MEASURES OF DISPERSION 85

84 STATISTICAL TOOLS AND TECHNIQUES

We have,
F 62 -7- -7 o -- - or-
Hence using (5), tho standard deviation of x is Hence
s,
=
lb| s
From this property, it follows that the standard deviation is independent of change of origin
s=
a360-62 +364-62 =xX-=2kg (here a), but depends on change of scale (here b).

Note: If a variable assume only two values and b (a* b), each
(ii) Suppose two groups of values of a variable x are given. If and s respectively denote
a
having same
frequency,
then the mean and the standard deviation of n values contained in one group and and s2, the
and values of the other
MD about mean = S.D. - la - bl. mean standard deviation of
of the combined data is given by
na group, then the standard deviation()

Some properties of the standard deviation are as follows

. (5k)
i) If all the values of a variable are equal, its standard deviation is zero. The converse is
also true. where the pooled mean F= " T 22
Let the variable x assume n values x i = 1(1)n and let t'2
Suppose the values in the first group i= 1,2,
X C, for each i. are X ..,
n, and those in the second group
areX2 i 1,2, n2: Then

mc and =t,,
Then x - = 0, for each i,
Again,

ands y-7} x0
= 0

On the contrary, suppOse The sum of squares of the deviations of the values of the two
groups from is
s= 0 or,s =0 or,
G-F = 0

or, 2-T = 0, which is possible only when x -

F =
0, for each i, Now, 2-7
=1
-+G-P
i.e. when = F, for each i.
Thus, if the standard deviation is zero, all the values of the variable anre equal y-+2-)-7)+ n-
i=l

i) Ify =a +br is the relation between two variables x and y, then theirrespective standard n+n-F,
deviations, denoted by s and s, are related as s,= |b] s,
=
since
(qy-) = 0.

two variables and y

We have the relation betwen
x as
Similarly. - 7 = ns+n(-7
y=a+ bx.
Hence, we have,
i=l,2, n
Hence y a t bx, = ,

Then ya+ br
for each i.
uY+ -H, AG-T}+n,(
So- = bo- F),
86 87
STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION

If Hence s, = V3.63 = 1.9.

we put =
T12*2 in (Sk), then on
simplification, we get
lustration 5.153
Remarks: (a) If there be
+2 t (5) A sample of 506 persons showed the income distribution
Income No of persons
given below

r
groups of values, the i-th group having n; values with mean 150-300 232
and standard deviation s,
i =1, 2, . . r , then (5k) may be generalised as follows
300-450 128
60
G - 7, where r =
450-600

600-750 40
750-900 28
(b) If and are not individually given but their difference is known, then (5) is used 900-1100 12
instead of (5k) for calculating s 1100-1500

lnstraion 5.4 Find out the standard deviation.

table for necessary calculations.

Calculate the standard deviation of the frequency distribution given below: First we form the following
6 TABLE 5.5
110
23 20 18
CALCULATION FOR STANDARD DEVIATION

We prepare the following table for necessary calculations Income Class-mark (x =5 No. of persons
TABLE 5.4
150-300 225 232 -1392 8352
NECESSARY CALCULATION FOR STANDARD DEVIATION
300-450 375 128
f 60 360 2160
450-600 525
0 12 40 480 5760
600-750 675
10 10 10 18 28 504 9072
750-900 825
13 26 52 25 12 300 7500
900-1100 1000
21 63 189 6 222 8214
1100-1500 1300
23 92 368 474 41058
Total 506
20 100 500
18 108 648
$8474= 81.14 -0.8774 80.2626

8
7 9 63
6
441
128
Nows2-i- 506 506

Here x = 375 +25y;

Total 120 478 2336
=(25)? x
s = 625 x
80.2626 =50164.125
We have,
224 units.
19.47 (3.98) = 19.47 15.84 3.63
Hence s, V50164 125
88
STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION 89

Illustration 5.16 We have,

Suppose 5x + 12y 85 is the relation between
=
two variables x and y and y has standard
deviation 2. Find the standard deviation of x.
From the given relation, we have

x or, x=17- = (a - b /2n

Hence, Hence the required standard deviation is

3 x2-48
nustraion S.17 lustration 5.19
For two values, say a and b, a < b, of a variable x, the mean and standard deviation are
Show that the standard deviation of first
of first n even numbers.
n odd numbers is equal to the standard deviation
respectively 25 and 4, Find a and b.
From the given dara we have, Let denote ith odd number. Then ith even number is given by (;+ 1) =, for each i

= 25 and s, = 4. Hence y =F+1

Hence =25 or, a +b = 5 0 . () 0 0a/0
or, - =
(x; + 1) -
(F+ 1) =- , say, for eachi
2 or, 5) = ; -T for each i.
Now,
oy-5 - - or, - o , -

or, s, d, (*a < b.

Tilustration 5.20
For a batch of 10 boys, the and standard deviation of weight are found to be 50 kg.
mean

Hence
and 5 kg respectively. On further verification it is detected that the weights of two boys have
been wrongly included as 45 55
kg, kg instead of the actual values 42 kg and 48 kg. Calculate
or, b a =8 . i)
001 008 the correct mean and correct standard deviation.
4
Let and s respectively denote the given mean and standard devation ofweight (), while
Solving (i) and (ii), a =
21, b =29. the correct mean and standard deviation be X and s

Ilstration5.18 From the given data, we have

Suppose a variable assumes the values a and b and ( - 2) other values all equal to n
deviation.
=
10, 7 = 50 kg, s = 5 kg.
b)/2. Find the standard
(a +
Hence incorrect x = 50 x 10 500.
Suppose x denotes the variable. Here each or the values a and b has frequency 1, while

the value (a + b}/2 is (n -

2).
the frequency of 500- 100 90 490.
(45 55) + (42 + 48) = + =

ST a+-b+(n-2)(a+b)/2 - 2atb)+n(a +b)-2(a+b) = (a + b)/2. 0 Correct 2x = 500 +

2n
90 STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION
91

Again, incorrect = n(s2 +T), since s= Tlustration5.22

- In a batch of 10 children, the marks obtained
by a dull boy are 25 below the average marks
=
10(25 +2500) 25250 of the other children. Show that the standard deviation of marks of all the
children is at least
7.5. If this standard deviation is actually 12.0, find what the standard deviation will be when
Thus correct
= 25250 (452 +553) + (422 + 48) the dull boy is left out.

25250 (2025 + 3025) + (1764 +2304) =24268. Let denote the average marks of 9 children and variance
of their marks be s. Then the
correct 2 marks of the dull boy is 25. If s is the standard deviation of marks for all the children,
490 49 kg.
-

Hence, =-
then we have,

and-coect -248-49-2426.8-2401 9xs+1x0

9+1 9x1xG+2 + 100
(9+1
So s.= 25-8 5.08 kg.
TO+56.25 6)
Tlustration 5,21
For a group of 50 girls the mean and standard deviation of scores on a test are 59.5 and 256.25 (7.5) (since s20)
8.38, while for a group of 40 boys the same measures are 54.0 and 8.23. Find the mean and
standard deviation of the combined group.
Hence s 2 7.5
i.e., the standard deviation of marks for all the children is at least 7.5.
The mean (T) for the two groups taken together is
If s = 12.0, then from (i) we find
F t - 50x59.5 +40 x54 5135
90
= 57.06.
50+40

deviation () for the combined group is given by

122 10T++56.25 or, 144 +56.25
Again, the standard
or,= x (144 - 56.25) =x 87.75 = 97.5
s 12
2.44
or, S= 97.5 =9.87, nearly.
57.06
-T =59.5
=

Now,

and - = 54 57.06 =3.06 lustration 5,23

An analysis of the monthly wages paid to workers in two firms A and B, belonging to the
8.38, s2 = 8.23 Same industry give the following results:
Also s =

