Data Collection

and Analysis UNIT 3 MEASURES OF CENTRAL

TENDENCY

Objectives
After going through this unit, you will learn:
• the concept and significance of measures of central tendency
• to compute various measures of central tendency, such as arithmetic
mean, weighted arithmetic mean, median, mode, geometric mean and
harmonic mean
• to compute several quantiles such as quartiles, deciles and percentiles
• the relationship among various averages.
Structure
3.1 Introduction
3.2 Significance of Measures of Central Tendency
3.3 Properties of a Good Measure of Central Tendency
3.4 Arithmetic Mean
3.5 Mathematical Properties of Arithmetic Mean
3.6 Weighted Arithmetic Mean
3.7 Median
3.8 Mathematical Property of Median
3.9 Quantiles
3.10 Locating the Quantiles Graphically
3.11 Mode
3.12 Locating the Mode Graphically
3.13 Relationship among Mean, Median and Mode
3.14 Geometric Mean
3.15 Harmonic Mean
3.16 Summary
3.17 Key Words
3.18 Self-assessment Exercises
3.19 Further Readings

3.1 INTRODUCTION
With this unit, we begin our formal discussion of the statistical methods for
summarising and describing numerical methods for summarising and
describing numerical data. The objective here is to find one representative
value which can be used to locate and summarise the entire set of varying
values. This one value can be used to make many decisions concerning the
entire set. We can define measures of central tendency (or location) to find
some central value around which the data tend to cluster.
36
 Measures of
3.2 SIGNIFICANCE OF MEASURES OF Central Tendency
CENTRAL TENDENCY
Measures of central tendency i.e. condensing the mass of data in one single
value, enable us to get an idea of the entire data. For example, it is impossible
to remember the individual incomes of millions of earning people of India.
But if the average income is obtained, we get one single value that represents
the entire population. Measures of central tendency also enable us to compare
two or more sets of data to facilitate comparison. For example, the average
sales figures of April may be compared with the sales figures of previous
months.

3.3 PROPERTIES OF A GOOD MEASURE OF

CENTRAL TENDENCY
A good measure of central tendency should possess, as far as possible, the
following properties,
i) It should he easy to understand.
ii) It should he simple to compute.
iii) It should be based on all observations.
iv) It should be uniquely defined.
v) It should be capable of further algebraic treatment.
vi) It should not be unduly affected by extreme values.
Following are some of the important measures of central tendency which are
commonly used in business and industry.
• Arithmetic Mean
• Weighted Arithmetic Mean
• Median
• Quantiles
• Mode
• Geometric Mean
• Harmonic Mean

3.4 ARITHMETIC MEAN

The arithmetic mean (or mean or average) is the most commonly used and
readily understood measure of central tendency. In statistics, the term average
refers to any of the measures of central tendency. The arithmetic mean is
defined as being equal to the sum of the numerical values of each and every
observation divided by the total number of observations. Symbolically, it can
be represented as:
∑�
�� =
� 37
Data Collection where ∑x indicates the sum of the values of all the observations, and N is the
and Analysis total number of observations. For example, let us consider the monthly salary
(Rs.) of 10 employees of a firm
2500, 2700, 2400, 2300, 2550, 2650, 2750, 2450, 2600, 2400
If we compute the arithmetic mean, then
�� = 2500 + 2700 + 2400 + 2300 + 2550 + 2650 + 2750 + 2450 + 2600 + 2400

25300
= = ��. 2530.
10
Therefore, the average monthly salary is Rs. 2530.
We have seen how to compute the arithmetic mean for ungrouped data. Now
let us consider what modifications are necessary for grouped data. When the
observations are classified into a frequency distribution, the midpoint of the
class interval would be treated as the representative average value of that
class. Therefore, for grouped data; the arithmetic mean is defined as
∑��
�� =
�
Where X is midpoint of various classes, f is the frequency for corresponding
class and N is the total frequency, i.e. N = ∑�.
This method is illustrated for the following data which relate to the monthly
sales of 200 firms.

