Chapter Three (Class –I)

Measures of Central Tendency

Topics will be covered:
1 Measures of Central Tendency
2 Objectives of measuring central tendency
3 Characteristics of a good or an ideal average
4 Various measures of central tendency (Arithmetic Mean)

Course Teacher: Fahmin Islam

Assistant Professor,
Department of Business Administration
Dhaka City Collage
Measures of Central Tendency
In the study of a population with respect to one in which we are interested
we may get a large number of observations. It is not possible to grasp any
idea about the characteristic when we look at all the observations. So it is
better to get one number for one group. That number must be a good
representative one for all the observations to give a clear picture of that
characteristic. Such representative number can be a central value for all
these observations. This central value is called a measure of central
tendency or an average or a measure of locations.
The meaning of average is nicely given in the following definitions:
“A measure of central tendency is a typical value around which other
figures congregate.”
“An average stands for the whole group of which it forms a part yet
represents the whole.”
“One of the most widely used set of summary figures is known as
measures of location.”

Objectives of measuring central tendency:

1. To get one single value that describes the characteristics of the entire
data. Measures of central value, by condensing the mass of data in
one single value, enable us to get an idea of the entire data. Thus one
value can represent thousands, lakhs and even millions of values. For
example, it is impossible to remember the individual incomes of
millions of earning people of Bangladesh and even if one could do it
there is hardly any use. But if the average income is obtained, we get
one single value that represents the entire population. Such a figure
would through light on the standard of living of an average
Bangladeshi.
 2. To facilitate comparison. Measures of central value, by reducing the
mass of data in one single figure, enable comparisons to be made.
Comparison can be made either at a point of time or over a period of
time. For example, the figure of average sales for December may be
compared with the sales figures of previous months or with the sales
figure of another competitive firm.

Characteristics of a good or an ideal average

The following properties should possess for an ideal average.
1. It should be rigidly defined.
2. It should be easy to understand and compute.
3. It should be based on all items in the data.
4. Its definition shall be in the form of a mathematical formula.
5. It should be capable of further algebraic treatment.
6. It should have sampling stability.
7. It should not be unduly affected by the presence of extreme values.

2, 5, 8, 10, 15 , Average=40/5=8
2,5,8,10,45, Average=70/5=14
The following chart represents the different measures of central tendency

Arithmatic Mean

Mathematical
Geometric Mean
Averages

Central Tendency Hermonic Mean

(Averages)

Median
Averages of
Location (Position)
Mode

Various measures of central tendency

There are five measures of central tendency or averages. Among them
arithmetic mean, median and mode are called simple averages and the
other two averages geometric mean and harmonic mean are called special
averages.
1. Arithmetic Mean: Arithmetic mean or simply the mean of a variable is
defined as the sum of the observations divided by the number
of observations.
(i) For ungrouped data:

(a)Direct method: If the variable x assumes n values x1, x2… xn , then the
mean, ̅ is given by

̅ ∑

Avoiding subscripts, we can write

∑
̅

(b)Short-Cut method: Under this method an assumed or an arbitrary

average (indicated by A) is used as the basis of calculation of
deviations from individual values. The formula is
∑
̅
where, A = the assumed mean or any value in x
d = the deviation of each value of x from the assumed mean
Example: A student’s marks in 5 subjects are 75, 68, 80, 92 and 56.
Then
X d=x–A
75 –5
68 –12
80 = A 0
92 12
56 –24
∑ = 371 ∑ = –29

Using direct method, average marks

∑
̅

Using short-cut method, average marks

∑
̅
 (ii) For grouped Data :

(a) Direct Method: The mean for grouped data is obtained from the
following formula:
∑
̅

Where, x = the mid-point of individual class

f = the frequency of individual class
N = the sum of the frequencies or total frequencies.
(b) Short-cut method:
∑
̅
Where,

x = the mid-point of individual class

f = the frequency of individual class
N = the sum of the frequencies or total frequencies.
A = any value in x
c = class interval
Example: Following is the distribution of persons according to different
income groups. Calculate arithmetic mean.

