Pareto chart

Definition

A Pareto chart is a type of bar graph that represents the frequency or impact of problems or causes in descending order, combined with a cumulative line graph to show the total effect. It helps identify the most significant factors in a dataset.

5 Must Know Facts For Your Next Test

1. Pareto charts are based on the Pareto principle, which states that roughly 80% of effects come from 20% of causes.
2. The bar heights in a Pareto chart represent frequencies or counts, while the cumulative line represents the running total percentage.
3. It's commonly used in quality control and business analytics to prioritize problem-solving efforts.
4. Pareto charts help visualize which categories contribute most significantly to an overall effect.
5. They can be constructed using software tools like Excel, Minitab, or statistical programming languages.

Review Questions

Related terms

Histogram:

A graphical representation of data distribution using bars to show frequency counts within specified intervals.

Bar Chart: A graph that uses bars to represent categorical data with rectangular bars proportional to the values they represent.

$80/20$ Rule: $80\%$ of outcomes result from $20\%$ of causes; also known as the Pareto Principle.