Monthly Sales No. of Monthly Sales No. of Firms

(Rs. Thousand) Firms (Rs. Thousand)
300-350 5 550-600 25
350-400 14 600-650 22
400-450 23 650-700 7
450-500 50 700-750 2
500-550 52

For computation of arithmetic mean, we need the following table:

Monthly Sales Mid point No. of firms fX
(Rs. Thousand) X f
300-350 325 5 1625
350-400 375 14 5250
400-450 425 23 9775
450-500 475 50 23750
500-550 525 52 27300
550-600 575 25 14375
600-650 625 22 13750
650-700 675 7 4725
700-750 725 2 1450
N = 200 ΣfX=102000
∑�� 102000
�̅ = = = 510
38 � 200
Hence the average monthly sales are Rs. 510. Measures of
Central Tendency
To simplify calculations, the following formula for arithmetic mean may be
more convenient to use.
∑��
�̅ = � + ×�
�
���
where A is an arbitrary point, d = �
, and i = size of the equal class interval.
���
REMARK: A justification of this formula is as follows. When d = �
, then
X = A + i d Multiplying throughout by f, taking summation on both sides
and. Dividing by N, we get
∑��
�̅ = � + ×�
�
This formula makes the computations very simple and takes less time. To
apply this formula, let us consider the same example discussed earlier and
shown again in the following table.

Monthly, Sales Mid point No. of (X-525)/50 =d fd

(Rs. Thousand) Firms f
300-350 325 5 -4 -20
350-400 375 14 -3 -42
400-450 425 23 -2 -46
450-500 475 50 -1 -50
500-550 525 52 0 0
550-600 575 25 +1 +25
600-650 625 22 +2 +44
650-700 675 7 +3 +21
700-750 725 2 +4 +8
N = 200 ∑fd = –60
∑�� 60
�̅ = � + × � = 525 − × 50
� 200
= 525 - 15 = 510 or Rs. 510
It may be observed that this formula is much faster than the previous one and
the value of arithmetic mean remains the same.

3.5 MATHEMATICAL PROPERTIES OF

ARITHMETIC MEAN
Because the arithmetic is defined operationally, it has several useful
mathematical properties. Some of these are:
1) The sum of the deviations of the observations from the arithmetic mean is
always zero. Symbolically, it is:
∑(� − �̅ ) = 0 39
Data Collection It is because of this property that the mean is characterised as a point of
and Analysis balance, i.e, the sum of the positive deviations from mean is equal to the
sum of the negative deviations from mean.
2) The sum of the squared deviations of the observations from the mean is
minimum, i.e., the total of the squares of the deviations from any other
value than the mean value will be greater than the total sum of squares of
the deviations from mean. Symbolically,
∑(� − �̅ )� is a minimum.
3) The arithmetic means of several sets of data may be combined into a
single arithmetic mean for the combined sets of data. For two sets of data,
the combined arithmetic mean may be defined as

N� X̄� + N� X̄ �
�̅�� =
N� + N�
Where �̅�� = combined mean of two sets of data.
�̅�� = arithmetic mean of the first set of data.
�̅�� = arithmetic mean of the second set of data.
N1 = number of observations in the first set of data.
N2 = number of observations in the second set of data.
If we have to combine three or more than three sets of data, then the same
formula can be generalised as:
N� ��� + N� ��� + N� ��� + ⋯ …
�����. =
N� + N� + N� + ⋯ …
The arithmetic mean has the great advantages of being easily computed and
readily understood. It is due to the fact that it possesses almost all the
properties of a good measure of central tendency. No other measure of central
tendency possesses so many properties. However, the arithmetic mean has
some disadvantages. The major disadvantage is that its value may be
distorted by the presence of extreme values in a given set of data. A minor
disadvantage is when it is used for open-end distribution since it is difficult to
assign a midpoint value to the open-end class.
Activity A
The following data relate to the monthly earnings of 428 skilled employees in
a big organisation. Compute the arithmetic mean and interpret this value.
Monthly No. of Monthly No. of
Earnings employees Earnings employees
(Rs.) (Rs.)
1840-1900 1 2080-2140 126
1900-1960 3 2140-2200 90
1960-2020 46 220Q-2260 50
2020-2080 98 2260-2320 6
2320-2380 8
40
 Measures of
3.6 WEIGHTED ARITHMETIC MEAN Central Tendency

