Measure of Central Tendency: Measure of Location

GOALS When you have completed this chapter, you will be able to: 1. Calculate the arithmetic mean, median, mode, weighted mean, and the geometric mean. 2. Explain the characteristics, uses, advantages, and disadvantages of each measure of location.

Measures of central tendency The best way to reduce a set of data and still retain part of the information is to summarize the set with a single value. But how can you calculate a number that is representative of an entire list of numbers? Measures of central tendencymean, median, and modecan help you capture, with a single number, what is typical of the data. The mean is the average value of all the data in the set. The median is the value that has exactly half the data above it and half below it. The mode is the value that occurs most frequently in the set. In a normal distribution, mean, median and mode are identical in value Arithmetic Mean: The sum of the values divided by the number of values--often called the "average." Population Mean: For ungrouped data, the population mean is the sum of the population values divided by the number of population values:

where is the population mean. N is the number of observations in the population. X is a particular value. S indicates the operation of adding. Parameter: a measurable characteristic of a population. Example: The Kiers family owns four vehicles. Following is the current mileage for each: 56,000; 23,000; 42,000; and 73,000.

Find the mean mileage. Solution: The mean is (56,000 + 23,000 + 42,000 + 73,000)/4 = 48,500 Example2: Statistic: a measurable characteristic of a sample. A sample of five executives received the following amounts of bonus last year: $14,000, $15,000, $17,000, $16,000, and $15,000. Find the mean bonus for these five executives. Since these values represent a sample size of 5, the sample mean is (14,000 + 15,000 +17,000 + 16,000 +15,000)/5 = $15,400. Formula for calculating mean: This is what people usually intend when they say "average"

Population Mean:

Sample Mean:

Properties of Arithmetic Mean: Every set of interval-level and ratio-level data has a unique mean. All the values are included in computing the mean. The mean is affected by unusually large or small data values. The arithmetic mean is the only measure of central tendency where the sum of the deviations of each value from the mean is always zero. median The value which divides the values into two equal halves, one half of the values being lower than the median and half higher than the median. Note: For an even set of numbers, the median will be the arithmetic mean of the two middle numbers.

Sort the values into ascending order. If you have an odd number of values, the median is the middle value.

If you have an even number of values, the median is the arithmetic mean (see above) of the two middle values.

Example: Compute the median for the following data. The age of a sample of five college students is: 21, 25, 19, 20, and 22. Arranging the data in ascending order gives: 19, 20, 21, 22, 25. Thus the median is 21. the height of four basketball players, in inches, is 76, 73, 80, and 75. Arranging the data in ascending order gives: 73, 75, 76, 80. Thus the median is 75.5 mode The mode is the most frequent data value i.e., The most frequently-occurring value (or values). There may be no mode if no one value appears more than any other. There may also be two modes (bimodal), three modes (trimodal), or more than three modes (multi-modal). For grouped frequency distributions, the modal class is the class with the largest frequency.

Calculate the frequencies for all of the values in the data. The mode is the value (or values) with the highest frequency.

Example: For individuals having the following ages -- 18, 18, 19, 20, 20, 20, 21, and 23, the mode is 20. Example: The exam scores for ten students are: 81, 93, 84, 75, 68, 87, 81, 75, 81, 87. Since the score of 81 occurs the most, the modal score is 81. Example of Weighted mean: During a one hour period on a hot Saturday afternoon cabana boy Chris served fifty drinks. Compute the weighted mean of the price of the drinks. (Price ($), Number sold): (.50,5), (.75,15), (.90,15), (1.10,15). The weighted mean is: $(.50x5 + .75x15 + .90x15 + 1.10x15)/(5 + 15 + 15 + 15) = $43.75/50 = $0.875 Geometric Mean: The geometric mean (GM) of a set of n numbers is defined as the nth root of the product of the n numbers. The formula is:

GM = n ( X 1)( X 2)( X 3)...( Xn)

Here the geometric mean is used to average percents, indexes, and relatives.

Example: The interest rate on three bonds were 5, 7, and 4 percent.

GM = 3 (7)(5)(4)
The geometric mean is =5.192.

