In a market study, what does a frequency distribution of sale prices show?
Correct Answer
B) How many sales fall into each price bracket
Why this is correct: A frequency distribution groups sale prices into brackets, showing how many sales fall into each bracket, revealing market concentration and distribution shape. Why the other choices are wrong: "The order in which the transactions closed" describes a time series, not frequency distribution. "The mean price of every bracket combined" is not shown; frequency counts sales, not calculates means. "The relationship between price and living area" requires a scatterplot or regression, not a frequency distribution. Exam tip: Frequency distributions show counts per price bracket; useful for identifying market segments and outliers.
Why This Is the Correct Answer
A frequency distribution reports how many observations fall into each price bracket, showing the shape and concentration of the market rather than a single summary figure.
Why the Other Options Are Wrong
Option A: The order in which the transactions closed
Closing order is chronological information, which a frequency distribution deliberately sets aside in favour of grouping by value.
Option C: The mean price of every bracket combined
A combined mean is a single summary statistic, which is what a distribution shows the limits of rather than what it reports.
Option D: The relationship between price and living area
The relationship between price and living area is shown by a scatter plot or estimated by regression.
How Many in Each Bucket
How Many in Each Bucket. The shape tells you things the average never will.
How to use: Look for two peaks. Bimodality usually means two submarkets have been analysed as one.
Exam Tip
Right skew is why the median is generally preferred for housing prices — a few high sales pull the mean upward.
Common Mistakes to Avoid
- -Reporting a mean without examining the distribution
- -Missing bimodality that signals combined submarkets
- -Confusing a frequency distribution with a scatter plot
Concept Deep Dive
Analysis
A frequency distribution groups observations into brackets and reports how many fall into each, converting a list of individual sale prices into a picture of the market's shape. That picture answers questions a mean cannot. It shows where the bulk of activity concentrates, how wide the market's range is, whether the distribution is skewed — housing markets typically have a long upper tail — and whether it is bimodal, which often signals that two distinct submarkets have been combined into one analysis. Each of those observations bears directly on appraisal judgment: skew explains why the median is usually the better central measure for housing, bimodality warns that the market area may be drawn too broadly, and the concentration shows where the subject sits relative to the bulk of activity. The distractors describe other things entirely: chronological ordering, a combined average, and the price-to-size relationship, which is a scatter plot or a regression rather than a frequency distribution.
Background Knowledge
A frequency distribution groups observations into intervals and reports counts per interval, revealing central tendency, spread, skew and multimodality. Housing price distributions are typically right-skewed, favouring the median as a central measure.
Real-World Application
An appraiser plots a frequency distribution, finds two distinct peaks, and splits the market area into the two submarkets the shape revealed.
More Statistics Questions
A set of comparable sales has a mean of $250,000 and a standard deviation of $20,000. What is the coefficient of variation?
A property sold for $400,000 and resold three years later for $463,050 with no physical change. What compound annual rate does this indicate?
A histogram of neighborhood sale prices shows two distinct peaks. What does this most likely mean?
What does it mean to validate a regression model?
An appraiser includes months elapsed since each sale as a variable in a price model. What is this intended to capture?
An appraiser presents a statistical analysis in a report. What must accompany it for the reader to weigh it?
An R-squared of 0.86 in a sales model indicates that:
Which measure would best summarize the most common lot size in a subdivision?
Paired sales analysis and regression differ mainly in that regression:
Price per square foot declines as homes get larger. What does this imply for a linear regression of price on area?
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