Business data tend to be right-skewed because financial variables often are unli
ID: 3252106 • Letter: B
Question
Business data tend to be right-skewed because financial variables often are unlimited at the top but are bounded from below by zero (e.g., salaries, employees, inventory). This is also true for engineering data (e.g., time to failure, defect rates) and sports (e.g., scores in soccer). Even in a Likert scale (1, 2, 3, 4, 5) a few responses in the opposite tail can skew the mean if most replies are clustered toward the top or bottom of the scale. Please Explain. No handwritten responds. Thanks. Business data tend to be right-skewed because financial variables often are unlimited at the top but are bounded from below by zero (e.g., salaries, employees, inventory). This is also true for engineering data (e.g., time to failure, defect rates) and sports (e.g., scores in soccer). Even in a Likert scale (1, 2, 3, 4, 5) a few responses in the opposite tail can skew the mean if most replies are clustered toward the top or bottom of the scale. Please Explain. No handwritten responds. Thanks.Explanation / Answer
To understand this, first we need to understand what skeweness actually is. Skewness is basically the deviation from the bell shaped curve. As we know, in bell shaped curve, the area under the left tail and right tail are equal. In skewed distribution, the peak of the curve occurs either on the left side or the right side but not in the middle of the distribution.
We can take the example of salaries. The salaries would be clustered around a particular value but there would be few outliers with high salaries (Typically the top management). Hence, it would be a skewed right distribution because those outliers will make the right tail longer than left. Similarly all the other examples are skewed distributions.
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