Economics · Ch 16 — Measures of Dispersion
Summary
Summary
- A measure of dispersion improves our understanding of the behaviour of an economic variable, because an average by itself hides the variability in the data. Dispersion is quantified by four numerical measures — range, quartile deviation, mean deviation and standard deviation — and by one graphic method, the Lorenz curve.
- Range and quartile deviation are based upon the spread of values. Range is the simplest to calculate and understand, but is unduly affected by extreme values. Quartile deviation, based on only the middle 50% of the data, is not affected by extreme values.
- Mean deviation and standard deviation are based upon the deviations of values from their average. Mean deviation averages the absolute deviations but ignores their signs and so appears unmathematical. Standard deviation, the most widely used measure, is based on all values, is applied in more advanced statistical work, and is calculated on the basis of the mean only. …