The arithmetic mean, as discussed earlier, gives equal importance (or weight)
to each observation. In some cases, all observations do not have the same
importance. When this is so, we compute weighted arithmetic mean. The
weighted arithmetic mean can be defined as
∑WX
��� =
∑W
Where ��� represents the weighted arithmetic mean,
W are the weights assigned to the variable X.
You are familiar with the use of weighted averages to combine several grades
that are not equally important. For example, assume that the grades consist of
one final examination and two mid term assignments. If each of the three
grades are given a different weight, then the procedure is to multiply each
grade (X) by its appropriate weight (W). If the final examination is 50 per
cent of the grade and each mid term assignment is 25 per cent, then the
weighted arithmetic mean is given as follows:
∑WX W� X� + W� X� + W� X�
��� = =
∑W W� + W� + W�
50X� + 25X� + 25X�
=
50 + 25 + 25
Suppose you got 80 in the final examination, 95 in the first mid term
assignment, as 85 in the second mid term assignment then
50(80) + 25(95) + 25(85)
��� =
100
4000 + 2375 + 2125 8500
= = = 85
100 100
The following table shows this computation in a tabular form which is easy
to employ for calculation of weighted arithmetic mean.

Grade Weight WX
X W
Final Examination 80 50 4000
First assignment 95 25 2375
Second assignment 85 25 2125
∑W = 100 ∑WX = 8500
∑WX 8500
��� = = = 85
∑W 100
The concept of weighted arithmetic mean is important because the
computation is the same as used for averaging ratios and determining the
mean of grouped data. Weighted mean is specially useful in problems
relating to the construction of index numbers.
41
Data Collection Activity B
and Analysis
A contractor employs three types of workers: male, female and children. He
pays Rs. 40, Rs. 30, and Rs. 25 per day to a male, female and child worker
respectively. Suppose he employs 20 males, 15 females, and 10 children.
What is the average wage per day paid by the contractor? Would it make any
difference in the answer if the number of males, females, and children
employed are equal? Illustrate.
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3.7 MEDIAN
A second measure of central tendency is the median. Median is that value
which divides the distribution into two equal parts. Fifty per cent of the
observations in the distribution are above the value of median and other fifty
per cent of the observations are below this value of median. The median is
the value of the middle observation when the series is arranged in order of
size or magnitude. If the number of observations is odd, then the median is
equal to one of the original observations. If the number of observations is
even, then the median is the arithmetic mean of the two middle observations.
For example, if the income of seven persons in rupees is 1100, 1200, 1350,
1500, 1550, 1600, 1800, then the median income would be Rs. 1500.
Suppose one more person joins and his income is Rs. 1850, then the median
���������
income of eight persons would be �
= 1525 (since the number of
observations is even, the median is the arithmetic mean of the 4th person and
5th person).
For grouped data, the following formula may be used to locate the value of
median.
�/�����
Med. = L + �
×i

where L is the lower limit of the median class, pcf is the preceding
cumulative frequency to the median class, f is the frequency of the median
class and i is the size of the median class.
As an illustration, consider the following data which relate to the age
distribution of 1000 workers in an industrial establishment.

Age (Years) No. of workers Age (Years) No. of Workers

Below 25 120 40-45 150
25-30 125 45-50 140
30-35 180 50-55 100
42 35-40 160 55 and above 25
Determine the median age. Measures of
Central Tendency
The location of median value is facilitated by the use of a cumulative
frequency distribution as shown below in the table.

Age (Years) No. of workers Cumulative frequency

f c.f
Below 25 120 120
25-30 125 245
30-35 180 425
Median class
35-40 160 585
40-45 150 735
45-50 140 875
50-55 100 975
55 and Above 25 1000
N = 1000
� ����
Median = size of �
th observation = �
= 500th observation which lies in
the class 35 - 40.
�/����� �������
Median = L + �
× i = 35 + ���
×5
���
= 35 + ��� = 35 + 2.34 = 37.34 years.

Hence the median age is approximately 37 years. This value of median

suggests that half of the workers are below the age of 37 years and other half
of the workers are above the age of 37 years.

3.8 MATHEMATICAL PROPERTY OF MEDIAN

The important mathematical property of the median is that the sum of the
absolute deviations about the median is a minimum. In symbols ∑∣X-Med.∣ is
minimum.
Although the median is not as popular as the arithmetic mean, it does have
the advantage of being both easy to determine and easy to explain.
As illustrated earlier, the median is affected by the number of observations
rather than the values of the observations; hence it will be less distorted as a
representative value than the arithmetic mean.
An additional advantage of the median is that it may be computed for an
open-end distribution.
The major disadvantage of median is that further mathematical treatments
cannot be done. However, since median is a positional average, its value is
not determined by each and every observation.

