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Statistics I Com Part 2

Chapter One Introduction

Q.No.1. Give Italian, Latin & German words used for the term Statistics.
Ans: The word Statistic came from the Latin word Status or the Italian word
Statista or German word Statistika which means Political State or Government.
Q.No.2. What is Statistics?
Ans: Statistics is the study of the collection, organization, analysis, interpretation
and presentation of data. It deals with all aspects of data. It is science of average.
Q.No.3. Define Statistics in your own words.
Ans: Statistics is the science which deals with data. After collection & organization of
data, it is further analyzed statistically and interpreted. It is the science of average,
counting & probability.
Q.No.4. Explain the term statistics in two different meanings.
Ans: The word Statistics has two different meaning i.e. in plural sense & in singular
sense which are as below:
In plural sense Statistics refers to data collected in systematic manner for
definite purpose in any filed of study i.e. industrial production, population
growth of country etc.
In singular sense Statistics refers to collection, analysis, interpretation &
presentation of numerical data. Through this we can make the opinion and
conclusion about the specific issue.
Q.No.5. What are the two different branches of statistics?
Ans: Statistics may be divided in two different branches (1) Descriptive Statistics
(2) Inferential Statistics
Q.No.6. List the phases of statistical analysis.
Ans: (1) Collection of data (2) Organization of data (3) Analysis of data (4)
Presentation & Interpretation of data.
Q.No.7. Differentiate census from sample survey.
Ans: In the census, data is collected at a specified time from the entire population
but in survey data is collected partly from the population.
Q.No.8. Why sample survey is preferred over census?
Ans: Sample survey is preferred over census because it is cost and time effective over
census.
Q.No.9. Distinguish a complete enumeration from sample survey.
Ans: Complete enumeration is the study of whole population in specified time while
sample survey is the statistical study of the part of population.
Q.No.10. Describe three limitations of Statistics.
Ans: (1)Statistical methods are best applicable on quantitative data.
(2) Statistical cannot be applied to heterogeneous data.
(3) Only a person who has an expert knowledge of statistics can handle statistical
data efficiently.
Q.No.11. What is Variable?
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University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Ans: A measurable quantity which can vary (differ) from one individual to another or
one object to another object is called variable. For e.g. height of students, weight of
children. It is denoted by the letters of alphabet e.g. x, y, z etc.
Q.No.12. What is Constant?
Ans: A characteristic is called a constant if it assumes a fixed or one value e.g. p is a
constant with a numerical value of 3.14286. is also a constant with numerical value
of 2.71828. The best example is that the weight of the whole Earth is constant.
Q.No.13. Define discrete and continuous variable.
Ans: A variable which can assume only some specific values within a given range is
called discrete variable. For e.g. Number of students in a class, Number of houses in a
street, number of children in a family etc. it cant occur in decimal. A variable which
can assume any value within a given range is called a continuous variable. For e.g.
age of persons, speed of car, temperature at a place, income of a person, height of a
plant, a life time of a T.V tube etc.
Q.No.14. Define discrete variable by giving examples.
Ans: A variable which can assume only some specific values within a given range is
called discrete variable. For e.g. Number of students in a class, Number of houses in a
street, number of children in a family etc. it cant occur in decimal.
Q.No.15. What is quantitative variable?
Ans: A characteristics expressed by mean of quantitative terms is known as
quantitative variable. For e.g. number of deaths in a country per year, prices
temperature readings, heights, weights etc.
Q.No.16. What is qualitative variable?
Ans: When a characteristic is express by mean of qualitative term is known as
qualitative variable or an attributes. For e.g. smoking, beauty, educational status,
green, blues etc. it is noted that these characters can not measure numerically.
Q.No.17. What is population?
Ans: The total group under discussion is called population. For example height of all
class students.
Q.No.18. What is Sample?
Ans: A part of population which represents the population is called sample.
Q.No.19. Define population and sample.
Ans: Total group under discussion is called population. For example height of all class
students. A part of population which represents the population is called sample.
Q.No.20. What is a parameter?
Ans: A measure computed from a population data is called parameter. For example a
population mean is a parameter.
Q.No.21. What is a statistic?
Ans: A measure computed from a sample data is called statistic. For example sample
mean is a statistic.
Q.No.22. What is descriptive statistics.
Ans: In descriptive statistics, it deals with collection of data, its presentation in
various forms, such as tables, graphs and diagrams and findings averages and other
measures which would describe the data.
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Q.No.23. What is Inferential Statistics.


