
= 25 + 133
.
= 26.33
X = A+
10
15
20
25
30
10
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EXAM
Multiple Choice Questions
1.
(a) AM
(c) mode
Answer (a) AM (Arithmetic Mean)
2.
[1 Mark]
(b) median
(d) All of these
The average of five quantities is 6 and the average of three is 8. What is the average of the
remaining two?
(a) 4
(b) 5
(c) 3
(d) 2
Answer (c) Q Average of 5 quantities = 6
Sum of 5 quantities = 6 5 = 30
\
Q Average of 3 quantities = 8
Sum of 3 quantities = 8 3 = 24
\
Sum of 2 quantities = 30 - 24 = 6
\
Hence, average of two quantities = 6 / 2 = 3
3.
The total of the deviation of a set of observation from their mean is always
(a) 0
Answer (a) 0
4.
Answer
(b)
Answer
7.
(d) -2
(b) 11
(c) 12
(d) 13
1 + 3 + 5 + 6 + X + 10
25 + X
AM =
6=
36 = 25 + X \ X = 36 - 25 = 11
6
6
(a) Z
(c) X -1
Answer (b) A
6.
(c) -1
5.
(b) 1
(b) Mean =
(b) 8
(d) None of these
1 + 3 + 5 + 7 + 9 + 11 + 13 + 15
= 64 / 8 = 8
8
(a) the average of upper class limit and lower class limit
(b) the product of upper class limit and lower class limit
(c) the ratio of the upper class limit and the lower class limit
(d) None of the above
Answer (a) The average of upper class limit and lower class limit
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8.
Which of the following formula is used for calculating combined arithmetic mean?
(a) X 1,2 =
X 1n1 + X 2 n2
n1 + n2
(b) X 1,2 =
(c) X 1,2 =
X 1X 2
n1 n2
Answer
(a) X 1,2 =
X 1n1 + X 2n 2
n1 + n 2
X1 + X 2
n1 + n2
[1 Mark]
Answer
10.
SX
n
Arithmetic Mean =
SfX
N
Answer
13.
Arithmetic Mean =
Give the formula of calculating arithmetic mean in grouped data (without assumed mean).
Answer
12.
Answer
11.
Arithmetic Mean = A +
Sfdx
c
Sf
Answer
14.
Answer
15.
X = A+
XW =
X =A+
Sfd x
c
Sf
If mean of a distribution is `700 and total is `6300, then find the number of observations.
Answer
Mean =
Total of Values
6300
6300
700 =
n=
=9
Number of Observations
700
n
Sfd x
?
?
[3/4 Marks]
Prove that the algebraic sum of deviation of a given set of observations from their mean is zero.
Answer
S( X - X ) = SX - SX = SX - NX
= NX - NX = 0
[Q Sa = Na]
Hence, proved.
as X = SX SX = NX
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92
17.
ne
(f)
10
15
20
10
25
30
6
S f = 50
Answer To find unknown frequency subtract the sum of known frequencies from sum of total
frequencies
S f = 50
Sum of Known Frequency = 5 + 7 + 10 + 8 + 6 = 36
Unknown Frequency = Total Frequency - Sum of Known Frequencies
= 50 - 36 = 14
18.
The arithmetic mean gets distorted by extreme values in the series and that the value of
arithmetic mean may not figure in the series at all. Write the limitations of mean with the help of
above statement.
Answer
19.
Average daily wage of 50 workers of a factory was ` 200. Each worker is given a raise of ` 20.
What is the new average daily wage?
20.
Show the sum of deviation of the value of variables from their arithmetic mean is equal to zero.
Answer
dx = ( X - X )
X =6
-4
-2
+2
10
+4
SX = 30, N = 5
Sdx = 0
SX 30
=
=6
5
n
This shows that the sum of deviations of the values of the variables from their arithmetic mean is
equal to zero.
X =
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29.
A book seller has 150 books of Economics and Accountancy. The average price of these books is
`40 per book. Average price of books on Economics is `43 and that of Accountancy is `35. Find the
number of books on Economics with the seller.
Answer
Now,
X 1, 2 = 40, X 1 = 43, X 2 = 35
X 1, 2 =
X 1n1 + X 2 n 2
n1 + n 2
43n1 + 35(150 - n1 )
150
43n1 + 5250 35n1
40 =
150
8n1 + 5250
40 =
150
6000 = 8n1 + 5250
8n1 = 750
40 =
750
= 93.75 = 94 (approx)
8
Thus, books on Economics with the seller are 94.
n1 =
[6 Marks]
Find out the arithmetic mean using the step deviation method.
