Histograms collect data into compartments and count the number of times data lands in a compartment. A common form of histogram is a frequency distribution histogram. Making a frequency distribution histogram has three steps, collecting data, sorting data into compartments of the same size, and counting how many times data lands into each compartment. Drawing a chart that represents a frequency distribution histogram is usually done using a bar graph.
Bar graphs use bars or bins that grow 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 into it. For example, the bin containing the numbers one through ten will increase anytime a number between one and ten is produced. If, for example, a three and a seven are produced, the bin labeled "one to ten" and will rise two units.
Other common forms of frequency distribution histograms are line graphs and relative frequency graphs. Line graphs do not display the bin width in the graph but simply place a dot at the frequency value for each bin. The relative frequency distribution histogram only allows a fraction of the whole set of data to be graphed. To find the relative frequency, the frequency of each bin is divided by the total amount of data collected. These are used often in polls or surveys to simplify results.
Several uses for frequency distribution histograms can be found in economics. It is often useful to make a frequency distribution histogram with bins showing a certain range of household income. For example, households with lower income might not be able to afford a new technology, and a frequency distribution histogram with household income compartments can show this.
The main features of modality, symmetry, and distribution type are all studied extensively to improve economic outcomes. Modality shows where peaks are and often helps explain why a graph is not symmetrical. Symmetrical graphs usually mean 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 in the respective monthly bin. The next step is to make a relative frequency distribution histogram to clearly understand the percentage of profit each month is responsible for. This graph helps employers develop campaign strategies, adjust inventory, and staff appropriately.