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Measures of Central Tendency - Basic Formulas

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28 views4 pages

Measures of Central Tendency - Basic Formulas

definitions & formulas

Uploaded by

anuradha
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Measures of Central Tendency - Formulas

Introduction to Measures of Central Tendency

Measures of central tendency are statistical metrics that describe the center
point or typical value of a dataset. They provide a summary statistic that
represents the middle or most common value, offering insights into the overall
distribution of data.

1. Arithmetic Mean

Definition

The arithmetic mean, commonly known as the average, is the sum of all
values in a dataset divided by the number of values. It represents the central
value in a dataset of evenly distributed numbers.

Formula

A.M = Sum of all Observations/Total Number of Observations.

∑𝑥
𝑥
= 𝑁
Properties

 Simplicity: Easy to compute and understand.


 Sensitivity: Affected by every value, including outliers (extremely high or
low values).
 Balance Point: The mean balances the dataset around the center of
gravity.
 Additivity: Adding a constant to each value increases the mean by that
constant.

Uses

 Overall Performance: Commonly used to calculate average scores,


grades, or performance metrics.
 Benchmarking: Provides a basis for comparing different sets of data.
 Data Symmetry: Suitable for datasets with symmetric distributions
without significant outliers.
2. Median

Definition

The median is the middle value of an ordered dataset. If the number of


observations is odd, it is the middle number. If even, it is the average of the two
middle numbers.

Calculation Steps

𝑡ℎ
1. Arrange the data in ascending order.
𝑛+1
2
2. If the number of observations n is odd, the median is the value.
𝑛+1𝑡ℎ
3. If n is even, the median is the average of
( ) 𝑎𝑛
𝑛
𝑡ℎ 𝑣𝑎𝑙𝑢𝑒
2
2
𝑑
Properties

 Robustness: Less affected by outliers compared to the mean.


 Positional Indicator: Reflects the central position in the dataset, not
influenced by the magnitude of values.
 Applicability: Useful for skewed distributions where mean may not be
representative.

Uses

 Income and Wealth: Often used in reporting median income to avoid


distortion by extremely high or low incomes.
 Ordinal Data: Suitable for data that can be ranked but not precisely
measured (e.g., ratings).
 Skewed Data: Provides a better central value for skewed datasets.

Definition

The mode is the value that appears most frequently in a dataset. A dataset can
have no mode, one mode (unimodal), or multiple modes (bimodal, multimodal).

Properties

 Frequency-Based: Indicates the most common value(s) in the dataset.


 Robust to Outliers: Not affected by extreme values.
 Non-Unique: There can be more than one mode or none at all.
 Best for Categorical Data: Particularly useful for nominal data where
mean and median are not applicable.
Uses

 Retail and Marketing: Identifying the most popular product or


preference among consumers.
 Education: Finding the most frequent grade or test score.
 Categorical Data Analysis: Useful in analyzing data with distinct
categories or classes.

4. Geometric Mean

Definition

The geometric mean is the nth root of the product of nnn values in a dataset.
It is used for data that involve rates of change, growth rates, or percentages.

𝐺. 𝑀 = 𝑎𝑛𝑡𝑖𝑙𝑜𝑔 ( )
∑𝑙𝑜g𝑥
𝑁

Properties

 Multiplicative Mean: Suitable for data involving multiplication or


exponential growth.
 Less Sensitivity to Outliers: Compared to the arithmetic mean.
 Non-Negative Data: Applicable only to positive numbers.
 Handles Proportions Well: Useful for averaging ratios and percentages.

Uses

 Financial Analysis: Calculating average rates of return on investments


over time.
 Environmental Studies: Assessing mean concentrations of pollutants
over time.
 Economic Growth: Measuring growth rates in economics, such as GDP
growth.

5. Harmonic Mean

Definition

The harmonic mean is the reciprocal of the average of the reciprocals of the
values in a dataset. It is particularly useful for datasets involving rates and
ratios.
𝐻. 𝑀 = 𝑛
1
(∑ ( ))
𝑥

Properties

 Emphasizes Smaller Values: More influenced by smaller values


than the arithmetic mean.
 Ideal for Ratios: Suitable for averaging ratios or rates.
 Non-Negative Data: Only applicable to positive values.
 Inverse Relationship: Reflects the inverse relationship in datasets.

Uses

 Speed and Efficiency: Calculating average speeds or efficiencies where


time and distance are involved.
 Financial Metrics: Useful in averaging financial ratios, such as P/E
ratios.
 Rate Problems: Effective for averaging quantities like travel times.
 Summary of Properties and Uses

Measure Definition Properties Uses


Sum of all values Sensitive to outliers; Average scores,
Arithmetic
divided by the easy to compute; performance
Mean
number of values balances data metrics
Robust to outliers; Income
Middle value of
Median positional; ideal for distribution,
ordered dataset
skewed data skewed datasets
Not influenced by
Most frequently Popular choices,
Mode outliers; frequency-
occurring value categorical data
based
nth root of the Suitable for growth Investment
Geometric
product of nnn rates; handles ratios returns, growth
Mean
values well rates
Emphasizes smaller
Harmonic Reciprocal of the Averaging speeds,
values; good for
Mean average of reciprocals financial ratios
rates and ratios

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