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Q: statistical economics ( Answered 5 out of 5 stars,   1 Comment )
Question  
Subject: statistical economics
Category: Business and Money > Economics
Asked by: jabeda-ga
List Price: $40.00
Posted: 24 Jul 2003 21:35 PDT
Expires: 23 Aug 2003 21:35 PDT
Question ID: 234875
In this question S stands for the last digit of student identity
number (SIN).  Thus if for example, SIN is S00115754 then in your case
for the purpose of this question it will be S = 4.

Consider the following 3 sets of data showing total expenditures ($)
incurred in 1999 by 3 families on 5 types of meat.  These expenditures
(data points) involve S where S stands for the last digit of student
identity number (SIN).  THus, for instance, the expenditure, S27, in
its full numerical form in the case of the student referred to above
(with SIN = S00115754), is 427 (dollars.

[NB: if the last digit of SIN is zero (0) then the equivalent set
relevant to your case, is the following data set ignoring S - that is
- assuming that each data point involves no S.  Thus, for instance,
S27, in the case of a student with zero as the last digit of his/her
SIN is simply 27 (dollars).

Table 3 Expenditures ($) incurred in 1999 by 3 families on 5 types of
meat.

Family 1: S27   S39   S22   S36   S31
Family 2: S32   S28   S33   S30   S27
Family 3: S34   S47   S16   S49   S39

A;  Based on the instruction given above, express the full numerical
version of the 3 data sets relevant to your case by substituting in
the relevant value for S.

Based on your fully expressed numerical version of the above 3 data
sets given in (a)

b.   Examine without performing any calculation, the 3 sets of data
shown above.  Indicate which set of data has the largest amount of
variability and which set has the least amount of variability and why?

c.   Calculate the variance and standard deviation of each of the
above 3 sets of data.  Discuss the results of calculation and in the
discussion relate obtained results to the following:

assessment based on examination by clear thinking without using
calculator
the units of measurement associated with the variance and the standard
deviation figures respectivley.
the usefulness of variance (how informative is it), as a measure of
variability of the 3 sets.
the usefulness of standard deviation (how informative is it), as a
measure of variability for the three sets.

d.   Calculate the sum of the deviations (differences) from the mean
of the individual expenditures for each of the above 3 sets of data. 
What general results that may be inferred from obtained results?

e.   Create and report a data set of size 5 whose mean is 20 and whose
variance is zero.  Discuss created/represented data set.

Hi

Need someones help to answer the above question in a hurry

thanks
Answer  
Subject: Re: statistical economics
Answered By: elmarto-ga on 25 Jul 2003 08:37 PDT
Rated:5 out of 5 stars
 
Hi jabeda!
Although the student number is missing from your question, it can be
done anyway. The only question that will remain unanswered here, then,
will be A; but this one is very easy once you know the appropiate
student number. Fortunately, the rest of the questions can be answered
without knowledge of S.

First of all let me explain why knowledge of S is not necessary to
answer questions regarding spread or dispersion (or variance). An S
"at the beggining" of a two-digit number, basically adds S*100 to that
number. For example, if S=4, then S27 is 427, or, conversely,

S*100 + 27 = 4*100 + 27 = 400 + 27 = 427

So basically, different S's just move the data points, but don't
change their dispersion. The set (120,124,119) has exactly the same
dispersion as (820,824,819).

So here are the answers to questions B on. Since S is irrelevant, I'll
assume S=0. When you know the appropiate S, just plug it before the
numbers in the answers.

B) Without performing any calculation, it appears that Family 2 has
the least variability. The data points only vary between 27 and 33 (or
427 and 433, or whatever), while the data points in the other families
vary between 27 and 39 for family 1; and between 16 and 49 for family
3. As data points in a set become "closer" to each other, the
dispersion of this set becomes smaller. It's clear that a collection
of numbers between 27 and 33 are closer to each other than numbers
between 27 and 39, or 16 and 49. This is a good indicative that
dispersion is the smallest in familiy 2. For analog reasons, without
performing any calculations, family 3 appears to have the greatest
dispersion.

C) These are the variances and standard deviations for each family:

           Variance       Std. Dev
Family 1     37.2            6.09
Family 2      5.2            2.28
Family 3    139.6           11.81

Notice that these results are independent of S: the variance for
familiy 1 is 37.2 whether S is 0, 1, 8 or whatever. You can check this
result for yourself. The formulas I used to calculate these values are
given in the following page, along with an example on how to calculate
them.

