MEAN

The arithmetic mean (or simply "mean") of a sample is the sum of the sampled values divided by the
number of items in the sample.
MERITS OF ARITHEMETIC MEAN
 ARITHEMETIC MEAN RIGIDLY DEFINED BY ALGEBRIC FORMULA
 It is easy to calculate and simple to understand
 IT BASED ON ALL OBSERVATIONS AND IT CAN BE REGARDED AS REPRESENTATIVE OF THE GIVEN
DATA
 It is capable of being treated mathematically and hence it is widely used in statistical analysis.
 Arithmetic mean can be computed even if the detailed distribution is not known but some of the
observation and number of the observation are known.
 It is least affected by the fluctuation of sampling
DEMERITS OF ARITHMETIC MEAN
 It can neither be determined by inspection or by graphical location
 Arithmetic mean cannot be computed for qualitative data like data on intelligence honesty and
smoking habit etc
 It is too much affected by extreme observations and hence it is not adequately represent data
consisting of some extreme point
 Arithmetic mean cannot be computed when class intervals have open ends

Median:
The median is that value of the series which divides the group into two equal parts, one part comprising
all values greater than the median value and the other part comprising all the values smaller than the
median value.
Merits of median
 Simplicity:- It is very simple measure of the central tendency of the series. I the case of simple
statistical series, just a glance at the data is enough to locate the median value.
 Free from the effect of extreme values: - Unlike arithmetic mean, median value is not destroyed
by the extreme values of the series.
 Certainty: - Certainty is another merits is the median. Median values are always a certain specific
value in the series.
 Real value: - Median value is real value and is a better representative value of the series
compared to arithmetic mean average, the value of which may not exist in the series at all.
 Graphic presentation: - Besides algebraic approach, the median value can be estimated also
through the graphic presentation of data.
 Possible even when data is incomplete: - Median can be estimated even in the case of certain
incomplete series. It is enough if one knows the number of items and the middle item of the
series.
Demerits of median:
 Lack of representative character: - Median fails to be a representative measure in case of such
series the different values of which are wide apart from each other. Also, median is of limited
representative character as it is not based on all the items in the series.
 Unrealistic:- When the median is located somewhere between the two middle values, it remains
only an approximate measure, not a precise value.
 Lack of algebraic treatment: - Arithmetic mean is capable of further algebraic treatment, but
median is not. For example, multiplying the median with the number of items in the series will
not give us the sum total of the values of the series.
However, median is quite a simple method finding an average of a series. It is quite a commonly used
measure in the case of such series which are related to qualitative observation as and health of the
student.

Mode:
The value of the variable which occurs most frequently in a distribution is called the mode.
Merits of mode:
 Simple and popular: - Mode is very simple measure of central tendency. Sometimes, just at the
series is enough to locate the model value. Because of its simplicity, it s a very popular measure
of the central tendency.
 Less effect of marginal values: - Compared top mean, mode is less affected by marginal values in
the series. Mode is determined only by the value with highest frequencies.
 Graphic presentation:- Mode can be located graphically, with the help of histogram.
 Best representative: - Mode is that value which occurs most frequently in the series.
Accordingly, mode is the best representative value of the series.
 No need of knowing all the items or frequencies: - The calculation of mode does not require
knowledge of all the items and frequencies of a distribution. In simple series, it is enough if one
knows the items with highest frequencies in the distribution.
Demerits of mode:
 Uncertain and vague: - Mode is an uncertain and vague measure of the central tendency.
 Not capable of algebraic treatment: - Unlike mean, mode is not capable of further algebraic
treatment.
 Difficult: - With frequencies of all items are identical, it is difficult to identify the modal value.
 Complex procedure of grouping:- Calculation of mode involves cumbersome procedure of
grouping the data. If the extent of grouping changes there will be a change in the model value.
 Ignores extreme marginal frequencies:- It ignores extreme marginal frequencies. To that extent
model value is not a representative value of all the items in a series. Besides, one can question
the representative character of the model value as its calculation does not involve all items of
the series.
Explain how measures of central tendency and measures of variation are complementary to each
other in the context of analysis of data.