The arithmetic mean is (6 + 3 + 2)/3 =5.333. The GM gives a more conservative profit figure because it is not heavily weighted by the rate of 7 percent. Another use of the geometric mean is to determine the average percent increase in sales, production or other business or economic series from one time period to another. The formula for this type of problem is:

GM = n (value at end of period) / (value at beginning of period) 1

The Mean of Grouped Data The mean of a sample of data organized in a frequency distribution is computed by the following formula:

X=

Xf Xf = f n

A sample of ten movie theaters in a large metropolitan area tallied the total number of movies showing last week. Compute the mean number of movies showing. Movies showing 1-2 3-4 5-6 7-8 9-10 Mean = 28.5/ 10 The Median of Grouped Data The median of a sample of data organized in a frequency distribution is computed by the following formula: Median = L + [(n/2 - CF)/f] (i) where L is the lower limit of the median class, CF is the cumulative frequency preceding the median class, f is the frequency of the median class, and i is the median class interval. Finding the median class: To determine the median class for grouped data: Construct a cumulative frequency distribution. Divide the total number of data values by 2. frequency 1 2 3 1 3 f class midpoint X 1.5 3.5 5.5 7.5 9.5 (f)(x) 1.5 7.0 16.5 7.5 28.5

Determine which class will contain this value. For example, if n=50, 50/2 = 25, then determine which class will contain the 25th value - the median class. Movies showing 1-2 3-4 5-6 7-8 9-10 Frequency 1 2 3 1 3 Cumulative Frequency 1 3 6 7 10

The median class is 5-6, since it contains the 5th value (n/2 =5From the table, L=5, n=10, f=3, i=2, CF=3. Thus, Median= 5 + [((10/2) - 4)/3](2)= 6.33 Grouped Frequency Distribution Since the data is grouped, you have lost all original information. Some textbooks have you simply take the midpoint of the class. This is an over-simplification which isn't the true value (but much easier to do). The correct process is to interpolate. Find out what proportion of the distance into the median class the median by dividing the sample size by 2, subtracting the cumulative frequency of the previous class, and then dividing all that bay the frequency of the median class. Multiply this proportion by the class width and add it to the lower boundary of the median class.

The mode for grouped data is approximated by the midpoint of the class with the largest class frequency. The modes in above example are 5.5 and 9.5. When two values occur a large number of times, the distribution is called bimodal. Q-Which Measure Should You Use? Or Which one is the best measure? The Mean is used in computing other statistics (such as the variance) and does not exist for open ended grouped frequency distributions (1). It is often not appropriate for skewed distributions such as salary information. The Median is the center number and is good for skewed distributions because it is resistant to change.

The Mode is used to describe the most typical case. The mode can be used with nominal data whereas the others can't. The mode may or may not exist and there may be more than one value for the mode (2). The Midrange is not used very often. It is a very rough estimate of the average and is greatly affected by extreme values (even more so than the mean). Property Always Exists Uses all data values Affected by extreme values Mean No (1) Yes Yes Median Yes No No Mode No (2) No No Midrange Yes No Yes

Book: Mason 1. The properties of Arithmetic mean. Page-68 2. The mean, median and mode of grouped data Page-79-Problem: 28, 29, 30, 31, 32, Prob-1, 2 page- 85 3. Prob-55, 56, 57, 58, 59, 60, 61 Find also Geometric Mean, Harmonic mean and weighted mean. Book: Gupta: Illustration 17, 18, 21 Computation of Quartiles, Deciles, Percentiles, etc. Advantages and disadvantages of Mean Median and Mode. Summery Definitions Statistic Characteristic or measure obtained from a sample Parameter Characteristic or measure obtained from a population Mean Sum of all the values divided by the number of values. This can either be a population mean (denoted by mu) or a sample mean (denoted by x bar) Median The midpoint of the data after being ranked (sorted in ascending order). There are as many numbers below the median as above the median. Mode The most frequent number Skewed Distribution The majority of the values lie together on one side with a very few values (the tail) to the other side. In a positively skewed distribution, the tail is to the right and the mean is larger than the median. In a negatively skewed distribution, the tail is to the left and the mean is smaller than the median. Symmetric Distribution The data values are evenly distributed on both sides of the mean. In a symmetric distribution, the mean is the median. Weighted Mean

The mean when each value is multiplied by its weight and summed. This sum is divided by the total of the weights. Percentile The percent of the population which lies below that value. The data must be ranked to find percentiles. Quartile Either the 25th, 50th, or 75th percentiles. The 50th percentile is also called the median. Decile Either the 10th, 20th, 30th, 40th, 50th, 60th, 70th, 80th, or 90th percentiles.

Prepared and compiled by: Masud Ibn Rahman Assistant Professor Faculty of Business and Economics Daffodil International University 4/2, Sobhanbag, Prince Plaza (Room No-716), Mirpur Road Dhaka 1207 Telephone: 8130864, 8129177, 8129348, 8129402, Ext- 132 Email: mir_bd@hotmail.com
A significant part of this material is copied from the soft copy of book of Anderson: The McGraw-Hill Companies, Inc., 2000