43
Data Collection Activity C
and Analysis
For the following data, compute the median and interpret this value.

Monthly Rent No. of Persons Monthly Rent No. of Persons

(Rs.) paying the rent (Rs.) paying the rent
Below 1000 6 1800-2000 15
1000-1200 9 2000-2200 10
1200-1400 11 2200-2400 8
1400-1600 14 2400 and above 7
1600-1800 20

…………………………………………………………………………………
…………………………………………………………………………………
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3.9 QUANTILES
Quantiles are the related positional measures of central tendency. These are
useful and frequently employed measures of non-central location. The most
familiar quantiles are the quartiles, deciles, and percentiles.
Quartiles: Quartiles are those values which divide the total data into four
equal parts. Since three points divide the distribution into four equal parts, we
shall have three quartiles. Let us call them Q1, Q2, and Q3. The first quartile,
Q1, is the value such that 25% of the observations are smaller and 75% of the
observations are larger. The second quartile, Q2, is the median, i.e., 50% of
the observations are smaller and 50% are larger. The third quartile, Q3, is the
value such that 75% of the observations are smaller and 25% of the
observations are larger.
For grouped data, the following formulas are used for quartiles.
jN/4 − pcf
Q� = L + ×i for j = 1,2,3
f
where L is lower limit of the quartile class, pcf is the preceding cumulative
frequency to the quartile class, f is the frequency of the quartile class, and i is
the size of the quartile class.
Deciles: Deciles are those values which divide the total data into ten equal
parts. Since nine points divide the distribution into ten equal parts, we shall
have nine deciles denoted by D1, D2, , D9,
For grouped data, the following formulas are used for deciles:
KN/10 − pcf
D� = L + ×i k = 1,2, … … ,9
f
where the symbols have usual meaning and interpretation.
44
Percentiles: Percentiles are those values which divide the total data into Measures of
Central Tendency
hundred equal parts. Since ninety nine points divide the distribution into
hundred equal parts, we shall have ninety nine percentiles denoted by
P� , P� , P� , … … … … … … . , P��
For grouped data, the following formulas are used for percentiles.
��/�������
�� = � + �
×� for � = 1,2, … . ,99

To illustrate the computations of quartiles, deciles and percentiles, consider

the following grouped data which relate to the profits of 100 companies
during the year 1987-88.

Profits No. of Profits No. of

(Rs. lakhs) companies (Rs. lakhs) companies
20-30 4 60-70 15
30-40 8 70-80 10
40-50 18 80-90 8
50-60 30 90-100 7

Calculate Q1, Q2, (median), D6, and P90, from the given data and interpret
these values.
To compute Q1, Q2, D6, and P90, we need the following table:

Profits (Rs. lakhs) No. of companies (f ) c.f

20-30 4 4
30-40 8 12
40-50 18 30
50-60 30 60
60-70 15 75
70-80 10 85
80-90 8 93
90-100 7 100
���
Q1 = Size of N/4th observation = �
= 25th observation, which lies in the
class 40 — 50
N/4 − pcf 25 − 12
Q� = L + × i = 40 + × 10 = 40 + 7.22 = 47.22
f 18
This value of Q1 suggests that 25% of the companies earn an annual profit of
Rs. 47.22 lakh or less.
� ���
Median or Q2 = Size of �
th observation = �
= 50th observation which lies
in the class 50 — 60.
N/2 − pcf 50 − 30
Q� = L + × i = 50 + × 10 = 50 + 6.67 = 56.67
f 30

45
Data Collection This value of Q2, (or median) suggests that-50% of the companies earn an
and Analysis annual profit of Rs. 56.67 lakh or less and the remaining 50% of the
companies earn an annual profits of Rs. 56.67 lakh or more.
�� ����
D6 = Size of ��
th observation = ��
= 60th observation, which lies in the
class 50 — 60.