On one hand, a measure of central tendency indicates the center of the data distribution; which is the
value around which all the data points gather. But still we do not know how closely data points gather
around that value. It could be very tight, or it could be very loose. There is no way to tell by looking at
the central tendency alone.

On the other hand, a measure of dispersion indicates how 'dispersed' the data points are around the
central value. A higher measure of dispersion suggests data points gather loosely around the central
value (highly dispersed), and conversely, a lower measure of dispersion suggests they gather tightly.

But looking at the dispersion measure alone does not tell us where the central value is. That is why, we
need both measures of central tendency and dispersion, so that we know the center of the distribution
of data, and we have a good idea of how widely the data dispersed.

What do you understand by ‘coefficient of variation’? Discuss its importance in business problems.

Describe the various methods of measuring variation along with their respective merits and demerits.

The following are some of the most important measures of studying variation in the data:

1. Range
2. Quartile deviation
3. Mean deviation
4. Standard deviation
5. Coefficient of variation
6. Lorenz curve
Method # 1. Range:
Range is the simplest measure of studying dispersion. It is the difference between the largest and
smallest value in the distribution.
It is given by the formula: Range = L – S Where, L = Largest value S = Smallest value
Calculation of Range:
1. Individual Observations:
Individual observations refer to a group of individual items or individual values. In such a group, the
range is calculated by deducting the lowest value from the highest value in the group or series.
2. Discrete Series:
Data is said to be discrete when the variable takes only particular values, that is, only integer values. For
example, number of students in a class, results of rolling two dice etc., cannot have values as fractions.
3. Continuous Series:
Continuous series can take any values in a given range. For example, the height of a person can be any
value within the minimum and maximum height of human beings and when time is a variable, it can
take any value and can also be measured to fractions of a second.
Range for a continuous series can be calculated by subtracting the midpoint of the lowest class from the
midpoint of the highest class.
Merits of Range:
1. Range is the simplest measure of dispersion among all the methods.
2. It is easy to understand.
3. It can be computed easily and quickly.
Demerits of Range:
1. It is not based on each and every variable in the data.
2. It fluctuates from sample to sample.
3. It cannot describe the characteristics of a distribution as it is merely based on two extreme values.
Method # 2. Quartile Deviation:
A quartile is a measure that divides the data into four quarters. The first quartile, denoted by Q 1 lies in
the middle of the first half of the data set. It covers the first 25 percent of the data set. The second
quartile, denoted by Q2, divides the data such that 50 percent of the data lies below it and 50 percent of
the data lies above it.
This is called as the median. The third quartile, denoted by Q 3, lies in the middle of the second half of the
data set. 75 percent of the data would lie below the third quartile and 25 percent of the data would be
greater than the third quartile.

The interquartile range is a measure of absolute dispersion. It is calculated based on the lower quartile
and the upper quartile, that is, the first quartile and the third quartile respectively. The interquartile
range is the difference between the third quartile and the first quartile.

Interquartile range = Q3 – Q1

Quartile deviation is a measure that reduces the interquartile range to semi-quartile range. Quartile
deviation is obtained by dividing the interquartile range by 2.

It gives the average value by which the two quartiles differ from the median value.

Computation of Quartile Deviations:

i. Individual Observations:

The important thing to be kept in mind while calculating first quartile and third quartile, in case of
individual observations, is that the data set should first be arranged in an ascending or descending
order. The formula for first quartile (Q1) is-

Where, N is the number of observations in the data set.

ii. Discrete Series:

In case of a discrete series, we first calculate the Cumulative Frequency (c.f.). Cumulative frequency is
calculated by adding a class frequency and all class frequencies before it, in a frequency distribution.