Variance and Std. Dev.
http://davidmlane.com/hyperstat/A16252.html

http://davidmlane.com/hyperstat/A40397.html

Also check

Standard deviation
http://www.quickmba.com/stats/standard-deviation/

As you can see, these results reflect what one supposed before making
any calculation. It's clear now that family 2 has the smallest
dispersion (since its variance is smaller than the other two) and that
family 3 has the largest one. Once we look at the actual values for
variance and SD, this results become apparent. Regarding the units of
both measures, since the units of the original data were dollars ($),
we have that the unit of the variance is "square-dollars" and the unit
of the SD is plainly dollars, hence the fact that SD is much more used
than variance when presenting summary statistics.

The standard deviation is also useful in the following way: if we
assume that the data points come from a normal (Gaussian)
distribution, then we can assume that roughly 95% of the observations
fall within plus or minus two standard deviations around the mean.
This is consistent with the data presented here. Take for example
family 2, which has mean=30 and SD=2.28. This would imply that most
observations fall between approximately 25.4 (~30-2*2.28) and 34.6
(~30+2*2.28). In this case, ALL the data points for family 2 fall in
this range.

Both the variance and the standard deviation are useful in assessing
the dispersion of a set of data points. If the variance of a set is
greater than the variance of another set, then it will always be the
case that the SD of the first set is also greater than the SD of the
second one. So in both cases, the largest the variance or SD, the
largest the dispersion of the data points. The main advantage of the
SD is that it has the same units as the original data.

More information on the subject:

"The variance and the standard deviation are both measures of the
spread of the distribution about the mean. The variance is the nicer
of the two measures of spread from a mathematical point of view, but
as you can see from the algebraic formula, the physical unit of the
variance is the square of the physical unit of the data. For example,
if our variable represents the weight of a person in pounds, the
variance measures spread about the mean in squared pounds. On the
other hand, standard deviation measures spread in the same physical
unit as the original data, but because of the square root, is not as
nice mathematically. Both measures of spread are useful"

Mean, Variance, and Standard Deviation
http://www.fmi.uni-sofia.bg/vesta/Virtual_Labs/freq/freq2.html

D) Let's calculate it for family 1, the results for the other families
are analogous. Also, these results are again independent of S. The
data points for this family are

(27,39,22,36,31)

The mean is then (27+39+22+36+31)/5 = 31. Therefore, the sum of
deviations from the mean is:

 (27-31)+(39-31)+(22-31)+(36-31)+(31-31)

=   -4  +   8   +   -9  +   5   +   0

= 0

If you calculate it in the same way, you'll see that this result is
also 0 for the other families. To see how this result is independent
from S, let's take S to be for example 6 and recalculate this. The
data points would be:

(627,639,622,636,631)

The mean would then be 631. And again,

 (627-631)+(639-631)+(622-631)+(636-631)+(631-631)

=   -4    +   8     +   -9    +     5   +   0

= 0

Why is it 0 for all the sets? This is a property of the mean. This
result will be true for any data set. The intuition behind this is
that the mean is a measure for central tendency. Therefore, one would
expect that, of all the data points in the set, some of them are above
the mean, and some of them are below the mean. Since we want the mean
to measure "central" tendency, the mean is constructed in a way that
values below the mean are "counterweighted" with values above the
mean, thus by looking at the mean we get an idea of around which
number are the data points located.

E) The only 5-observation data set eith mean 20 and zero variance is
simply

(20, 20, 20, 20, 20)

Clearly the mean here is 20. A set having zero variance must imply
that all the observations are equal. That is 0-variance means no
dispersion at all, and the only sets with no dispersion at all are
sets that have only identical numbers. Mathematically, if you look at
the formula for the variance, you'll see that if even one of the data
points were different from the rest, it's impossible for the variance
to be 0. For example, the set:

(20,20,20,21,19)

The mean of this set is 20. However, its variance is:

 (1/5)* [ (20-20)^2 + (20-20)^2 + (20-20)^2 + (21-20)^2 + (19-20)^2 ]
=(1/5)* [     0             0          0          1          1      ]
=2/5


Google search strategy
variance "standard deviation"
://www.google.com/search?sourceid=navclient&ie=UTF-8&oe=UTF-8&q=variance+%22standard+deviation%22


I hope this helps! If you find anything unclear about my answer,
please don't hesitate to request a clarification, so I can follow up.
Otherwise, I await your rating and final comments.

Best wishes!
elmarto
jabeda-ga rated this answer:5 out of 5 stars
Can you for all your help.  This is the first time I am doing this
subject.  You have helped me to really understand (step by step) the
whole process
thanks once again for all your help
Jabeda

Comments  
Subject: Re: statistical economics
From: elmarto-ga on 28 Jul 2003 23:00 PDT
 
You're very welcome for your nice comments and rating! I hope to see
you again soon around here.

Best wishes!
elmarto

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