(f)
More than 0
28
More than 10
24
More than 20
14
More than 30
/ In the above problem, cumulative frequencies are given. Firstly, it will be changed into exclusive class interval
and thereafter we will calculate arithmetic mean using the formula of step deviation method.
Answer
dm
= m- A
c
(f)
(m)
fd m
0-10
28 - 24 = 4
-10
-1
-4
10-20
15
24 - 14 = 10
20-30
25
14 - 4 = 10
10
10
30-40
35
20
Sf = 28
dm
c
c = 10
d m =
X = A+
X = 20
Sfd m
14
c = 15 + 10 = 15 + 5
Sf
28
Sfd m = 14
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Median
Median is that positional value of the variable which divides the
distribution into two equal parts, one part comprises all values greater
than the median value and the other comprises all the values less than
the median value.
Median is the middle element when the data set is arranged in
order of the magnitude.
Definitions of Median
If the number of group are ranked in order according to the
measurement under consideration, then the measurement of
the number most nearly one half is the median.
AL Bowley
The median is that value of the variable which divides the group
into two equal parts, one part comprising all values greater and
the other part comprising all values lesser than the median
value.
Connor
The median is usually defined as the value which divides a
distribution so that an equal number of items is on either side of
it.
Croxton and Cowden
Computation of Median
The median can be calculated in the following series
15
17
18
20
25
26
30
35
40
10
45
11
50
n = 11
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Mode
The word mode has been derived from the French word
La Mode which signifies the most fashionable values of a
distribution because it is repeated the highest number of times
in the series. It is the most frequently observed data value.
Mode is the value of that item in a variable which is
repeated at the greatest number of times or occurs most
frequently.
Definitions of Mode
The mode may be regarded as the most typical of a
series of value.
Croxton and Cowden
The value of the variable which occurs most frequently
in a distribution is called the mode.
Kenny
Mode is the value occurring most frequently in a series
of items.
Zizek
67
69
67
50
48
66
60
70
66
72
71
65
40
35
40
45
40
36
25
32
40 46 47 25 35
Calculation of Mode
30
Calculation of Mode
Values of mode can be calculated in the following way for
three series
60
52
40
35
45
36
25
32
46
47
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200
300
400
500
20
30
15
10
Calculation of Mode
Solution
100
200
300
400
500
20
30
15
10
(f)
II
III
II
III
IV
IV
V
VI
Total
10
11
12
13
14
15
10
11
12
13
14
15
VI
11
15
17
15
14
16
17
19
24
21
26
24
23
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Important Formulae
1. Calculation of Arithmetic Mean
(i) Individual Series
(a) Direct method, X =
SX
N
Sd x
N
Sdx
N
Sfx
N / Sf
Sfd x
c
N / Sf
Sf / N
Sfm
3. Calculation of Median
(i) Individual Series and Discrete Series
N + 1
M = Size of
th item
2
(ii) Continuous Series
N
M = Size of th item
2
N
- cf
and
c
L1 + 2
f
N 1 X 1 + N 2 X 2 + N 3 X 3 ++ N n X n
N 1 + N 2 + N 3 ++ N n
N + 1
Q 3 = Size of 3
th item
4
(ii) Continuous Series
N
Q 1 = Size of th item
4
N
- cf
= L1 + 4
c
f
f1 - f 0
f2
c
c or l1 +
2 f1 - f 0 - f 2
f0 + f2
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Misconception of Concepts
P Concept Consider the following formulae
fx
In Discrete Series X =
N
Calculate arithmetic mean by short-cut method
=
=
+
+
010
20
1020
24
2030
40
3040
36
4050
20
Misconception
In Discrete Series
e.g.,
3 4
fx
=
\
=
X = 25.86
N=5
6 12 20 30
fx = 70
fx 70
=
= 14
X=
5
N
d =
m- A
( A = 5)
Marks (x)
Mid
Value m
010
20
1020
15
24
10
240
2030
25
40
20
800
3040
35
36
30
1080
4050
45
20
40
800
f = 140
\
fdm
M = 21
fdm = 2920
fdm
f
2920
X = 5+
140
X = A+
X = 5 + 20.86
X = 25.86
3
Liberalisation, Privatisation
and Globalisation
During the tenure of Narasimha Rao Government (1991), India met with an
economic crisis relating to its external debt. The government was unable to make
repayments on its borrowings from abroad; foreign exchange reserves were not
sufficient to repay the debts. The prices of essential goods were rising and the
imports were growing at a very high rate.