Hence, Firm A Firm B

2 +50x (2.44)+40x(-3.06)
50x(8-38 +40x(8-23)50+40 No. of earners 586 648

Average monthly wag Rs. 52.5 Rs. 47.5

50x 70 22 +40x677390+50 x5-95 +40 x9.36 6892 1 co
90 Variance 100 121
() Which firm A or B pays out largest amount of monthly wages ?
so that,
() Which firm A or B has greatest variability in individual wages ?
8.75.
s =
T6 58 =

Gii) Find the standard deviation of the wages of all workers in two firms taken together.
 92 STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION 93

0 We have, Average monthly wage =Amount of monthly wage Again, the standard deviation (6) for the whole group is given by
No. of earmers
So, in firm A, amount of monthly wage = 586 x 52.5 30765 (Rs) and in firm B, amount
of monthly wage = 648 x 47.5 = 30780 (Rs).

Hence, firm B pays out largest amount of monthly wages

or. 13.44= 100X3+150 xs 100x 150 x(15-16 since s= 3]
10 and standard deviation of
100+150 (100+ 150)
) Here standard deviation of wages of firm A= J100 =

wages of fim B = VI21 = 11.

900+150s5.
250
15000
250x 250
900
250
+1505 + 0.24
So, fim B has greatest variability in individual wages.

s 121. 00 +150s2 or, 900+ 150 s 250 x 13.20 3300

(ii) In usual symbols, n = 586, n2 648, =52.5, T = 47.5 =
10, =
or, 13.20 =

250
The standard deviation () of wages of all workers in the two fims taken together is given
or, 150 s= 2400 or,s 5 0 16.
by
Hence, s = VI6 = 4.
+n 586 x586 648 xI121 586x648 x(52.5-47-5
100++648
( = 111.03 +6.23 = 117.26.
(586+648)
llustration 525
The mean and standard deviation of 20 observations are found to be 10 and 2 respectively.
At the time of checking it was found that one observation 8 was incorect. Calculate the mean
Hence s I17-26 = 10.83. and standard deviation if the wrong observation () is omitted (i) is replaced by 12.
In usual given data,
from the we have, n =
20, =
10, s = 2.
symbols,
1lustration 5.24 with 15 and standard deviation 3. If the So, incorrect x; = 20x 10 200.
subgroups has 100 items
mean
The first of two
with mean 15.6 and standard deviation 13,44, find the standard
whole group has 250 items i) Here x 200 8 192.
=
correct =

deviation of the second subgroup.

deviation of the second subgroup. From the given data, we have correct = 10.1.
Let s denote the standard
first subgroup 100 =

of items in the
n = number

in the second subgroup = 250 100 = 150 Again, s=E- or, =n(P+ ?).
= number of items
n 100) 2080.
subgroup = 15 So, incorrect = 20(4 + =

mean of items of first

2080- 82 2080 64 2016.
of 250 items
of whole group =15.6 correct 2x} =

T = mean

(10.1)2 = 106.1 -
102.01 =4.09.
We have, =
Hence, correct2
So, correct s = V4.09 = 2.02 (nearly).
x 1500+ 150 250 x 15.6
taa
=

=204.
00x15+150

(i) Here 200 8+ 12

or,
15.6= T00+150 correct x =

2400 16.
or, F215010
1500+ 150,
=
3900 corect =
20
10.2.
or,

From above calculations in (i), incorrect 2xf= 2080.

 MEASURES OF DISPERSION 95
94 STATISTICAL TOOLS AND TECHNIQUES

(b) By definition, we have

So, correct x =
2080 82 + 122 2080- 64 +144 = 2160.

correct s= -

(10.2)2 = 108 104.04 3.96.

