Bangladesh University of Business and Technology

Course Title: Introduction to Statistics

Chapter: Measures of Central Tendency
Course Teacher: Md. Moyazzem Hossain

Central Tendency

In a representative sample, the value of a series of data have a tendency to cluster around
a certain point usually at the center of the series is usually called central tendency and its
numerical measures are called the measures of central location.

Different Measures of Central Tendency

The following are the important measures of central tendency which are generally used in
business:

 Arithmetic mean
 Geometric mean
 Harmonic Mean
 Median
 Mode

Arithmetic mean

The sum of observations divided by the total number of observations.

Calculation of Arithmetic Mean-Ungrouped Data

For ungrouped data, arithmetic mean may be computed by applying any of the following
methods:

 Direct method
 Short-cut method

Direct method

The arithmetic mean, often simply referred to as mean, is the total of the values of a set of
observations divided by their total number of observations. Thus, if
represent the values of items or observations, the arithmetic mean denoted by is
defined as:
 Measures of Central Tendency

If the subscripts are dropped, the formula becomes:

=

Example

The monthly income (in Tk’s) of 10 persons working in a firm is as follows:

14870 14930 15020 14460 14750 14920 15720 15160 14680 14890

Find average monthly income.

Solution:

Let income be denoted by X

By using calculator,
=149400

= = =14940

Hence, the average monthly income Tk.14940

Example

Sun Com is studying the number of minutes used monthly by clients in a particular cell
phone rate plan. Random sample of 12 clients showed the following number of minutes
used last month.

90 77 94 89 119 112
91 110 92 100 113 83

What is the arithmetic mean number of minutes used?

Solution
Let the minute be denoted by X

By using calculator,

=1170

= = = 97.5

2 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

The arithmetic mean number of minutes used last month by the sample of cell phone
users is 97.5 minutes.

Calculation of Arithmetic Mean-Grouped Data

For grouped data, arithmetic mean may be computed by applying any of the following
methods:

 Direct method
 Short-cut method

Direct Method

When direct method is used

=
Where,
= mid-point of various classes
= the frequency of each class
= the total frequency

Note: For computing mean in the case of grouped data the mid points of the various
classes are taken as representative of that particular class. The reason is that when the
data are grouped, the exact frequency with which each of the variable occurs in the
distribution is unknown.

Example

The following are the figures of profits earned by 1400 companies during 1999-2000.

Profits (Tk. lakhs) No. of companies Profits (Tk. lakhs) No. of companies
200-400 500 1000-1200 100
400-600 300 1200-1400 80
600-800 280 1400-1600 20
800-1000 120

Calculate the average profits for all companies.

Solution

Calculation of average profits

3 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Profits (Tk. Mid-point No. of companies

lakhs)

200-400 300 500 150000

400-600 500 300 150000
600-800 700 280 196000
800-1000 900 120 108000
1000-1200 1100 100 110000
1200-1400 1300 80 104000
1400-1600 1500 20 30000

We know that,

By using calculator we get,

= = 605.71

So the average profit is Tk. 605.71 lakhs.

Arithmetic mean for two or more related groups

If we have the arithmetic mean and number of observations two or more than two related
groups, we can compute combined average of these groups by applying the following
formula.

=
Where,
=Combined mean of the two groups
=Arithmetic mean of the first group
=Arithmetic mean of the second group
=Number of observations in the first group
= Number of observations in the second group

4 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

*** If we have to find out the combined mean of three series, the above formula can be
extended as follows:

Example

There are two branches of a company employing 100 and 80 persons respectively. If
arithmetic mean of the monthly salaries paid by two branches are Tk.1570 and Tk.1750
respectively, find the arithmetic mean of the salaries of the employees of the company as
a whole.

Solution

We should compute the combined mean. The formula is

=
Given,

N1=100, =1570, N2=80 and =1750

= = =1650

Merits of Arithmetic Mean

 It should be easy to understand.

 It should be easy to compute.
 It should be based on all the observations.

5 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

 It should be rigidly defined.

 It should be capable of further algebraic treatment.
 It should have sampling stability.

Limitations of Arithmetic Mean

Arithmetic mean is used unduly affected by the presence of extreme values. Also in
open-end frequency distribution it is difficult to compute mean without making
assumption regarding the size of the class interval of the open-end classes.

Weighted Arithmetic Mean

One of the limitations of the arithmetic mean is that it gives equal importance to all the
observations. But there are cases where the relative importance of all the different
observations is not the same. When that is so, we compute weighted arithmetic mean.

