Unit1-Business statistics-102- Measure of

Central Tendency -Arithmetic Mean

By:Dr.Lotica surana
Learning outcomes:
After studying this unit, you would be able to
1. define an average;
2. explain the significance of a measure of central tendency;
3. explain the properties of a good average;
4. calculate the different types of measures of central tendency;
5. describe the merits and demerits different types of measures of
central tendency;
• According to Professor Bowley, averages are “statistical constants
which enable us to comprehend in a single effort the significance
of the whole”. They throw light as to how the values are
concentrated in the central part of the distribution. For this
reason as on last page that they are also called the measures of
central tendency, an average is a single value which is considered
as the most representative for a given set of data. Measures of
central tendency show the tendency of some central value
around which data tend to cluster.
•
• Significance of the Measure of Central Tendency
• The following are two main reasons for studying an average:
• 1. To get a single representative
• Measure of central tendency enables us to get a single value from the mass of data and
also provide an idea about the entire data. For example it is impossible to remember the
heights measurement of all students in a class. But if the average height is obtained, we get
a single value that represents the entire class.
• 2. To facilitate comparison
• Measures of central tendency enable us to compare two or more than two populations by
reducing the mass of data in one single figure. The comparison can be made either at the
same time or over a period of time. For example, if a subject has been taught in more than
two classes so by obtaining the average marks of those classes, comparison can be made.
• 1
• The following are the properties of a good measure of average:
• 1. It should be simple to understand
• Since we use the measures of central tendency to simplify the complexity of a
data, so an average should be understandable easily otherwise its use is bound
to be very limited. It should be easy to calculate
• An average not only should be easy to understand but also should be simple to
compute, so that it can be used as widely as possible.
• 3. It should be rigidly defined
• A measure of central tendency should be defined properly so that it has an
appropriate interpretation. It should also have an algebraic formula so that if
different people compute the average from same figures, they get the same
answer.
4.It should be liable for algebraic manipulations
A measure of central tendency should be liable for the algebraic manipulations. If there are
two sets of data and the individual information is available for both set, then one can be
able to find the information regarding the combined set also then something is missing.
5. It should be least affected by sampling fluctuations
We should prefer a tool which has a sampling stability. In other words, if we select 10
different groups of observations from same population and compute the average of each
group, then we should expect to get approximately the same values. There may be little
difference because of the sampling fluctuation only.
6. It should be based on all the observations
If any measure of central tendency is used to analyse the data, it is desirable that each and
every observation is used for its calculation.
It should be possible to calculate even for open-end class intervals
A measure of central tendency should able to be calculated for
the data with open end classes.
8. It should not be affected by extremely small or extremely
large observations
It is assumed that each and every observation influences the
value of the average. If one or two very small or very large
observations affect the average i.e. either increase or decrease
its value largely, then the average cannot be consider as a good
average.
Different Measures of Central Tendency
The following are the various measures of central tendency:
1. Arithmetic Mean 2. Weighted Mean 3. Median 4. Mode 5.
Geometric Mean 6. Harmonic Mean
Partition Values
1. Quartiles 2. Deciles 3. Percentiles
ARITHMETIC MEAN
Arithmetic mean (also called mean) is defined as the sum of all the observations
divided by the number of observations.
Arithmetic mean (AM) may be calculated for the following two types of data:
1. For Ungrouped Data
For ungrouped data, arithmetic mean may be computed by applying any of the
following methods:
(1) Direct Method
If fi is the frequency of xi (i=1, 2,…, k), the
formula for arithmetic mean would be
(2) Short-cut Method
The arithmetic mean can also be calculated by taking
deviations from any arbitrary point “A”, in which the
formula shall be

Here, k is the number of distinct observations in the distribution.

Note: Usually the short-cut method is used when data are large.
Example 1: Calculate mean of the weights of five students
54, 56, 70, 45, 50 (in kg)
X=54+56+70+45+50/5=55
Therefore, average weight of students is 55 kg.
Example 2: Compute arithmetic mean of the weight of students for the given data in Example
1 by using shortcut method.
Solution: For shortcut method, we use following formula

If 50 is taken as the assumed value A in the given data in Example 1 then, for the calculation of
di we prepare following table:
 We have A = 50 then,
x d = x-A
54 54–50 = 4

56 56–50 = 6
70 70–50 =20
45 45–50 = -5
50 50–50=0
For Example: For the following data, calculate arithmetic mean using direct
method
Properties of Arithmetic Mean
Arithmetic mean fulfills most of the
properties of a good average except the last
two. It is particularly useful when we are
dealing with a sample as it is least affected
by sampling fluctuations. It is the most
popular average and should always be our
first choice unless there is a strong reason
for not using it.
Three algebraic properties of mean are
given below:
Property 1: Sum of deviations of
observations from their mean is zero.
Merits and Demerits of Arithmetic Mean
Merits of Arithmetic Mean
1. It utilizes all the observations;
2. It is rigidly defined;
3. It is easy to understand and compute; and
4. It can be used for further mathematical treatments.
Demerits of Arithmetic Mean
1. It is badly affected by extremely small or extremely large
values;
2. It cannot be calculated for open end class intervals; and
3. It is generally not preferred for highly skewed distributions.
WEIGHTED MEAN

Weight here refers to the importance of a value in a

distribution. A simple logic is that a number is as
important in the distribution as the number of times it
appears. So, the frequency of a number can also be its
weight. But there may be other situations where we have
to determine the weight based on some other reasons. For
example, the number of innings in which runs were made
may be considered as weight because runs (50 or 100 or
200) show their importance. Calculating the weighted
mean of scores of several innings of a player, we may take
the strength of the opponent (as judged by the proportion
of matches lost by a team against the opponent) as the
corresponding weight. Higher the proportion stronger
would be the opponent and hence more would be the
weight. If xi has a weight wi, then weighted mean is
defined as: