Statistics
"The mean tells you WHERE. Variance tells you how FAR. Together, they describe EVERYTHING."
1. Chapter Overview
This is the DATA side of statistics (complementing the Economics Statistics chapters). Given a dataset, how SPREAD OUT is it? This chapter covers: range, mean deviation about mean and median, variance, standard deviation, and coefficient of variation — for both ungrouped and grouped (continuous) data.
2. Measures of Dispersion
Why Dispersion?
- Two datasets can have the SAME MEAN but completely different SPREAD
- Dispersion measures quantify VARIABILITY, CONSISTENCY, RELIABILITY
Measures Covered
| Measure | Formula (Ungrouped Data) |
|---|---|
| Range | Max — Min |
| Mean Deviation about mean | Σ |
| Mean Deviation about median | Σ |
| Variance (σ²) | Σ(xᵢ — x̄)² / n |
| Standard Deviation (σ) | √[Σ(xᵢ — x̄)² / n] |
3. Variance and Standard Deviation
Formulas
Ungrouped Data
- Variance (σ²) = Σ(xᵢ — x̄)² / n
- Standard Deviation (σ) = √(Variance)
Alternative (Computational) Formula
- σ² = Σxᵢ²/n — (Σxᵢ/n)² = (mean of squares) — (square of mean)
Grouped (Discrete) Data
- σ² = Σfᵢ(xᵢ — x̄)² / Σfᵢ
Grouped (Continuous) Data
- Step deviation method using assumed mean and class interval — simplifies calculations with large numbers.
4. Coefficient of Variation (C.V.)
- C.V. = (σ / x̄) × 100
- A UNIT-FREE measure of relative dispersion
- Allows COMPARISON of variability across datasets with different means or units
- Lower C.V. = greater consistency (less variability)
5. Comparing Two Datasets
- Equal means → compare STANDARD DEVIATIONS (lower = more consistent)
- Different means → compare COEFFICIENTS OF VARIATION (C.V.)
6. Exam Focus
- Mean deviation about mean and median — for ungrouped data
- Variance and standard deviation — for ungrouped AND grouped (discrete and continuous)
- Step deviation method for continuous grouped data
- Coefficient of variation — formula, when used, interpretation
- Comparing datasets using C.V.
7. Key Formulas
| Formula | Ungrouped Data |
|---|---|
| Mean Deviation (about mean) | Σ |
| Variance (σ²) | Σ(xᵢ — x̄)² / n |
| Standard Deviation (σ) | √(σ²) |
| Coefficient of Variation | (σ / x̄) × 100 |
8. Conclusion
Statistics transforms raw numbers into MEANING:
- MEAN DEVIATION: How far, on average, are the values from the centre?
- VARIANCE and STANDARD DEVIATION: The STANDARD measures of spread. Standard deviation has the same units as the original data.
- C.V.: The relative measure. For comparing apples and oranges — datasets with different means or units.
'Without data, you're just another person with an opinion. With data and statistics, you're a person with evidence.'