The terms ‘weight’ stands for the relative importance of the different observations. The
formula for computing weighted arithmetic mean is

Where,
= Represents the weighted arithmetic mean
X = The variable
W = Weights attached to the variable X.

Weighted mean is especially useful in the problems relating to the construction of index
numbers and standardized birth and death rates.

Example

The cater Construction company pays it hourly employees $16.50, $17.50, or $18.50 per
hour. There are 26 hourly employees, 14 are paid at the $16.50 rate, 10 at the $17.50 rate
and 2 at the $18.50 rate. What is the mean hourly paid the 26 employees?

6 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Solution

We know that,

= = = $17.038

The weighted mean hourly wage is rounded to $17.04

Example

Suppose that, the nearby Wendy’s Restaurant sold medium, large and Biggie-sized soft
drinks for $0.90, $1.25 and $1.50 respectively of the last 10 drinks sold, 3 were medium,
4 were large and 3 were Biggie-sized. Find the mean price of the last 10 drinks sold.

Solution

We know that,

= = = $1.22

Median

The median is the measure of central tendency which appears in the “middle” of an
ordered sequence of values. That is, half of the observations in a set of data are lower
than it and half of the observations are greater than it.

7 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

As distinct from the arithmetic mean which is calculated from the value of every
observation in the series, the median is what is called a positional average. The term
‘position’ refers to the place of a value in a series. The place of the median in a series is
such that an equal number of observations lie on either side of it.

For example, if the income of five persons is Tk.1000, 1200, 1500, 1600, 1800 then the
median income would be Tk. 1500. Changing any or both of the first two values with any
other numbers with value 1500 or less and/or changing any of the last two values to any
other values with values of 1500 and more, would not affect the value of the median
which would remain 1500.

In contrast, in case of arithmetic mean, the change in value of single observation would
cause the value of the mean to be changed.

Calculation of Median –Ungrouped Data

The median is defined as the middle most observations when the observations arranged in
order of magnitude.

Arrange the data in ascending or descending order of magnitude. (Both arrangements

would give the same answer)

For ungrouped data

 When (total number of observations) is odd, the middle most observation i.e,
th observation will be the median in the series.

 When is even, the median will be the arithmetic mean of th and th

observations in the series.

Example

From the following data of wages of 7 workers, compute the median wage:

Wages (in Tk.) 1600 1650 1580 1690 1660 1606 1640

8 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Solution

Calculation of median

Sl. No. Wages arranged in

ascending order
1 1580
2 1600
3 1606
4 1640
5 1650
6 1660
7 1690

Median = Size of observation

= = 4th observation

Value of 4th observation is 1640. Hence median wage = Tk.1640

Example

The flowing table gives the monthly income of 12 families in a village.

House No Monthly income House No Monthly income

(Tk.) (Tk.)
1 587 7 805
2 693 8 907
3 595 9 763
4 780 10 865
5 840 11 768
6 760 12 894

Calculate the median income.

Solution

For calculating median the data have to arrange either in ascending or descending order.
Here income has been arranged in ascending order.

House No. Monthly income

(Tk.)

9 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

1 587
2 595
3 693
4 760
5 763
6 768
7 780
8 805
9 840
10 865
11 894
12 907

We know that, when is even, the median will be the arithmetic mean of th and

th observations in the series.

th
We have, . Hence, th observation observation and

observation = = 7th observation.

So that, Median

= = 774

Hence, the median income = Tk.774.

Calculation of Median –Grouped Data

Apply the following formula for determining the exact value of median:

10 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Median

Where = lower limit of median class i.e., the class in which the middle item in the
distribution lies.

= preceding cumulative frequency to the median class

= frequency of the median class

= the class interval of the median class.

Example

Suppose 1500 workers are working in an industrial establishment. Their age is classified
as follows:

Age (yrs.) No. of workers Age (yrs.) No. of workers

18-22 120 38-42 184
22-26 125 42-46 162
26-30 280 46-50 86
30-34 260 50-54 75
34-38 155 54-58 53

Calculate the median age.

Solution

Calculation of median age

Age (yrs.) f c. f

11 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

18-22 120 120

22-26 125 245
26-30 280 525
30-34 260 785
34-38 155 940
38-42 184 1125
42-46 162 1286
46-50 86 1372
50-54 75 1447
54-58 53 1500

Median = Size of th observation observation.

Hence, the median lies in the class 30-34.

Median = L+

=
= 30 + 3.46
= 33.46

Hence, the median age is 33.46 years.