Ans: It is the branch of statistics, which deals with the testing of hypothesis and
inference about population parameter is called Inferential Statistics.
Q.No.24. What is data?
Ans: A set of values or number of values is called data.
Q.No.25. What is primary data?
Ans: Most original first hand collected data is called primary data or the data without
any statistical analysis is called primary data.
Q.No.26. What is secondary data?
Ans: The data which has already collected and statistically analyzed by someone is
called secondary data. The data given in your book and all grouped data is called
secondary data.
Q.No.27. Give three sources of secondary data.
Ans: i. Official Source ii. Research Organization iii. Technical, Trade, Journals and
Newspaper
Q.No.28. Define continuous data and give two examples.
Ans: Data which can be described by a continuous variable is called continuous data.
For e.g. age of persons, speed of car, temperature at a place, income of a person,
height of a plant, a life time of a T.V tube etc
Q.No.29. Define attribute by giving example.
Ans: Attribute represents the quality or character. For example color of eyes, type of
mangoes, beauty etc.
Q.No.30. Note major sources for collecting secondary data.
Ans: i. Official Source ii. Semi Official Source iii. Private Source iv. Research
Organization v. Technical, Trade, Journals and Newspaper
Q.No.31. Name five fields of application of statistics.
Ans: (1) Business (2) Economics (3) State Affairs (4) Accounting & Audit (5) Natural
& Social Sciences
Q.No.32. Differentiate primary data from secondary data.
Ans: Most original first hand collected data is called primary data or the data without
any statistical analysis is called primary data. The data which has already collected
and statistically analysed by someone is called secondary data.
Q.No.33. Name the methods for collecting primary data.
Ans: i. Direct Personal Investigation ii. Indirect Investigation iii. Local Source iv.
Questionnaire Method
v. Registration vi. Questionnaire by Post vii. By Enumerators viii. By Telephone ix.
Through Internet
Q.No.34. Describe editing of data.
Ans: Editing of data means modifying, changing and correcting of data. It may does
for correction of data errors.
Q.No.35. Why editing of data is necessary?
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University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Ans: Statistical analysis will be productive only when data will be error free so editing
of data makes data error free.

Chapter Two Presentation of Data


Q.No.1. What is Classification?
Ans: The process of arranging data into homogenous group or classes according to
some common characteristics present in the data is called classification. For
Example: The process of sorting letters in a post office, the letters are classified
according to the cities and further arranged according to streets.
Q.No.2. Define tabulation.
Ans: The process of placing classified data into tabular form is known as tabulation. A
table is a symmetric arrangement of statistical data in rows and columns. Rows are
horizontal arrangements whereas columns are vertical arrangements. It may be
simple, double or complex depending upon the type of classification.
Q.No.3. What are different parts of statistical table?
Ans: (1) Title, (2) Head or Prefatory Note, (3) Box Head/Caption (4) Stub (5) Body (6)
Foot Note (7) Source Note.
Q.No.4. Draw Sketch of a table indicating its necessary parts.
Ans:

Q.No.5. What is frequency distribution?


Ans: A frequency distribution is a tabular arrangement of data into classes according
to the size or magnitude along with corresponding class frequencies (the number of
values fall in each class).
Q.No.6. What is an array?
Ans: The numerical raw data is arranged in ascending or descending order is called
an array.
Example:
Array the following data in ascending or descending order 6, 4, 13, 7, 10, 16,
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University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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19.
Solution:
Array in ascending order is 4, 6, 7, 10, 13, 16, and 19
Array in descending order id 19, 16, 13, 10, 7, 6, and 4

Q.No.7. What is meant by grouped data?