6N/10 − pcf 60 − 30
D� = L + × i = 50 + × 10 = 50 + 10 = 60
f 30

Thus 60% of the companies earn an annual profit of Rs. 60 lakh or less and
40% of the companies earn Rs. 60 lakh or more.
��� �����
P90 = size of ���
th observation = ���
= 90th observation, which lies in
the class 80-90.

90N/100 − pcf 90 − 85
P�� = L + × i = 80 + × 10 = 80 + 5 = 85
f 10

This value of 90th percentile suggests that 90% of the companies earn an
annual profit of Rs. 85 lakh or less and 20% of the companies earn more than
Rs. 85 lakh or more.

3.10 LOCATING THE QUANTILES

GRAPHICALLY
To locate the median graphically, draw less than cumulative frequency curve
(less than ogive). Take the variable on the X-axis and frequency on the Y-
axis. Determine the median value by locating N/2th observation on the Y-
axis. Draw a horizontal line from this on the cumulative frequency curve and
from where it meets the curve, draw a perpendicular on the X-axis. The point
where it meets the X-axis is the value of median.
Similarly we can locate graphically the other quantiles such as quartiles,
deciles and percentiles.
For the data of previous illustration, locate graphically the values of Q1, Q2,
D60, and Q90.
The first step is to make a less than cumulative frequency curve as shown in
figure I.

46
 Measures of
Figure 1: Cumulative Frequency Curve Central Tendency
100
100
P90
0.90
90

80 0.80

0.70
70
D6
Cumulative Frequency

60 0.60
Less Than Curve Q2
50 0.50

40 0.40

30 Q1 0.30

20 0.20

10 0.10

20 30 40 50 60 70 80 90 100
Q1 = 47.22 D6 = 60 Q2 = 56.67 P93 = 85
Profits (Rs. Lakhs)

To determine different quantiles graphically, horizontal lines are drawn from

the cumulative relative frequency values. For example if we want to
determine the value of median (or Q2), a horizontal line can be drawn from
the cumulative frequency value of 0.50 to the less than curve and then
extending the vertical line to the horizontal axis. Ina similar way, other values
can be determined as shown in the graph. From the graph, we observe
Q� = 47.22, Q� = 57.67, D� = 60.0, P�� = 85
It may be noted that these graphical values of quantiles are the same as
obtained by the formulas.
Activity D
Given below is the wage distribution of 100 workers in a factory:

Wages (Rs.) No. of workers Wages (Rs.) No. of workers

Below 1000 3 1800-2000 10
1000-1200 5 2000-2200 8
1200-1400 12 2200-2400 5
1400-1600 23 2400 and above 3
1600-1800 31

Draw a less than cumulative frequency curve (ogive) and use it to determine
graphically the values of Q2, Q3, D60, and P80. Also verify your result by the
corresponding mathematical formula.
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47
Data Collection
and Analysis
3.11 MODE
The mode is the typical or commonly observed value in a set of data. It is
defined as the value which occurs most often or with the greatest frequency.
The dictionary meaning of the term mode is most usual. For example, in the
series of numbers 3, 4, 5, 5, 6, 7, 8, 8, 8, 9, the mode is 8 because it occurs
the maximum number of times.
The calculations are different for the grouped data, where the modal class is
defined as the class with the maximum frequency. The following formula is
used for calculating the mode.
��
Mode = L + � ×i
� ���

where L is lower limit of the modal class, d1 is the difference between the
frequency of the modal class and the frequency of the preceding class, d2 is
the difference between the frequency of the modal class and the frequency of
the succeeding class, i is the size of the modal class. To illustrate the
computation of mode, let us consider the following data.

Daily Sales No. of firms Daily Sales No. of firms

(Rs. thousand) (Rs. thousand)
20-30 15 60-70 35
30-40 23 70-80 25
40-50 27 80-90 5
50-60 20

Since the maximum frequency 35 is in the class 60-70, therefore 60-70 is the
modal class. Applying the formula, we get
�� �����
Mode = L + � × i = 60 + (�����)�(�����) × 10
� ���

150
= 60 +
25
= 60 + 6 = Rs.66.
Hence modal daily sales are Rs. 66.

3.12 LOCATING THE MODE GRAPHICALLY

In a grouped data, the value of mode can also be determined graphically. In
graphical method, the first step is to construct histogram for the given data.
The next step is to draw two straight lines diagonally on the inside of the
modal class bars, starting from each upper corner of the bar to the upper
corner of the adjacent bar. The last step is to draw a perpendicular line from
the intersection of the two diagonal lines to the X-axis which gives us the
modal value.