Example

Calculate the median from the following data:

Value Frequency

12 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

0-10 4
10-20 12
20-30 24
30-40 36
40-50 20
50-60 16
60-70 8
70-80 5

Solution

Calculation of median

Value f c. f
0-10 4 4
10-20 12 16
20-30 24 40
30-40 36 76
40-50 20 96
50-60 16 112
60-70 8 120
70-80 5 125

Median = Size of th observation observation.

Hence, the median lies in the class 30-40.

Median = L+

Here, , , , , .

Median =
= 30 + 6.25

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

= 36.25 (Ans.)

Merits and Limitations of Median

The median is superior to arithmetic mean in certain respects. For example, it is

especially in case of open-end distribution and also it is not influenced by the presence of
extreme values. In fact, when extreme values are present in a series, the median is more
satisfactory measure of central tendency than the mean.

However, since median is positional average, its value is not determined by each and
every observation. Also median is not capable of algebraic treatment. For example,
median cannot be used for determined the combined median of two or more groups.

Mode

Mode is the most typical or commonly value in a set of data. For example, if we take the
values of six different observations as 5, 8, 10, 8, 5, 8 mode will be 8 as it has occurred
maximum number of times, i.e 3 times. Graphically, it is the value on the X-axis below

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

the peak or highest point, of the frequency curve as we can be seen from the flowing
diagram.

Calculation of mode –Ungrouped data

For determining mode count the numbers of items the various values repeat themselves
and the value which occurs the maximum number of times is the modal value.

Example

The following figures relate to the preferences with regard to size of screen in inches of
T.V sets of 30 persons selected at random from a locality. Find the modal size of the T.V
screen.
12 20 12 24 27 20 12 20 27 24
24 20 12 20 24 27 24 24 20 24
24 20 24 24 12 24 20 27 24 24

Solution

Calculation of modal size

Size in inches Tally Frequency

12 IIII 5
20 IIII III 8
24 IIII IIII III 13
27 IIII 4

Since size 24 occurs the maximum number of items, therefore, the modal size of T.V
screen is 24 inches.

Calculation of mode- Grouped data

In case of grouped data the following formula is used for calculating mode:

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

Mode =

Where,
L = Lower limit of the modal class

The difference between the frequency of the modal class and the frequency
of the pre-modal class.

The difference between the frequency of the modal class and the frequency
of the post-modal class.

= The size of the modal class.

Example

The following data relate to the sales of 100 companies:

Sales(Tk.lakhs) No. of companies

Below 60 12
60-62 18
62-64 25
64-66 30
66-68 10
68-70 3
70-72 2

Calculate the modal sales.

Solution

Since the maximum frequency 30 is in the class 64-66, therefore 64-66 is the modal class.

Mode =

Here, L = 64, (30-25) = 5, (30-10) = 20, =2

Mode =

= 64+
= 64.4

16 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Hence, modal sales are Tk.64.4 lakhs.

Locating Mode Graphically

In a frequency distribution the value of mode can also be determined graphically. The
steps in calculation are

 Draw a histogram of the given data

 Draw two lines diagonally on the inside of the modal class bar, starting from each
upper corner of the bar to the upper corner of the adjacent bar.
 Draw a perpendicular line from the intersection of the two diagonal lines to the X-
axis (horizontal scale) which gives us modal value.

Example

The daily profits in TK’s of 100 shops are given as follows:

Profits (in Tk’s) No. of shop

0-100 12
100-200 18
200-300 27
300-400 20
400-500 17
500-600 6

Draw the histogram and then find the modal value. Check this value by direct calculation.

Solution
Direct calculation

Mode lies in the class 200-300.

17 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Mode =

=
= 256.25

30
27

25
20
Number of shops

20 18
17

15
12

10
6
5

0
0-100 100-200 200-300 300-400 400-500 500-600
Profits

From the above diagram, the modal value is also Tk. 256. Hence by both the methods we
get the same value of mode.

Merits and Limitations of Mode

18 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Merits

a) The mode is not affected by the extreme values.

b) It can be calculated from frequency distribution with open class.
c) Mode can be easily used to describe qualitative phenomenon.

Limitations

a) It is not based on all observations.

b) It is difficult for algebraic treatments.
c) Mode is not clearly defined in case of bi-modal or multimodal distribution.

Geometric Mean

For ungrouped data

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

The geometric mean of a set of non-zero positive observations is the th root of their
product. Let be non-zero positive observations in a series of data.

Thus, the geometric mean .