Ans: Data presented in the form of frequency distribution is called grouped data.
Q.No.8. Define class limits.
Ans: The variant values of the classes or groups are called the class limits. The
smaller value of the class is called lower class limit and larger value of the class is
called upper class limit. Class limits are also called inclusive classes. For Example:
Let us take the class 10 19, the smaller value 10 is lower class limit and larger value
19 is called upper class limit.
Q.No.9. Define class interval.
Ans: The difference between the upper and lower class boundaries (not between class
limits) of a class or the difference between two successive mid points is called size of
class interval.
Q.No.10. Define class mark.
Ans: The class marks or mid point is the mean of lower and upper class limits or
boundaries. So it divides the class into two equal parts. It is obtained by dividing the
sum of lower and upper class limit or class boundaries of a class by 2. For Example:
The class mark or mid point of the class 60 69 is 60 69/2 = 64.5
Q.No.11. What steps should we consider to make a frequency distribution?
Ans: (a) Decide the nature of data as discrete or continuous (b) Find the range (c)
Decide in the light of above two steps in which case the given problem falls. Cases are
as follows:
(1)Data is discrete and range is less than or equal to 15. (2) Data is discrete and
range is more than 15. (3) Data is continuous irrespective of range.
(d) Designed the class. However in designing you should consider following four
points:
(1) Starting point (2) Decide approximate desired number of classes (3) Decide
desired size of class (4) Decide the design of class.
Q.No.12. What is relative frequency distribution?
Ans: The relative frequency is the fraction or proportion of the total number of items
belonging to a class. This definition is applicable to both quantitative and categorical
(qualitative) data.
Q.No.13. What is meant by graph?
Ans: A diagram representing a system of connections or interrelations among two or
more things by a number of distinctive dots, lines, bars, etc.
Q.No.14. Define Histogram.
Ans: Histogram is a set of adjacent rectangles in which area of each rectangle is
proportional to the corresponding class frequency and class size.
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Q.No.15. What is frequency polygon?


Ans: Frequency polygons are a graphical device for understanding the shapes of
distributions. They serve the same purpose as histograms, but are especially helpful
for comparing sets of data. Frequency polygons are also a good choice for displaying
cumulative frequency distributions.
Q.No.16. What are the different type of charts used in presenting a
statistical data?
Ans:
1. Simple Bar Chart
2. Multiple Bar Chart or Cluster Chart
3. Staked Bar Chart or Sub-Divided Bar Chart or Component Bar Chart
Simple Component Bar Chart
Percentage Component Bar Chart
Sub-Divided Rectangular Bar Chart
Pie Chart
Q.No.17. When we use simple bar chart, multiple bar chart, component bar
chart & percentage component bar chart?
Ans: A simple bar chart is used when there is only one variable classified on spatial,
qualitative or temporal, in more than one interrelated variables we sue multiple bar
chart, simple component bar chart is used when there is variation in different
components within each class and percentage component bar chart is used when we
want to make a comparison in components holding the difference of total constants.
Q.No.18. Give preference to use multiple bar chart.
Ans: It is easy to understand and in more than one variable it is convenient way to
express the data simply while simple bar chart is only suitable for one variable.
Q.No.19. When you prefer to use component bar chart?
Ans: Component bar chart is preferred when the total magnitude of data is
subdivided into different parts or components.
Q.No.20. When you should prefer to use pie chart?
Ans: We use sub divided rectangular diagram and pie chart to compare two or more
quantities when each is subdivided into several components and comparison is also
desired in totals.
Q.No.21. When to use percentage component bar chart?
Ans: We use percentage component bar chart when we want to make the comparison
in components holding the difference of total constants.
Q.No.22. When you prefer to draw histogram?
Ans: When there is large number of observations and we want to see those
observations visible and clear to understand, we prefer to draw histogram of those
observations.
Q.No.23. What is a pie chart?
Ans: A graphic representation of quantitative information by means of a circle divided
into sectors, in which the relative sizes of the areas (or central angles) of the sectors
correspond to the relative sizes or proportions of the quantities. Total area consists on
360 angles.
Q.No.24. Give three advantages of graphs.
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University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Ans: (1) It shows trend (2) It gives understanding of data (3) It is easy to understand
Q.No.25. what is simple frequency distribution?
Ans: Number of times a given quantity (or group of quantities) occurs in a set of data.
For example, the frequency distribution of income in a population would show how
many individuals (or households) have the income of a certain level (say, $5,000 a
month)
Q.No.26. Define cumulative frequency distribution.
Ans: A table showing the cumulative frequency distribution is called the cumulative
frequency distribution or a cumulative frequency distribution is a summary of a set of
data showing the frequency (or number) of items less than or equal to the upper class
limit of each class.