48
Consider the following data to locate the value of mode graphically. Measures of
Central Tendency
Monthly salary No. of Monthly salary No. of
(Rs.) employees (Rs.) employees
2000-2100 15 2400-2500 30
2100-2200 25 2500-2600 20
2200-2300 28 2600-2700 10
2300-2400 42

First draw the histogram as shown below in figure II.

Figure II: Histogram of Monthly Salaries
Figure II: Histogram of Monthly Salaries

The two straight lines are drawn diagonally in the inside of the modal class
bars and then finally a vertical line from the intersection of the two diagonal
lines is drawn on the X-axis. Thus the modal value is approximately Rs.
2353. It may be noted that the value of mode would be approximately the
same if we use the algebric method.
The chief advantage of the mode is that it is, by definition, the most
representative value of the distribution. For example, when we talk of modal
size of shoe or garment, we have this average in mind. Like median, the
value of mode is not affected by extreme values and its value can be
determined in open-end distributions.
The main disadvantage of the mode is its indeterminate value, i.e., we cannot
calculate its value precisely in a grouped data, but merely estimate it. When a
given set of data have two or more than two values as maximum frequency, it
is a case of bimodal or multimodal distribution and the value of mode is not
unique. The mode has no useful mathematical properties. Hence, in actual
practice the mode is more important as a conceptual idea than as a working
average.
Activity E
Compute the value of mode from the grouped data given below. Also check
this value of mode graphically.
49
Data Collection Monthly stipend No. of management Monthly No. of
and Analysis
(Rs.) trainees stipend (Rs.) trainees
2500-2700 25 3300-3500 20
2700-2900 35 3500-3700 15
2900-3100 60 3700-3900 5
3100-3300 40

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..………………………………………………………………………………..
..………………………………………………………………………………..

3.13 RELATIONSHIP AMONG MEAN, MEDIAN

AND MODE
A distribution in which mean, median and mode coincide is known as a
symmetrical (bell shaped) distribution. If a distribution is skewed (that is, not
symmetrical) then mean, median, and mode are not equal. In a moderately
skewed distribution, a very interesting relationship exists among mean,
median and mode. In such type of distributions, it can be proved that the
distance between mean and median is approximately one third of the distance
between the mean and mode. This is shown below for two types of such
distributions.

This relationship can be expressed as follows:

Mean - Median = 1/3 (Mean - Mode)
or Mode = 3 Median - 2 Mean
Similarly, we can express the approximate relationship for median in terms of
mean and mode. Also this can be expressed for mean in terms of median and
mode. Thus, if we know any of the two values of the averages, the third value
of the average can be determined from this approximate relationship.
For example, consider a moderately skewed distribution in which mean and
median is 35.4 and 34.3 respectively. Calculate the value of mode.
To compute the value of mode, we use the approximate relationship
50
Mode = 3 Median - 2 Mean Measures of
Central Tendency
= 3 (34.3) - 2 (35.4)
= 102.9-70.8 = 32.1
Therefore the value of mode is 32.1.

3.14 GEOMETRIC MEAN

The geometric mean like the arithmetic mean, is a calculated average. The
geometric mean, GM, of a series of numbers, X1 X2, .... Xn, is defined as

GM N X1.X 2 .X 3 ... ... ... X N

or the Nth root of the product of N observations.

When the number of observations is three or more, the task of computation
becomes quite tedious. Therefore a transformation into logarithms is useful to
simplify calculations. If we take logarithms of both sides, then the formula
for GM becomes
�
Log GM = � (log X1 + log X2 +……..+ log XN)
∑��� �
and therefore, GM = Antilog � �
�

For the grouped data, the geometric mean is calculated with the following
formula
∑f(log X)
GM = Antilog � �
N
Where the notation has the usual meaning.
Geometric mean is specially useful in the construction of index numbers. It is
an average most suitable when large weights have to be given to small values
of observations and small weights to do large values of observations. This
average is also useful in measuring the growth of population.
The following data illustrates the use and the computations involved in
geometric mean.
A machine was purchased for Rs. 50,000 in 1984. Depreciation on the
diminishing balance was charged @ 40% in the first year, 25% in the second
year and 15% per annum during the next three years. What is the average
depreciation charged during the whole period?
Since we are interested in finding the average rate of depreciation, geometric
mean will be the most appropriate average.

