Histograms count data in compartments, with frequency distribution histograms being the most common. They involve collecting and sorting data into compartments, then graphing using a bar chart. Other forms include line graphs and relative frequency graphs. They have various uses in economics, such as tracking household income or profits in banking and accounting. Mode, symmetry, and distribution type are studied to improve results.
Histograms collect data into compartments and count the number of times the data arrives in a compartment. A common form of histogram is a frequency distribution histogram. Creating a histogram of the frequency distribution involves three steps: collecting the data, sorting the data into compartments of the same size, and counting how many times the data arrives in each compartment. Drawing a graph representing a histogram of the frequency distribution is usually done using a bar graph.
Bar charts use bars or bins that increase by a certain amount each time more data is added to a bin. The frequency distribution histogram has compartments that have a certain number for the times data landed in it. For example, the bin containing the numbers one through ten will increment each time a number between one and ten is produced. If, for example, a three and a seven are produced, the basket labeled “one to ten” will increase by two units.
Other common forms of frequency distribution histograms are line graphs and relative frequency graphs. Line graphs do not show the width of the bin in the graph, they simply place a dot at the frequency value for each bin. The relative frequency distribution histogram allows you to graph only a fraction of the entire data set. To find the relative frequency, the frequency of each bin is divided by the total amount of data collected. These are often used in polls or surveys to streamline the results.
Several uses for frequency distribution histograms can be found in economics. It is often useful to create a frequency distribution histogram with bins showing a certain range of household income. For example, lower income households may not be able to afford a new technology, and a frequency distribution histogram with household income compartments can demonstrate this.
The main characteristics of mode, symmetry and type of distribution are all studied in depth to improve economic results. The mode shows where the peaks are and often helps explain why a graph is not symmetrical. Symmetrical graphs usually indicate that the distribution type is normal, and other distribution types can further investigate non-symmetrical frequency distribution histograms.
In banking and accounting, frequency distribution histograms are used to track profits from month to month. Each month represents a bin and all profit goes into the respective monthly bin. The next step is to create a relative frequency distribution histogram to clearly understand the percentage of profit it is responsible for each month. This chart helps employers develop campaign strategies, adjust inventory and staff appropriately.
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