The calculation may sometime by simplified by taking logarithm, that is

Example

Calculate the geometric mean for the following data:

6.5 169.0 11.0 112.5 14.2 75.0 35.5 215.0

Solution

We know that,

Let us consider, the observations is denoted by .

Now by using calculator we get,

13.043 and .

20 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

= 42.697

Example

Calculate the geometric mean of the following price relatives:

Commodity Price Relatives

Wheat 207
Rice 198
Pulses 156
Sugar 124
Salt 107
Oils 196

Solution

We know that,

Let us consider, the price relatives is denoted by .

Now by using calculator we get,

13.2208 and .

= 159.77

For grouped data

In grouped data for calculating geometric mean first we will find the mid-points and then
apply the following formula:

21 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Where, = mid-point.

Example

Find out geometric mean from the following data:

10 20 30 40 50 60
12 15 25 10 6 2

Solution

We know that,

From the given data, by using calculator we get

= 98.214 and = 70.

= 25.29

Example

Calculate geometric mean for the following distribution.

Weight (in lbs) Frequency

22 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

100-104 24
105-109 30
110-114 45
115-119 65
120-124 72

Solution

Calculation of geometric mean

Weight (in lbs) Midpoint Frequency

100-104 102 24
105-109 107 30
110-114 112 45
115-119 117 65
120-124 122 72
Total 236

We know that,

From the given data, by using calculator we get

= 485.95 and = 236.

= 114.55
Merits and Limitations of Geometric Mean

Geometric mean is highly useful in averaging ratios and percentages and in determining
rates of increase and decrease. It is also capable of algebraic manipulation. For example,

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

if the geometric mean of two or more series and their number of observations are known,
a combined geometric mean can easily be calculated.

However, compared to arithmetic mean, this average is more difficult to compute and
interpret. Also geometric mean cannot be computed when there are both negative and
positive values in a series or more observations are having zero value.

Harmonic Mean

The harmonic mean is based on the reciprocal of the numbers averaged. It is defined as
the reciprocal of the arithmetic mean of the reciprocal of the individuals’ observations.

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

For ungrouped data

The harmonic mean

H.M = =

i.e. the harmonic mean of a set of non zero observations in a series is

the reciprocal of the arithmetic mean of the reciprocals.

Example

Calculate the Harmonic mean of the following series of monthly expenditure of a batch
of students:

TK. 1250 1300 1750 1000 1450 1500 1550 1400 1500 1150

Solution

We know that,

The harmonic mean

H.M = =

Let, monthly expenditure denoted by X.

By using calculator we get,

1250 0.0008
1300 0.000769

25 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

1750 0.000571
1000 0.001
1450 0.00069
1500 0.000667
1550 0.000645
1400 0.000714
1500 0.000667
1150 0.00087
Total 0.007393

Here, = 0.007393 and

H.M = = 1352.693

Example

Calculate the Harmonic mean from the following figures:

9.7 0.0009 178.7 0.874 1238 0.012 89.9 78.4 0.989 0.008

Solution

We know that,

The harmonic mean

H.M = =

Let, the observations denoted by X.

By using calculator we get,

= 1321.73 and

H.M = = 0.008.

26 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

For grouped data

For grouped data,

H.M =

Where,
may be considered as the mid values of the class intervals.

Example

Calculate the harmonic mean from the following data

10 12 14 16 18 20
5 18 20 10 6 1

Solution

We know that,

H.M =

By using calculator we get,

10 5 0.500
12 18 1.500
14 20 1.429
16 10 0.625
18 6 0.333
20 1 0.050
Total 4.437

Here, = 4.437 and

H.M = = 13.52

27 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Example

Calculate harmonic mean from the following data:

Marks Frequency
0-10 5
10-20 10
20-30 7
30-40 3
40-50 2

Solution

We know that,

H.M =

Calculation of harmonic mean

Marks Frequency (f) Mid-points (x)

0-10 5 5 1
10-20 10 15 0.667
20-30 7 25 0.280
30-40 3 35 0.086
40-50 2 45 0.044
Total 27 2.077

We get,
= 2.077 and

H.M = =13.00061=13

28 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Theorem

For non-zero positive observations,

Arithmetic mean Geometric mean Harmonic mean

Example

Find the arithmetic mean, geometric mean and harmonic mean from the following data

5 8 11 10 15 7 11 12 4 6

and hence show that ,

Arithmetic mean Geometric mean Harmonic mean

Solution

We know that

Arithmetic mean = =

Geometric mean G.M =Antilog

=Antilog
= 8.25

Harmonic mean H.M = = = = 7.598

Hence we observed that,

Arithmetic mean Geometric mean Harmonic mean

29 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

Q. Which average to use?

We have explained different methods of computing the various types of averages and
also their distinctive features. At this point we have a question “which of these averages
should we use”? or “ which of these is the best average to be used”?