20
Hence, correct s =
v3.96 = 1.99 (nearly).
TIllustration5.26 [neglectingand higher powers of in the erpansion of 1
Suppose that the variable x takes positive values only and that the deviations ( - I) aree
small compared to x. Show that in such a case.

from )

where x h and s respectively denote the geometric mean, the harmonic mean and the
standard deviation.
or,
Let x assumes the values X, 2 We denote x = - T , so that x, = X +T

We have. -)-0,- - 7 ns . (i)

(neglecting higher powers of
(from definition)
(a)x (2 (d) Quartile deviation
log,
or,
log= logt+ 7)
Quartile deviation is a measure of dispersion
if the values of a variable differ much from one another,
the
the quartiles. It is understood that,
based on
differences between the quartiles
the values are close to one another, the differences
Would be large; on the other hand, when difference between Q and Q and
would be small. As such, one can take the average of the
that between Q and Q, as a measure of dispersion, called quartile deviation (denoted by Q)
= log+ la
Thus,

[neglecting and higher

- log - 2nT27
powers of
It is also called the semi-interquartile range.
or both of the terminal classes open or
from lf the data are given in a frequency table with one
(i)
=
log n = log with class-intervals of unequal size, then the quartile deviation is used as an appropriate

measure.

or, T.e 2xor, , = An important property of the quartile deviation is discussed below:
logx, log| Te 2
=
=
or,
and y related as y = a+ bx, then their quartile deviations are related
iftwo variables x are
as
of
[neglecting higher powers Q0) = lb| Qa).
ie,
96 STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION 97

When b> 0, Q,0) =

a +
b.Q,(), and Q,) = a +
b.0,). otiosp Can you compute the standard deviation from the above data ? Find the dispersion using
suitable measure.
:
Q,0)- ,0)= bIQ,) - 9.) or, Q)-Q0 ,Q,)- - Here the terminal classes of the frequency table are open, and therefore, the standard
i.e. deviation cannot be obtained.
Q0) b.Qt). (i)
=

The quartile deviation is the suitable measure of dispersion here. Now we form the following
Again, when b < 0, Q,0) = a +
b.Q,®), and Q,)=a + b.Q,) table for cumulative frequencies.
TABLE 5.6
Q,0)-Q,0) =
-bl9,)- Q,)) or, Q=-b,Q4)-Q() CUMULATIVE, FREQUENCY TABLE
i.e.
Q0) -b.Q).
=
i) .

Monthly expenditure (Rs.) Frequency Cumulative frequency

Combining ) & (i), we get Less than 1000 30 30
Q0) = b l Q ) . 1000-1250 45 75
1250-1500 70 145
lustration 5.27 1500-1750 82 227
The relation between two variables andy is
is 5. Find the
x
2x - 5y =
10, and the quartile deviation of 1750-2000 66 293
x
quartile deviation of y.
2000-2250 57 350
2x-5y=10.y =- 2. 2250-2500 28 378
2500-2750 22 400
So Q0)- Q)-5-2 2750-3000 18 418
more than 3000 12 430
Total
Tlustration528 430
Here n = 430, so that
The following table gives the distribution of monthly expenditure for 430 families in a
particular region:
Monthly expenditure (Rs.) Frequency
4 =
107.5 and
322.5
From the cumulative
Less then 1000 30 1500 and 2000-2250
frequency column of TABLE 5.6 we find that the class-intervals 1250-
1000-1250 45
respectively contain Q and Q3
1250-1500 70 Hence Q =
1250+
x250 =1250 + 8125
70
1500-1750 82
1750-2000 66
=
1250+ 116.07 =
1366.07 (Rs)
2000-2250 57
and Q 2000+
2250-25000 28 57 x250 =2000 S +

2500-2750 22 2000+ 129.38 =

2129.38 (Rs.)
2750-3000 18
more than 3000 12 O- 9-1= 2129.38-1366.07 763.31 =381.65 (Rs.)
 MEASURES OF DISPERSION 99
98 STATISTiCAL TOOLS AND TECHNIQUES

5.3 Comparison of the measures

the basis of
- 2 2 - 7 , since n(F -R 2 0,
The different measures of dispersion can be compared among themselves
on

various criteria, which have been discussed in Section 4.3.