As a result, the government initiated a new set of policy measures to reform the
conditions of an economy and several economic reform programme were also
introduced in this respect to promote privatisation, liberalisation and
globalisation.
Globalisation
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287
The following points highlight the need for economic reforms in the
country
(i) Increasing fiscal deficit
(ii) Adverse Balance of Payments
(iii) Gulf crisis
(iv) Rise in prices
(v) Poor performance of Public Sector Units (PSUs).
(vi) High rate of deficit financing.
(vii) Collapse of soviet block.
Balance of Payment It is a system of recording countrys economic transactions with the rest of the world over a period of one year.
Inflation It is a situation in which general price level of goods and services increases in an economy over a period of time.
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EXAM
Multiple Choice
1.
2.
Questions [1 Mark]
(b) In June 1991
(b) Deficit
(c) Loss
(d) Profit
4.
(a) Surplus
Answer (b) Deficit
3.
Answer New Economic Policy is called the policy of economic reforms since, it seeks to remove the
inefficiencies in the economic system.
5.
Answer The government needs to generate funds to implement various policies and to meet its
general administration expenses.
6.
Inspite of low funds in the 1980s government had to overshoot its revenues? Why?
Answer Even though the revenues were low in 1980s, the government had to overshoot its revenues
to meet problems like unemployment, poverty, and population explosion.
7.
Answer Government expenditure began to exceed its revenue by very large margins. This was the
main cause to make the government unsustainable.
8.
Answer A severe financial crisis due to unsustainable fiscal deficit, fall in foreign exchange reserves
and inability to pay interest to international lenders forced Indian Government to borrow from
international organisations.
Short Answer
9.
Answer Since independence, India followed the mixed economy framework by combining the
advantages of the market economic system with those of the planned economic system. But over the
years, this policy resulted in the establishment of a variety of rules and laws which were aimed at
controlling and regulating the economy and these rules ended up hampering the process of growth
and development.
The economy was facing problems of declining foreign exchange, growing imports without matching
rise in exports and high inflation. India changed its economic policies in 1991 due to the financial
crisis and pressure from international organisations like the World Bank and IMF.
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Liberalisation
Libralisation was introduced with an aim to put an end to
those restrictions which became major hindrances in growth
and development of various sectors. It is generally defined as
the lossening of government regulations in a country to allow
for private sector companies to operate business transactions
with fewer ristrictions. In relation to developing countries, this
term refers to opening of economic border for multinationals
and foreign investment.
Objectives of Liberalisation
The main objectives of liberalisation policy are
(i) To increase competition among domestic industries.
(ii) To increase foreign capital formation and technology.
(iii) To decrease the debt burden of the country.
(iv) To encourage export and import of goods and
services.
(v) To expand the size of the market.
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290
(i) Devaluation of Rupee Devaluation implies a fall in
the value of rupee against some foreign currency. In
1991, the rupee was devalued to increase our
countrys exports and to discourage imports.
(ii) Other Measures
Import quotas were abolished.
Policy of import licensing was almost scrapped.
Import duty was reduced.
Export duty was completely withdrawn.
Functions of WTO
(i) It facilitates the implementation, administration and
operation of the objectives of multilateral trade
agreements.
(ii) It administers the trade review mechanism.
(iii) It administers the understanding rules and procedures
governing the settlement disputes.
(iv) It is a watchdog of international trade. It examines the
trade regimes of individual members.
(v) Trade disputes that cannot be solved through bilateral
talks are forwarded to the WTO dispute settlement
court.
(vi) It is a management consultant for world trade. Its
economist keep a close watch on the activities of the
global economy and provide studies on the main issues of
the day.
ne
Privatisation
It refers to giving greater role to private sector thereby
reducing the role of public sector. In other words, it means
shedding of the ownership or management of a government
owned enterprise.
It may also mean de-reservation of industries previously
reserved for public sector.
Government companies (public companies) are converted
into private companies in two ways
(i) By withdrawal of the government from ownership
and management of the public sector companies.
(ii) By the method of disinvestment.
