The Pareto Chart Help in Statistics

The Pareto Chart is based on The Pareto principles of Italian Economist Vilfredo Pareto in 19th centaury. The Pareto principles state that the most effects are the result of relatively of few causes that is, 80 % of effects come from 20 % of the possible causes. Materials, raw materials and operators can be taken as example.

The Pareto Chart: The Pareto chart can also be known as, the Pareto diagram. There can be two types of Pareto Charts such as, a weighted Pareto chart or a comparative Pareto Chart. A Pareto chart is a special bar graph, where the lengths are represented by frequency or cost, time or money that are arranged with the longest bars on the left and the shortest to the right side. Thus, a chart visually exhibits the relative importance of problems or conditions.

Today in the subject of Statistics, Pareto Chart is of a great importance.

Here are the few steps involved in constructing a Pareto Chart:

· The problem to be analyzed is defined and to identify the different potential causes.

· Decide which criterion to use when comparing the possible causes such as, how often the different causes occur, their consequences or costs.

· Define the time interval during which data will be collected and carry out the data collection for the selected criterion.

· Place the causes from left to right on the horizontal axis of the chart, in descending relative importance. Rectangle lines are drawn to represent the heights.

· It is necessary to mark the data value on the left vertical axis and the percentage value on the right and a curve of cumulative is drawn along the top edges of the rectangles.

An illustration is given below to explain the use of a Pareto Chart:

This illustration explains how a Pareto Chart works. Many studios around the world make televisions commercials. One studio specialized in shooting ads starring cats. Lately, many factors took place for the delay of the commercial such as, lack of equipment, technical problems with audio and video, rework of scripts and misbehaving cats.

Causes of Cat distress Time lost due to the cause Total time lost due to the cause

Not been fed 4, 3, 5, 2, 5, 3 22

Not been cuddled 3, 3, 5, 3 14

Studio too cold 9, 2, 4, 6, 4, 5 30

Too much noise 20, 15, 35, 20, 9, 16 115

Smell of previous cat still present 41, 68, 39, 60, 29, 52, 19, 8 316

Surface to sit/lie on not appealing 2, 4, 1 7

The above given details can also be explained with a graphical example.

Time lost (Minutes) Cumulative % time lost

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Tax effect on Supply and Demand Curve Help

In the subject of Economics, Supply and Demand play an important role. In Economics Tax effect on Supply and Demand can be significant. Taxes on goods and services can determine their cost and in turn their demand and supply.

Definition of Tax effect:

The primary reasons for any tax is to raise income or revenue from tax payers for the taxing authority as, to impose economic burden on those tax payers to alter the distribution or allocation of resources in the affected markets. By changing the distribution of resources that is the quantities produced and consumed, where a tax can also affect the economic efficiency with which the resources are employed. As a result, the analysis and consequences of tax consists of revenue, resource allocation, income distribution and economic efficiency. In case, if a tax is raised on a particular market, the direct effects can be examined in that market. Whereas, it’s indirect effects can cause an issue to other related markets.

The effect of Tax on a good:

Tax on a good is added to the marginal cost of seller of the goods. An illustration can explain the shift supply and demand curve. $1 of tax on one gallon diesel fuel will change the supply curve due to the amount of tax. The shifts in the supply curve, the equilibrium of price and quantity will also change because of tax. Eventually the impact on quantity and price will depend on the price elasticity’s of demand and supply.

In the above illustrated figure shows elasticity of demand and supply determine the impact of the tax. Here, the curve shifts upwards due to the amount of the tax. So, the equilibrium quantity falls and the equilibrium prices rises because of the tax. The decrease in the equilibrium of quantity creates a loss of consumer surplus and also producers’ surplus, which is known as deadweight loss from the tax. The size of the deadweight loss and the relative size of the impact on the price and quantity are varied. As, a result the supply curve and the demand curve have different price elasticity.

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