Chapter Three Averages of First Order


Q.No.1. What is Measures of Central Tendency?
Ans: Single numerical value which mostly falls in the centre of data and used to
represent the whole data is called measures of central tendency. It is also called
measures of location or average value.
Q.No.2. What is an average?
Ans: Average refers to the sum of numbers divided by n. it is also called the mean
average or Central tendency or a measure of the middle value of the data set.
Q.No.3. Describe the qualities of good average.

Ans: (1) It should be easy to calculate and simple to understand.


(2) It should be clearly defined by a mathematical formula.
(3) It should not be affected by extreme values.
(4) It should be based on all the observations.
(5) It should be capable of further mathematical treatment.
(6) It should have sample stability.
Q.No.4. Name Different averages and defines one of them.

Ans: Types of Averages: (1) Arithmetic Mean (2) Geometric Mean (3)
Harmonic
Mean
(4) Median (5) Mode
Note: To define one of average, see below:
Q.No.5. Define Arithmetic Mean.

Ans: It is the most commonly used average or measure of the central tendency applicable only in
case of quantitative data. Arithmetic mean is also simply called mean. Arithmetic mean is defined
as:
Arithmetic mean is quotient of sum of the given values and number of the given values.
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University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Q.No.6. Explain the Direct Method for finding the arithmetic mean.
Ans: There are two formulas one for ungroup data and one for group data. In ungroup
data XX=X/n where X= sum of all X variable values and n means count of X
variable. In group data XX=fX/f where fX= sum of relevant frequencies multiply by
relevant variable X and f= sum of all the frequencies.
Q.No.7. What do you understand by Change of Origin & Change of
Scale?
Ans: Calculation of arithmetic mean by indirect shortcut method is called change of
origin In this method we calculate D by subtracting constant from every X value.
On the other hand method of calculating arithmetic mean by indirect coding is called
Change of Scale in which we divide D=X-XX by C (Common Divisor) or h.
Q.No.8.Give properties of arithmetic mean.
Ans:
(1) The sum of the deviations, of all the values of x, from their arithmetic mean,
is zero i.e. for ungroup data (X-XX)=0 and for group data f(X-XX)=0.
(2)Sum of squares of deviations from arithmetic mean is least i.e. (X-XX) < (XA) where A is any constant other than XX.
(3)If mean of variable X is XX and X & Y are linearly related as Y=a+bX then
YX=a+bXX. Where a and b are known constants.
(4)If means of n1, n2, n3..nk set of values are XX1, XX2, XX3. XXk
respectively then mean of overall n values is:

XXc=
XXc=

n1XX1+n2XX2+n3XX3+
nkXXk
n1+n2+n3+nk
niXXi
ni

Q.No.9. Explain the Concept of Weighted Mean.


