Chapter 2

Measures of Variation

Measures of Variation: Measures of variation is the study of the importance characteristics

of a distribution, that is, the extent to which the observation may vary from one another from
some average value. For example-

Factory A Factory B Factory C

wages (Tk.) wages (Tk.) wages (Tk.)
2300 2310 2380
2300 2300 22 l0
2300 2304 2220
2300 2306 2200
2300 2250 2490
Total : 11,500 11,500 I 1,500
x 2,300 2,300 2,300

Significance of Measuring Variation: Measures of variation are needed for four basic
purposes:
i) To determine the reliability of an average
ii) To serve as a basis for the control of the variability
iii) To compare two or more series with regard to their variability
iv) To facilitate the use of other statistical measures.

Methods of Studying Variation:

The following are the important methods of studying variation:
I. The Range,
II. The Interquartile Range or Quartile Deviation,
III. The Average Deviation,
IV. The Standard Deviation, and
V. The Lorenz Curve.

1. Range: Range is the simplest method of studying variation. It is defined as the difference
between the value of the smallest observation and the value of the largest observation
included in the distribution.
Formula: Range = L-S
Here, L = Largest value, and
S = Smallest value
Coefficient of Range: The relative measure corresponding to range, called the coefficient of
range, is obtained by applying the following formula:

Coefficient of Range = L−S /L+ S

Illustration 1: The following are the prices of shares of a company from Monday to
Saturday:
Days Price (Tk.)
Monday 200
Tuesday 210
Wednesday 208
Thursday 160
Friday 220
Saturday 250

Calculate range and coefficient of range.

Solution: Range = L-S
Here, L = 250
S = 160
Range = 250 — 160 = Tk. 90
Coefficient of Range = L−S /L+ S
250−160
=
250+160
= 0.219

Illustration 2: Calculate coefficient of range from the following data:

Profits No. of Companies

10-20 8
20-30 10
30-40 12
40-50 8
50-60 4

2. The Average Deviation: Average deviation is obtained by calculating the absolute

deviations of each observation from median (or mean), and then averaging these deviations
by taking their arithmetic mean.
Formula:
Calculation of Average Deviation-Ungrouped Data:

i) A.D. (X̄) =
∑ ¿ x− X̄ ∨¿ ¿ ii) A.D. (Med) =
∑ ¿ x−Med .∨¿ ¿
N N
Calculation of Average Deviation-Grouped Data:

i) A.D. (X̄) =
∑ f ∨x− X̄ ∨¿ ¿ ii) A.D. (Med) =
∑ f ∨x−Med .∨¿ ¿
N N

Coefficient of A.D.:
A .D. A.D.
i) Mean = ii) Median =
Mean Median

Illustration 3: Calculate the average deviation and coefficient of average deviation (median)
of the income groups of five workers of a company-

Workers Income (Tk.)

1 4000
2 4200
3 4400
4 4600
5 4800

Solution: Calculation of Average Deviation

Workers Income (x) X – Med.

1 4000 400
2 4200 200
3 4400 0
4 4600 200
5 4800 400
N=5 ∑|x−Med .|=1200

A.D. (Med) =
∑ ¿ x−Med .∨¿ ¿ = 1200
= 240
N 5

A.D. 240
Coeff. of A.D.=
Median
= 4400
= .054
Illustration 4: Calculate average deviation from mean from the following data:

Sales No. of days

(Tk.)
10-20 3
20-30 6
30-40 11
40-50 3
50-60 2

3. The Standard Deviation: The standard deviation concept was introduced by Karl Pearson
in 1893. It is by far the most important and widely used measure of studying variation. Its
significance lies in the fact that it satisfies most of the properties of a good measure of
variation. It is a measure of how much “spread” or “variability” is present in the sample. If all
the numbers in the sample are very close to each other, the standard deviation is close to zero.
If the numbers are well dispersed, the standard deviation will tend to be large. Standard
deviation is also known as root mean square deviation for the reason that it is the square root
of the means of square deviations from the arithmetic mean. Standard deviation is denoted by
the small Greek letter σ (read as sigma) and is defined as:

σ=√
∑ ( x− X̄ ) 2
N

If standard deviation is squared, it is called Variance.

Variance = σ2 or, σ = √ Variance

Calculation of Standard Deviation-Ungrouped Data:

σ=√
∑ ( x− X̄ ) 2
N

Illustration 5: Find the standard deviation from the weekly wages of ten workers working in
a factory:

Worker Weekly Wages (Tk.) Worker Weekly Wages (Tk.)

s s
A 1320 F 1340
B 1310 G 1325
C 1315 H 1321
D 1322 I 1320
E 1326 J 1331
Calculation of Standard Deviation-Grouped Data:

σ=√
∑ f ( x− X̄ ) 2
N

Illustration 6: An analysis of production rejects resulted in the following figures:

No. of rejects No. of Operators

21-25 5
26-30 15
31-35 28
36-40 42
41-45 15
46-50 12
51-55 3

Coefficient of Variation:
The standard deviation is an absolute measure of variation. The corresponding relative
measure is known as the coefficient of variation. This measure developed by Karl Pearson is
the most commonly used measure of relative variation. lt is used in such problems where we
want to compare the variability of two or more than two series. That series (or group) for
which the coefficient of variation is greater is said to be more variable or conversely less
consistent, less uniform, less stable or less homogeneous. On the other hand, the series for
which coefficient of variation is less is said to be less variable or more consistent, more
uniform, more stable or more homogeneous. Coefficient of variation denoted by C.V. is
obtained as follows:

σ
C.V. =
X̄
x 100