The following two considerations should be kept in mind in the selection of an average:

 The type of data available

Are they broadly skewed (avoid the mean), guppy around the middle (avoid the median)
or unequal in the class (avoid the mode)?

 The concept of the typical value required by the problem.

Is a composite average of all absolute or relative values needed (arithmetic mean or

geometric mean)? Is a middle value needed (median) or the most common value (mode)?

Arithmetic mean

In the following cases arithmetic mean should not be used:

 In distributions with open-end intervals.

 When an average rate of growth or change over a period of time is
required.
 When the observations from geometric progression, i.e. 1, 2, 4, 8, 16 etc.
 When averaging rates (i.e. speed, fluctuations in the price of articles etc).
 When there are very large and very small values of observations
arithmetic mean would be seriously misleading on account of undue
influence of extreme values.

Median

The median is generally the best average in open-end grouped distributions. In case of
price distribution or income distribution very high or very low values would cause the

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

mean to be higher or lower than most “common values”. The median may be more
representative to use in describing the mass of the data.

Mode

Generally speaking, the significance of mode lies in the fact that it can be used to
describe qualitative data. The mode can be used in problems involving the expression of
preference where quantitative measurements are not possible. If we want to compare
consumer preferences for different kinds of products or different kind of advertising, we
can compare the modal preferences expressed by different groups of people but we
cannot calculate the median or mean.

Geometric mean

The geometric mean is typically used is averaging index numbers, rates of change, ratios
and other sets of data expressed in percentage form.

Harmonic mean

Harmonic mean is useful in problems in which values of a variable are compared with a
constant quantity of another variable i.e. rates, time, distance covered within certain time
and quantities purchase or sold per unit etc.

Compare A.M, Median and Mode

 Arithmetic mean, median and mode are easy to understand and easy to
calculate.
 Arithmetic mean is based upon all observation but median and mode are
not.
 Arithmetic mean is amenable to algebraic treatment but the median and
mode are not easy for algebraic treatment.
 Arithmetic mean cannot be calculated from the distribution with open
class but median and mode can be calculated from the distribution with
open classes.

31 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT
 Measures of Central Tendency

 Arithmetic mean is affected very much by extreme values that median and
mode are not at all affected by extreme values.

The empirical relationship between mean, median and mode

Now we shall describe the relationship among mean, median and mode for symmetrical
distribution and asymmetrical distribution.

For a symmetrical distribution

The values of mean, median and mode coincide.

Mean = Mode = Median

For asymmetrical distribution

 Positively skewed ♦ Negatively skewed

Mean > Median > Mode Mode > Median > Mean

Karl Pearson has expressed the relationship as follows.

Mean-Median = (Mean-Mode)

Mode = 3 Median - 2 Mean

And Median =Mode + (Mean-Mode)

General Limitations of an Average

 Since an average is a single value responding a group of values, it must be

properly interpreted; otherwise, there is very possibility of jumping to wrong

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Lecturer in Statistics, BUBT
 Measures of Central Tendency

conclusion. This can be best illustrated with the help of a story. A person had to
cross a river from one bank to another .He must not aware of the depth of the
river, so he enquired from another man who told him that the average depth of
water is160 cms. The man was 175 cms and he thought that he can very easily
cross the river because all the time he would be above the water level. So he
started. In the beginning the level of water was very shallow but as he reached
the middle, the water was 500 cms deep and he lost his life. The man was
drowned because he had a misconception that average depth means uniform
depth throughout. But it is not so. An average respondent a group of values and
lies somewhere in between the two extreme values.

 An average may give us a value that doesn’t exists in the data. For example, the
arithmetic mean of 100, 300, 250, 50, 100 is , a value that does not
exists in the data.

 At times an average may give absurd results. For example, if we are calculating
average size of a family we may get a value 4.8. But that is impossible as persons
cannot be in fractions. However we should remember that it is an average value
representing the entire group of families.

 Measures of central value fail to give us any idea about the formation of the
series. Two or more series may the same central value but may differ widely in
composition. For example, observe the following two series

Series A 150 170 190 210 280

Series B 300 500 20 78 102

In both series, average = 200.

33 Md. Moyazzem Hossain

Lecturer in Statistics, BUBT