Ans: Thus, arithmetic mean computed by considering relative importance of
each items is called weighted arithmetic mean. To give due importance to each
item under consideration, we assign number called weight to each item in proportion
to its relative importance. Weighted Arithmetic Mean is computed by using following
formula: XXw= WX/W where W stands for weights and X stands for variable.
Q.No.10. Give merits and demerits of arithmetic mean.
Ans:

Merits:
It is rigidly defined.
It is easy to calculate and simple to follow.
It is based on all the observations.
It is determined for almost every kind of data.
It is finite and not indefinite.
It is readily put to algebraic treatment.
It is least affected by fluctuations of sampling.
Demerits:
The arithmetic mean is highly affected by extreme values.
It cannot average the ratios and percentages properly.
It is not an appropriate average for highly skewed distributions.
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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It cannot be computed accurately if any item is missing.


The mean sometimes does not coincide with any of the observed value.

Q.No.11. Define Median.


Ans: Median is the most middle value in the arrayed data. It means that when the
data are arranged, median is the middle value if the number of values is odd and the
mean of the two middle values, if the numbers of values is even. In group data it is:

where L stands for lowest class boundary, h= difference


between class, f= relevant frequency, n=f and C= cumulative frequency.
Q.No.12. What purpose do you think an average serve?
Ans: 1. To improve measuring techniques
2. To reduce the amount of experimental error
3. To make sure that the data is recorded exactly the same way every time
Q.No.13. Compare Strengths and weaknesses of mode.
Ans:

Advantages:
It is easy to understand and simple to calculate.
It is not affected by extreme large or small values.
It can be located only by inspection in ungrouped data and discrete
frequency distribution.
It can be useful for qualitative data.
It can be computed in open-end frequency table.
It can be located graphically.
Disadvantages:
It is not well defined.
It is not based on all the values.
It is stable for large values and it will not be well defined if the data
consists of small number of values.
It is not capable of further mathematical treatment.
Sometimes, the data having one or more than one mode and sometimes
the data having no mode at all.
Q.No.14. Compare advantages and disadvantages of median.
Ans:

Advantages
1)
2)
3)
4)
5)

It is easy to compute and understand.


It can also be computed in case of frequency distribution with open ended classes.
It can be determined graphically.
It can be calculated easily by watching the data.
In some cases median gives better result than mean.

Disadvantages:

1) For computing median data needs to be arranged in ascending or descending order.


2) It is not based on all the observations of the data.
3) It can not be given further algebraic treatment.
4) It is not accurate when the data is not large.
5) In some cases median is determined approximately as the mid-point of two
observations whereas for mean this does not happen.
Q.No.15. Define Mode with examples.
Ans: Most repeated value of the given data is called mode for example if X=2, 2, 3,
4, 5, 5, 5, 6, 8, 10. In this data most repeated value is 5 so our mode will be 5.
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

P a g e | 10

Q.No.16. Note empirical relationship among mean, median and mode by


both equation and sketch.
Ans: If both the tails of frequency curve are equally extended on both sides from the
centre we say it is symmetrical distribution in which. If both the tails of frequency
curve are not equally extended on both sides from the centre we say it is positive or
negative skewed distribution.
Symmetrical Distribution= Mean=Median=Mode
Positively Skewed=Mean>Median>Mode
Negatively Skewed=Mean<Median<Mode

Q.No.17. How you differentiate ordinary mean from weighted mean?


Ans: In situation where al items do not have equal importance, we use weighted
mean rather than arithmetic mean and where all items do have equal importance, we
use arithmetic mean.

Important Formulas
Arithmetic Mean
Methods Name

Nature of Data
Ungrouped Data
Grouped Data

Direct Method
Indirect or
Short-Cut Method
Method of
Step-Deviation
Where
Indicates values of the variable
Indicates number of values of

.
.

Indicates frequency of different groups.


Indicates assumed mean.
Indicates deviation from

i.e,

Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Step-deviation and

Indicates common divisor

Indicates size of class or class interval in case of grouped data.


Summation or addition.