defined. But the range becomes meaningless O - s -
All the four measures of dispersion are rigidly
the quartile deviation
when one or both of the two limits of the variable values are infinite, and Remarks : From (i), we have the following relation.

may not be uniquely obtained in

the case of ungrouped data or for the frequency distribution
of a discrete variable.
the variable are taken into account.
- G-+ (F -o
In finding each of these measures, all the given values of
However, the mean deviation and the standard deviation
are directly based on all the values. i.e., mean-square-deviation about c = variance of x + (T - c).
deviation remain unchanged even after the alteration of
On the other hand, the quartile may
be smaller than deviation about mean.
different nature of scatter may (B) The standard deviation cannot mean
several values. Again, two distributions exhibiting markedly
two extreme values.
have the same range, as range is dependent only
on
Let y i = 1, 2, . n are real quantities and = . Then we have,
deviation and quartile deviation is easily
The significance of the range, m e a n
the standard deviation is not capable of simple interpretation due to its
comprehensible. But
abstract nature.
(-520, for each i.

involve almost
The range is the simplest one to compute. Generally, the other measures

amount of labour for their

calculation.
the same

number of desirable properties by virtue of which it is readily

The standard deviation has
a

treatment. But the other measures do not possess such properties. I fwe put ; = ; - T, i = 1, 2, n , then we get,
amenable to algebraic
in general, the standard deviation is the best measure of
dispersion.
Thus, it is evident that,
when specd of computation is of prime importance (as in the
Of course, range is preferred is the suitable in of
control). Again, quartile deviation
measure case
case of statistical quality
distributions with open end.classes. Taking positive square-root, we have,
frequency
relations
5.4 Some important i.e., s,2 MD.
the least root-mean-square deviation.
(A) Standard deviation is
From (5d), the root-mean-square deviation The equality sign is valid either when all the values of the variable
Suppose a variable x taken n
values X1, X2 variable
are equal or when the
an arbitrary
value c is assumes only two distinct values with
equal frequency.
of x about
(C) The difference between the arithmetic mean and the median cannot be
the standard deviation. greater than
Let X1. X21 X are the given values of a
variable x. Let x and
2-7)+(7-of =-7 +2-)-7)+ n -?
me be,
arithmetic mean and the median of the respectively, the
Now -of given values and their standard deviation.
-
s
i=]
We show
are to
that
- -+nR-o. x melSs.

el-
me -me me
100 STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION 101

ne s - (ince MD ist Hence, 22 2n

gn holds either if all the values of the variable equal if all the values
Ss. [from 54.(B) MD S s]. Theequality are or

except the maximum and minimum values are equal to

(D) Suppose s and R are, respectively, the standard deviation and range of a set of n values
of a variable x, Then Hence, we have,
T.D.B.COLLEGE LIBRARY
ACC.Na 2.
Let the variable x assume the values x, X2
values be denoted by b and a respectively.
Let the greatest and the least of the 5.5 Measures of relative dispersion Dote 2I.d.
The measures of dispersion, discussed so far, are called the absolute measures and each of
Then R b - a.
them possesses the same unit as that of the variable. Naturally, they cannot be used for
the of two or more distributions having different units of measurement
From 5.4(A), we know - l e a s t when c = T. comparison of variability
for the variables. So, we requirearesome
of the
measures of dispersion which
referred to
independent of units
are

variables. Such measures as of relative dispersion. The simplest

measures
way of getting such a measure is to express an absolute measure of dispersion as a percentage
HeneceC- sY- =1 z(-a of a measure of central tendency. Some commonly used measures of this type are as follows:
where 2 and , include respectively those values of x which ()Coeficient of Variation : t is defined as
SandardMean
deviationx 100%. (5o)
are less than or equal to and greater than
2 In other words, the coefficient of variation is the standard deviation
expressed as a
perecentage of the mean. Symbolically,