51
Data Collection Year Diminishing value (for
and Analysis
a value of Rs. 100) Log X
X
1984 100 - 40 = 60 1.77815
1985 100 - 25 = 75 1.87506
1986 100-15 = 85 1.92941
1987 100- 15 = 85 1.92941
1988 100-15 = 85 1.92941
∑log � = 9.44144
∑log �
�� = Antilog � �
�
9.44144
= Antilog � � = Antilog 1.8883 = 77.32
5
The diminishing value being Rs. 77.32, the depreciation will be 100-77.32 =
22.68%. The geometric mean is very useful in averaging ratios and
percentages. It also helps in determining the rates of increase and decrease. It
is also capable of further algebraic treatment, so that a combined geometric
mean can easily be computed. However, compared to arithmetic mean, the
geometric mean is more difficult to compute and interpret. Further, geometric
mean cannot be computed if any observation has either a value zero or
negative:
Activity F
Find the geometric mean for the following data:

Class interval Frequency Class interval Frequency

4.5-5.5 8 8.5- 9.5 25
5.5-6.5 10 9.5 - 10.5 18
6.5-7.5 12 10.5-11.5 7
7.5 - 8.5 15 11.5-12.5 5

…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………
…………………………………………………………………………………

3.15 HARMONIC MEAN

The harmonic mean is a measure of central tendency for data expressed as
rates such as kilometers per hour, tonnes per day, kilometers per litre etc. The
harmonic mean is defined as the reciprocal of the arithmetic mean of the
reciprocal of the individual observations. If X1, X2, ……….. XN are N
observations, then harmonic mean can be represented by the following
formula.

52
 � � Measures of
�� = � � � = �
Central Tendency
��
+ � + ⋯…..+� ∑ �� �
� �

For example, the harmonic mean of 2, 3, 4 is

3 3 36
HM = � � � = = = 2.77
+�+� 13/12 13
�

For grouped data, the formula becomes

N
HM = �
∑ ���

The harmonic mean is useful for computing the average rate of increase of
profits, or average speed at which a journey has been performed, or the
average price at which an article has been sold. Otherwise its field of
application is really restricted.
To explain the computational procedure, let us consider the following
example.
In a factory, a unit of work is completed by A in 4 minutes, by B in 5
minutes, by C in 6 minutes, by D in 10 minutes, and by E in 12 minutes. Find
the average number of units of work completed per minute.
The calculations for computing harmonic mean are given below:

X 1/X
4 0.250
5 0.200
6 0.167
10 0.100
12 0.083
∑1/� = 0.8

Hence the average number of units computed per minute is 5/0.8 = 6.25.
The harmonic mean like arithmetic mean and geometric mean is computed
from each and every observation. It is specially useful for averaging rates.
However, harmonic mean cannot be computed when one or more
observations have zero value or when there are both positive or negative
observations. In dealing with business problems, harmonic mean is rarely
used.
Activity G
In a factory, four workers are assigned to complete an order received for
dispatching 1400 boxes of a particular commodity. Worker-A takes 4
minutes per box, B takes 6 minutes per box, C takes 10 minutes per box, D
takes 15 minutes per box. Find the average minutes taken per box by the
group of workers.
………………………………………………………………………………… 53
Data Collection …………………………………………………………………………………
and Analysis
…………………………………………………………………………………
…………………………………………………………………………………

3.16 SUMMARY
Measures of central tendency give one of the very important characteristics of
data. Any one of the various measures of central tendency may be chosen as
the most representative or typical measure. The arithmetic mean is widely
used and understood as a measure of central tendency. The concepts of
weighted arithmetic mean, geometric mean, and harmonic mean are useful
for specified type of applications. The median is generally a more
representative measure for open-end distribution and highly skewed
distribution. The mode should be used when the most demanded or
customary value is needed.

