Presentation3 - Calculating average distances Imagine you...

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6/21/11 Calculating average distances Imagine you have three numbers: 1, 2, and 9. The mean is 4. What happens if we find the average distance of values from the mean? Average distance = (1 to μ) + (2 to μ) + (9 to μ) 3 = 3 + 2 + (-5) 3 = 0 The average distance of values from the mean is always 0. The positive and negative distances cancel each other out. So what
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6/21/11 We can calculate variation with the variance… We want a way to measure the average distance of values from the mean in a way that stops the distances from cancelling each other out. We need a way of making all the numbers positive. Maybe it’ll work if we square the distances first. Then each number is bound to be positive. Let’s try this with the same three numbers.
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6/21/11 Average (distance)2 = (1 to μ)2 + (2 to μ)2 + (9 to μ)2 3 = 32 + 22 + (-5)2 3 = 9 + 4 + 25 3 = 12.67 (to 2 decimal places) Variance The variance is a way of measuring spread, and it’s the average of the distance of values from the mean
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This note was uploaded on 06/19/2011 for the course ECON 202 taught by Professor Pharuddin during the Summer '11 term at The School of the Art Institute of Chicago.

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Presentation3 - Calculating average distances Imagine you...

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