C.v.= x 100%.
It is used for comparing dispersions
primarily of variables having different unitsof
Hence. -7}sie. fs measurement. For example, if we are to compare the
of students with the dispersion of their
dispersion of height (in cm.) of a group
weights (in kg.), we cannot use standard deviation of
either when all the values are equal or when the variable takes the two sets of data as they have different
Here the equality sign holds units, but we can use coefficient of variation.
values with equal frequency. Again, the coefficient of variation is taken as the suitable measure for
only two distinct comparison of
Again, we have dispersionof variables having same unit of measurement
when their means are wide
apart
Suppose there are two groups of people, one rich and the other poor, and the standard deviation
ns 2 - 7 ? = (a- 7) + (b- 7} + X,6- 7 of income of each group is Rs. 100.
i=1
Now, a difference of Rs. 100 in income does not have
and maximum values.
same
significance in the two cases; while for the first
group it is negligible, for the second it
the minimum is not n such cases, where means are
includes all values of x except so.
where , quite different, one should use coefficient of variation,
instead of standard deviation, for
meaningful comparison.
ns22 (a 7) + (b F)= [2(a + 2(b F The distribution having greater coefficient of
variation is regarded
-

So, as less stable (or more

variable) than the other.
[:24p2+ 4) =(p+ + (p- 91
ICa +b 27) + -b,
(a
(i) Coefficient of Mean Deviation :It is given by
Mean deviation about mean (or median)
100%
2a-b Mean (or median) .
(5p)
102 MEASURES OF DISPERSION 103
STATISTICAL TOOLS AND TECHNIQUES

(ii) Coefficient of Quartile Deviation: It is expressed as First we find, taking scores of batsman A,

Quartile deviationx 100% (5q) F mean (A) = 2+28 +47+ 63+71+39+10+60+96+14

10
46
Median
It should be noted that among these measures, coefficient of variation is the most widely SA F s.d(A) =32-46 +(2846+47-46)++(4-46|
used measureof relative dispersion, as it is based on the best measure of dispersion and that
of central tendency.
= 1O196+324+1+ 289 +625+49 +1296 + 196+2500 +1024)
Zlhustration 5.29
The mean and standard deviation of height readings of a group of employees of a firm are x 6500 = 650 25.49
found to be 172 cm and 18 cm, while the same measures for their weight readings are 65 kg
and 9 kg. So, C.V. of A = A x 100% = x 100% = 55.41%
46
Compare the variability of the height readings with that of the weight readings. TA
Again, for scores of batsman B, we get
calculate the
Here two variables have different units of measurement. So we are to
coefficient of variation of both the variables for comparing their variability.
FR mean (B) = tS|+48+55 +67 +90 +10+ 62 +40+80s
10
Since c.v. = standard deviation x 100%
mean
g S.d (B) = VTo19-50) + (31-50) + (48-50++(80-50|
C.v. for height = X
100 = 10.46%

= 1961+ 361+ 4+9+ 289 + 1600 +1600+ 144 + 100+ 900]

x100 13.849%.
and c.v. for weight =
the weight readings are more 596.8
weight is more than that of height, hence, V10 x5968 24.43.
= =

Since for
c.v.
in other words, the height readings are more stable than the V10
variable than the height readings;
weight readings. Hence, c.v.
of B xB 100% = x 100% =48.86%
Tllustration 5.30 We see that c.v. of B < c.v. of A. So, batsman B is more consistent in scoring.
and C.V. 50%, find var(5 2x)
10 =

ifA.M. =

5.6. Lorenz curve-representation of distribution of income

C.V. x 100%
We have,
=

A.M Lorenz curve is a special type of cumulative frequency graph. It is useful in studying the
concentration of wealth or income in relation to certain segment of a population.
30x105
50 =0 x 100 or,
S.D. =