Median
Median from Ungrouped Data:

Median = Value of

Median from Grouped Data:

item

Where
= Lower class boundary of the model class
= Frequency of the median class
= Number of values or total frequency
= Cumulative frequency of the class preceding the median class
= Class interval size of the model class

Mode
Mode from Ungrouped Data:
Mode is calculated from ungrouped data by inspecting the given data.
We pick out that value which occur the greatest numbers of times in the data.
Mode from Grouped Data:
When frequency distribution with equal class interval sizes, the class which
has maximum frequency is called model class.

Or

Where
= Lower class boundary of the model class
= Frequency of the model class (maximum frequency)
= Frequency preceding the model class frequency
= Frequency following the model class frequency
= Class interval size of the model class
Or Empirical Mode= 3 Median 2 Mean
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Weighted Arithmetic Mean

Where:
Stands for weighted arithmetic mean.
Stands for values of the items and
Stands for weight of the item

Harmonic Mean
For Ungrouped Data

For Grouped Data

Geometric Mean
For Ungrouped Data

For Grouped Data

Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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Chapter Four Index Number


Q.No.1. What is an Index Number?
Ans: An index number is a specialized average designed to measure the relative
change in the value of variable or group of related variables with reference to change
in time or location.
Q.No.2.What are the types of index number?
Ans: There are two types of an index number (i) Simple Index Number (ii) Composite
Index Number.
Q.No.3.What is the base period?
Ans: The period which we like to compare the relative changes is known as referance
period or base period.
Q.No.4.What is price index number?
Ans: An index that traces the relative changes in the price of an individual good (or a
market basket of goods) over time.
Q.No.5. What is quantity index number?
Ans:A statistical measure reflecting the average of relative change in the quantities of
specified goods & services between two periods of time is called quantity index
number.
Q.No.6.What is simple index number?
Ans: A simple index numbers that measure a relative change in a single variable with
respect to a base these variables are Prices, Quantity, Cost of Living etc.
Q.No.7.What is composite index number?
Ans: It is number that measures an average relative change in a group of related
variables with respect to a base. Composite Index number are further classified as:
(1) Un-weighted composite Index Number
(2) Weighted Composite Index Number
Q.No.8.Define Chain Base method.
Ans: In this method index number is computed in two steps. As a first step, we
calculate link relative by dividing current period price/quantity/value by
price/quantity/value of immediate previous period of current and expressing this ratio
in percentage. In second step, we take just reverse step of step 1. Hence, to get chain
indices we multiply the current period link relative by link relative of immediate
previous period of current period and divide this product by 100.
Q.No.9.Define weighted index number.
Ans: Weighted index number is an index in which weights are assigned to that index.
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University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
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P a g e | 14

Q.No.10.Define Unweighted index number.


Ans: Unweighted index number is an index in which weights are not assigned to an
index.
Q.No.11. Define link relative.
Ans: Price of current period divided by price of immediate previous period multiplied
by 100 is called link relative.
Q.No.12.Define price relative.
Ans: Price in current year divided by price of base year and multiplied by 100 is
simply called price relative.
Q.No.13.What are the uses of index number?
Ans: Uses of Index Numbers
1. The price index numbers are used to measure change in the price of a

commodities. It helps in comparing the changes in the prices of one


commodity with another.
2. The quantity Index number is used to measure the change in quantities

produced, Purchased, Sold etc.


3. The Index numbers of industrial production are used to measure the

changes in the level of industrial production in the country.


4. The index number is used to measure the change in enrolment of

performance etc.
5. The index numbers of import prices and export prices are used to measure

the change in the terms of trade of a country.


6. The index numbers are used to measure seasonal variation and cyclical

variation in a time series.


7. The index numbers measure the purchasing power of money and determine

the real wages.