3.17 KEY WORDS

Arithmetic Mean is equal to the sum of the values divided by the number of
values.
Geometric Mean of N observations is the Nth root of the product of the
given value observations.
Harmonic Mean of N observations is the reciprocal of the arithmetic mean
of the reciprocals of the given values of N observations.
Median is that value of the variable which divides the distribution into two
equal parts.
Mode is that value of the variable which occurs the maximum number of
times.
Quantiles are those values which divide the distribution into a fixed number
of equal parts, eg., quartiles divide distribution into four equal parts.

3.18 SELF-ASSESSMENT EXERCISES

1) List the various measures of central tendency studied in this unit and
explain the difference between them.
2) Discuss the mathematical properties of arithmetic mean and median.
3) Review for each of the measure of central tendency, their advantages and
disadvantages.
4) Explain how you will decide which average to use in a particular
problem.
5) What are quantiles? Explain and illustrate the concepts of quartiles,
deciles and percentiles.

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6) Following is the cumulative frequency distribution of preferred length of Measures of
Central Tendency
study table obtained from the preferency study of 50 students.
Length No. of Length No. of
students students
more than 50 cms 50 more than 90 cms 25
more than 60 cms 46 more than 100 18
cms
more than 70 cms 40 more than 110 7.
cms
more than 80 cms 32

A manufacturer has to take decision on the length of study-table to

manufacture. What length would you recommend and why?
7) A three month study of the phone calls received by Small Company
yielded the following information.
Number of calls No. of days Number of calls No. days
per day per day
100 - 200 3 600- 700 10
200-300 7 700- 800 9
300-400 11 800-900 8
400-500 13 900- 1000 4
500- 600 27
Compute the arithmetic mean, median and mode.
From the following distribution of travel time of 213 days to work of a firm's
find the modal travel time.
Travel time No. of Travel time No. of
(in minutes) Days (in minutes) days
Less than 80 213 Less than 40 85
Less than 70 210 Less than 30 50
Less than 60 195 Less than 20 13
Less than 50 156 Less than 10 2
8) The mean monthly salary paid to all employees in a company is Rs. 1600.
The mean monthly salaries paid to technical employees are Rs. 1800 and
Rs. 1200 respectively. Determine the percentage of technical and non-
technical employees of the company.
9) The following distribution is with regard to weight (in grams) of apples of
a given variety. If an apple of less than 122 grams is to be considered
unsuitable for export, what is the percentage of total apples suitable for
the export?
Weight No. of apples Weight No. of apples
(in grams) (in grams)
100-110 10 140-150 35
110-120 20 150-160 15
120-130 40 160-170 5
130-140 55
Data Collection Draw an ogive of more than one type and deduce how many apples will be
and Analysis more than 122 grams.
10) The geometric mean of 10 observations on a certain variable was
calculated to be 16.2. It was later discovered that one of the observations
was wrongly recorded as 10.9 when in fact it was 21.9. Apply appropriate
correction and calculate the correct geometric mean
11) An incomplete distribution of daily sales (Rs. thousand) is given below.
The data relate to 229 days.
Daily sales No. of days Daily sales No. of days
(Rs. thousand) (Rs. thousand)
10-20 12 50-60 ?
20-30 30 60-70 25
30-40 ? 70-80 18
40 -50

You are told that the median value is 46. Using the median formula, fill up
the missing frequencies and calculate the arithmetic mean of the completed
data.
12) The following table shows the income distribution of a company.
Income No. of Income No. of
(Rs.) employees (Rs.) employees
1200-1400 8 2200-2400 35
1400-1600 12 2400-2600 18
1600-1800 20 2600-2800 7
1800-2000 30 2800-3000 6
2000-2200 40 3000-3200 4

Determine (i) the mean income (ii) the median income (iii) the mean (iv) the
income limits for the middle 50% of the employees (v) D7, the seventh
docile, and (vi) P80, the eightieth percentile.

3.19 FURTHER READINGS

Clark, T.C. and E. W. Jordan. Introduction to Business and Economic
Statistics, South-Western Publishing Co.
Enns, P.G., Business Statistics. Richard D. Irwin: Homewood.
Gupta, S.P. and M.P. Gupta, Business Statistics, Sultan Chand & Sons: New
Delhi.
Moskowitz, H. and G.P. Wright, Statistics for Management and Economics,
Charles E. Merin Publishing Company:
B. Bowerman and Richad O’ Cennell, Business statistics in Practice,
McGraw Hill.

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