or, 100 Let FCt) denote the percent cumulative frequency for the variable upto the value x and
Var(a) = 4 x (5)? = 100. 9 ) denote the percent cumulative total for the variable upto the value x. Obviously, both
So, Var(5- 21)
=
(-2)
F) and o) vary from 0 to 10. The curvee obtained by plotting Oa) against F(), for
different fixed values of x, is known as the Lorenz curve or the curve of concentration. The
Tlustration 5.31 certain season, given curve is necessarily concave upwards. The line ø) = Fl) is called the line
The scores of two batsmen, A and B, in ten innings during a are
of equal
distribution. In case of an income distribution it would mean that 10% of persons would earn
below: 10% of the total income, 50% of persons would earn 50% of the total income, and so on.
71 39 10 60 96 14
47 63 The more the departure of the Lorenz curve from the line of equal distribution, the more
32 28
48 53 67 90 10 62 40 80
the concentration of the total value in a few hands. The area between the line of equal
is
19 31
more consistent in scoring.
b a t s m e n in
of the
Find which
104 STATISTICAL TOOLS AND TECHNIQUES MEASURES OF DISPERSION 105

100T
(vi) Gini's coefficient G =

90
80 Here R' means the difference between the highest and the lowest income relative to the
mean income. Each of these measures is nonnegative. All the devices, excepting variance,
can
70 then
measure the relative inequality in distribution. If income is divided absolutely equally,
ANDQFEQBÓISTE R= 0. Again, R = N when the entire income goes to a single person. With perfect equality,
0
M = 0 and it becomes 2(N 1)/N in the case of whole income accruing to a single person.
and it is
It may be noted that Gini's coefficient G becomes zero in case of equal distribution
of variation
+0
KOF equal to (N 1)/N in the context of extreme inequality. The coefficient possesses
0 the property of being sensitive to income transfers for all income levels and, unlike the variance,
is independent of the mean income level.
20
It should be noted that Gini's coefficient is exactly one-half of the relative
mean difference,
where mean difference is defined as the arithmetic average of the absolute values of difference[
between all pairs of income. This measure is widely used and it is really a very direct measure
10 20 30 40 50 60 70 80 90 100 of income difference, taking note of differences between every pair of incomes. An alternative
PERCENTAGE CUMULATIVE FREQUENCY representation of G is
Fig. 5.1. The curve of concentration and the area of concentration.
G=1+N NY+ (N-1)Y +..
+2YN- +Yl, for Y, SY, S..s Y
distribution and the Lorenz curve, called the area of concentration, indicates the degree of This expression shows that Gini's coefficient is a rank-order-weighted sum of different
concentration; the larger the area the more is the concentration. Twice the area is Gini's
persons' income shares. Thus the poorest of the N individuals gets the weight eqal N,
to the
coefficient of concentration. next poor person the weight (N - 1), and so on till we arrive at the richest person who gets

5.7 Measures of inequality the Unless the rank-order is changed, even if there is any alteration in income
weight unity.
levels, the weighting pattern remains unchanged.
consider some measures which will be useful in comparing different distributions
Here we
Of course, the proper choice of inequality measure is a major problem. These inequality
of income and wealth. measures mutually differ in the sense that they weigh individual incomes in the perspective
the ith person, Y the total income, Y the mean income and N
Let Y denote the income of of the overall distribution. The range concentrates on the extremes giving zero weight to the
The common measures of inequality are given by, Gini's coefficient considers the income of
the total number of persons. entire middle portion of the distribtion, where as

(6) Relative range R' = Max Y-Min Y) peitdoe-ari cach individual by the rank-order weight.

Relative mean deviation M =

(ii) EXERCISES

1. A. Write True or False :

c Variance V=y- minimum about the mean.
i) Sum of squares of deviations is
C =
(i) Variance is always positive
iv) Coefficient of variation
always taken about
mean,
(iii) Mean deviation is

()Standard deviation
of logarithms H=
N2logY-log Y o same standard deviation but the mean of A is
(iv) Two samples A and B have the
The coefficient of variation of A is greater than that of B.
greater than that of B.

14