Income
0 – 10 10 – 20 20 – 30 30 – 40 40 – 50 50 – 60 60 – 70
(in Tk.)
Number of
6 8 10 12 7 4 3
persons
Solution: Table: Calculation of arithmetic mean (using direct method)

Number Class
Income of mid-
fx
(in Tk.) persons point
(f) (x)
0 – 10 6 5 30
10 – 20 8 15 120
20 – 30 10 25 250
30 – 40 12 35 420
40 – 50 7 45 315
50 – 60 4 55 220
60 – 70 3 65 195
N = 50 ∑ = 1550

Using direct method, arithmetic mean

∑
̅
 Table: Calculation of arithmetic mean (using short- cut method)
Class
Income Number of
mid- fd
(in Tk.) persons (f)
point (x)
0 – 10 6 5 –3 –18
10 – 20 8 15 –2 –16
20 – 30 10 25 –1 –10
30 – 40 12 35 = A 0 0
40 – 50 7 45 1 7
50 – 60 4 55 2 8
60 – 70 3 65 3 9
N = 50 ∑ = –20

Using short-cut method, arithmetic mean

∑
̅

= 31
Example 2: Calculate mean from the following frequency distribution

Wages
10 – 20 20 – 30 30 – 40 40 – 50 50 – 60 60 – 70
(in Tk.)
Number of
8 10 12 7 4 3
workers

Solution: (i) Table: Calculation of mean

Number
Class
Wages of
mid-point fd
(in Tk.) workers
(x)
(f)
10 – 20 8 15 –2 –16
20 – 30 10 25 –1 –10
30 – 40 12 35 = A 0 0
40 – 50 7 45 1 7
50 – 60 4 55 2 8
60 – 70 3 65 3 9
N = 44 ∑ = –2

Using short-cut method, arithmetic mean

∑
̅
Merits and demerits of Arithmetic mean:

Merits:
1) It is rigidly defined.
2) It is easy to understand and easy to calculate.
3) If the number of items is sufficiently large, it is more accurate
and more reliable.
4) It is a calculated value and is not based on its position in the
series.
5) It is possible to calculate even if some of the details of the data
are lacking.
6) Of all averages, it is affected least by fluctuations of sampling.
7) It provides a good basis for comparison.

Demerits:
1) It cannot be obtained by inspection nor located through a
frequency graph.
2) It cannot be in the study of qualitative phenomena not capable of
numerical measurement i.e. Intelligence, beauty, honesty etc.
3) It can ignore any single item only at the risk of losing its
accuracy.
4) It is affected very much by extreme values.
5) It cannot be calculated for open-end classes.
6) It may lead to fallacious conclusions, if the details of the data
from which it is computed are not given.
Characteristics of arithmetic mean
Some of the important characteristics of the arithmetic mean are:

1) The sum of the deviations of the individual observations from the

arithmetic mean is always zero. This means∑( ̅) , where x is
the value of an observation and ̅ is the arithmetic mean. Since the
sum of the deviations in the positive direction is equal to the sum of
the deviations in the negative direction, the arithmetic mean is
regarded as a measure of central tendency.

X ( ̅)
1 1-3 = - 2
2 -1
3 0
4 1
5 2
∑ =15 ∑( ̅)
∑
̅
2) The sum of the squared deviations of the individual observations from
the arithmetic mean is always minimum. In other words, the sum of
the squared deviations taken from any value other than the arithmetic
mean will be higher.

X ( ) ( )
1 4 ( ) 1
2 1 0
3 0 1
4 1 4
5 4 9
∑ =15 ∑( ) ∑( )
∑
̅

3) If we have the arithmetic mean and number of observations of two or

more than two related groups, we can compute combined mean 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
Example: Average monthly production of a certain factory for the first
9 months is 2584, and for remaining three months it is 2416 units.
Calculate average monthly production for the year.

Solution: Given that,

n1 = 9
n2 = 3
̅ = 2584
̅ = 2416
We know,
̅ ̅
̅
Home work: From Gupta’s Book ,page No. 119, problem 12,22,28.

Thank You