Q.No.14.What are the limitations of index number?
Ans:
1. All index numbers are not suitable for all purposes. They are suitable for the
purpose for which they constructed.
2. Comparisons of changes in variables over long period are not reliable
3. Index numbers are subject to sampling error.
4. It is not possible to take into account all changes in quality or product.
5. The index numbers obtained by different methods of construction may give
different results.
Q.no.15. Write down the classification of an index number.
Ans: Index number generally classified as
1. Simple index number.
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

P a g e | 15

2. Composite index number.


Index Number
Simple

Composite

Weighted

Un Weighted

Average of relative

Average of relative

Aggregative

Aggregative

Q.No.16.What is Laspeyres Index Number?


Ans:In this method base year quantities are used as weights for price index and base
year prices for quantity index.
Q.No.17.What is Paasches Index Number?
Ans:In this method current year quantities are used as weights for price index and
current year prices for quantity index.

Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

P a g e | 16

Chapter Five Probability


Q.No.1. Define an experiment/random experiment/trial?
Ans: In probability, experiment or trial is simply an action in which the result is
uncertain or simply uncertain situation in statistics is called Random Experiment (R.E).
Q.No.2. Define Probability.
Ans: Probability is the measurement of uncertainty which consists on occurrence or
non-occurrence of an event.
Q.No.3. Differentiate certainty and uncertainty.
Ans: A situation is called certain if it has only one possible outcome and it is called
uncertain if it has more than one outcome.
Q.No.4. Define Sample Space or possible outcomes.
Ans: All possible outcomes of an experiment are called sample space and is denoted
by S i.e. in toss of coin the sample space will be two (Head & Tail) & in throwing a
die it will be 6 (1, 2, 3, 4, 5, 6)
Q.No.5. Define Sample Point.
Ans: The elements of the sample space or possible outcome of a given random
experiment is called sample point.
Q.No.6. Define an event. What are its types?
Ans: A single result of an experiment or any desired sub set of the sample space is
called and event and it may be denoted by any letter A to Z. it has two main types (1)
Possible event & (2) Impossible event. Possible event has two types (1) simple event
(2) compound event and compound event has one more type which is sure or certain
event.
Q.No.7. Define simple event.
Ans: An event of sample space contains only one outcome is called simple event.
Q.No.8. Define compound event.
Ans: An event of sample space contains at least two outcomes is called compound
event these may be denoted by any letter A to Z.
Q.No.9. Define possible event.
Ans: An event of sample space contains at least one possible outcome is called
possible event.
Q.No.10. Define Impossible event.
Ans: An event of sample space contains none of the possible outcome is called
impossible event and is denoted by Greek letter .
Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

P a g e | 17

Q.No.11. What are the types of at least two events?


Ans: (1) Mutually exclusive events (2) Not-Mutually exclusive events (3) Equally Likely
Events (4) Exhaustive Events (5) Independent Events (6) Dependent Events
Q.No.12. Define Mutually Exclusive events.
Ans: If two events A & B have nothing common in sample space S then the event will
be mutually exclusive event.
Q.No.13. Define Not-Mutually Exclusive events.
Ans: If two events A & B have some thing common in sample space S then the event
will be Not-Mutually exclusive event.
Q.No.14. Define Equally Likely Event.
Ans: If two events A & B have equal chance of occurrence in sample space S then the
event will be Equally Likely Event.
Q.No.15. Define Independent Event.
Ans: If there are two events i.e. A in sample space 1 (S1) and B in sample space 2
(S2) and occurrence or non-occurrence of one event does not affect the occurrence
and non-occurrence of other event then it is called independent event.
Q.No.16. Define Dependent Event.
Ans: If there are two events i.e. A in sample space 1 (S1) and B in sample space 2
(S2) and occurrence or non-occurrence of one event affects the occurrence and nonoccurrence of other event then it is called dependent event.

Prepared & Selected By Iftikhar Ali Msc Economics (AIOU), Certification in Chinese History & Political Economy Howard
University, Behavioral Economics (Toronto University), Globalization (Howard University), American Capitalism (Cornell
University), Student of CMA (Certified Management Accountant) Institute of Cost & Management Accountancy Pakistan.
Teaching at Punjab College of excellence in Commerce Kamra Cantt

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