Forms of Privatisation
Different forms of privatisation are
(i) Denationalisation When 100% government
ownership of productive assets is transferred to the
private sector, it is called denationalisation. It is
also known as strategic sale.
(ii) Partial Privatisation When less than 100% or
more than 50% ownership is transferred, it is a case
of partial privatisation with private sector owning
majority of shares. In this situation, the private
sector can claim to possess substantial autonomy in
its functioning. It is also known as partial sale.
(iii) Deficit Privatisation/Token Privatisation When
the government disinvests its shares to the extent of
5 to 10% to meet the deficit in the budget, this is
termed as deficit privatisation or token
privatisation.
Objectives of Privatisation
The most common and important objectives of privatisation
are
(i) Improving the financial condition of the
government.
(ii) Raising funds through disinvestment.
(iii) Reducing the workload of public sector.
(iv) Increasing the efficiency of the government
undertakings.
(v) Providing better goods and services to consumers.
(vi) Bringing healthy competition within an economy.
(vii) Making way for Foreign Direct Investment (FDI).
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292
1.
Sircilla Tragedy
Privatisation of power supply in Andhra Pradesh resulted in
substantial increase in power-rates, causing many powerlooms to
shut down in a small town, Sircilla.
50 workers committed suicide because of loss in means of
livelihood.
Questions [1 Mark]
EXAM
Multiple Choice
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293
2.
Which of the following organisation settles the disputes among the member countries?
(a) IMF
Answer (c) WTO
3.
(a) raised
Answer (b) Lowered
5.
4.
(c) WTO
(b) lowered
(d) abolished
Predecessor of WTO is
(a) general agreement on trade and tariff
6.
(a) Liberalisation
(b) Globalisation
Answer (c) Disinvestment
7.
(b) franchising
(c) contracting
(a) liberalisation
(b) globalisation
Answer (a) Liberalisation
9.
(d) Privatisation
(a) leasing
Answer (d) All of these
8.
(c) Disinvestment
(c) privatisation
10.
International body which deals with Multilateral Trade Agreement between nation is
(a) UNO
Answer (b) WTO
11.
(d) VSNL
(b) WTO
(d) IBRD
(c) independent
(a) contradictory
(b) complementary
Answer (b) Complementary
12.
(c) OPEC
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13.
Opening up the economy to the economies of the world so that Indian economy can compute at
international level is called
(a) liberalisation
Answer (b) Globalisation
(b) globalisation
(c) privatisation
Why has government decided to retain the navaratanas in the public sector?
Answer Government has decided to retain the navaratanas in the public sector since they are profit
making and help the government to raise financial resources for themselves.
15.
Do you think outsourcing is good for India? Why are developed countries opposing it?
Answer Outsourcing is good for India since it has generated the new employment opportunities in
the Indian economy, contributed in GDP and has increased the foreign reserve in the country.
16.
17.
What was the limit of automatic approval for direct foreign investment?
Answer Automatic approval was granted for direct foreign investment up to 51 percent in a wide
range of industries.
18.
Short Answer
19.
20.
Deepak argues that in the era of privatisation, there is no need for government intervention in
education and health sectors. However, his friend Raju argues that education and health care
services create social benefits and therefore there is a need for government intervention in
education and health sectors. Decide with reasons, who is right?
Answer Raju is right, the government intervention in these sectors is essential due to following reasons
(i) Expenditures on education and health, make substantial long-term impact and they cannot be
reversed.
(ii) Individual consumers of education and health services do not have complete information
about the quality of services and their costs.
(iii) The government has to ensure that private institutions in these sectors adhere to the standards
stipulated by the government and charge the correct price.
(iv) In developing economies, a substantial sector cannot afford to have these services by paying for
it. These should be provided to them by the government.
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32.
Long Answer
33.
Strategic Sale
Meaning
Control
Process
Bilateral Sale
Multi-lateral Trade
Meaning
It is a trade agreement between two countries. It is a trade agreement among more than two
countries.
Negotiations
Economic
cooperation
Tariff Barriers
Non-tariff Barriers
Meaning
Purpose
Nature
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Your
Very Short Answer Type Questions [1 Mark]
1. What do you mean by foreign direct investment?
2. What was the main aim of trade and investment policy reforms?
3. State the measures adopted by the government to promote globalisation?
4. It is said, New Economic Policy is liberal. Do your agree?
5. How are bilateral trade agreements different from multilateral trade agreements? State in
one line.
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