The formulae for calculating Q1 and Q3 in this case, remain the same as the ones used in the case of
individual observations.

iii. Continuous Series:

In case of continuous series, we first calculate cumulative frequency, as done in the case of discrete
series.

However, the formulae used for calculating Q1and Q3 in this case are:

Merits of Quartile Deviation:

1. It is considered to be superior to range.
2. It is extremely useful in open end distributions (when one or more classes do not have a boundary) or
when the data is ranked and measured quantitatively.
3. In case of skewed distributions, quartile deviation is an appropriate measure of dispersion as it is least
affected by the presence of extreme values.
Demerits of Quartile Deviation:
1. It ignores 50 percent of the data as it considers only first 25 percent and last 25 percent of the data.
2. The value is not based on every item in the data.
3. It does not indicate how the values are dispersed around the average.
4. It does not facilitate further mathematical treatment.
Method # 3. Mean or Average Deviation:
The mean deviation, also known as the average deviation, is the average difference between the values
in the distribution and the mean or the median. This method shows the average scatteredness of the
values in the distribution around the mean or the median.

This means that the mean deviation can be calculated in the following two ways:
1. Mean Deviation (M.D.) about the mean value, and
2. Mean Deviation (M.D.) about the median value.

Computation of Mean Deviation:

1. Individual Observations:
In case of individual observations, mean deviation is calculated using the formula:

Where, n is the number of observations in a distribution.

X is a particular observation in the distribution, and
A is either the median value or the mean value.
| X – A | or | D | means that the deviation values are taken as absolute values.

2. Discrete Series:
In case of a discrete series, we first calculate the cumulative frequency (c.f.). Cumulative frequency is
calculated by adding a class frequency and all class frequencies before it, in a frequency distribution.
The formula used for calculating mean deviation in this case is:

Where, N is the total of all frequencies in a distribution, is the frequency of any given observation, X is a
particular observation in the distribution, and A is either the median value or the mean value.

| X – A | or | D | means that the deviation values are taken as absolute values.

3. Continuous Series:
In case of a continuous series, the formula used for calculating mean deviation remains the same as
stated in the case of discrete series with one important exception that now, the deviations are the
difference between midpoints of various classes and the mean or the median value.

Where, N is the total of all frequencies in a distribution, is the frequency of a class interval, m is the mid-
point of the class intervals, and A is either the median or the mean value.

| m – A | or | D | means that the deviation values from mid-points of class intervals are taken as
absolute values.

Merits of Mean Deviation:

1. It is simple to understand.
2. It is easy to compute.
3. It is based on each and every value in the data set.
4. It is less affected by the presence of extreme values.
5. It facilitates comparison of two or more data sets.

Demerits of Mean Deviation:

1. It ignores the algebraic signs, that is, the positive and the negative signs. This means that it takes only
absolute deviations. Thus, it is not very accurate.
2. It does not support further algebraic treatment.

Method # 4. Standard Deviation:

Standard deviation is the square root of the average of the squared deviations from the mean. It
measures the absolute deviation of the values from the mean. Greater the value of standard deviation,
greater is the deviation of the values from the mean.

Computation of Standard Deviation:

1. Individual Observations:

(i) Direct Method:

In case of individual observations, the formula used for calculating standard deviation using direct
method is-
(ii) Assumed Mean Method:
Standard deviation can also be calculated by assumed mean method using the following formula-

Where, d = X – A and it represents deviations from assumed mean.

A = assumed mean
X = any particular observation in the data.
N = number of observations in the data.

2. Discrete Series:
(i) Direct Method:
In case of a discrete series, standard deviation is calculated using the formula given below:

(ii) Assumed Mean Method:

Using the method of assumed mean, the standard deviation can be calculated for a discrete series using
the following formula:

3. Continuous Series:

When the data is in the form of a continuous series then the midpoints of each class are taken as X and
deviations of these mid points from assumed mean is calculated.
Step deviation method is the most commonly used method in case of a continuous data set. In a step
deviation method, the mid-points are calculated and then the deviations of assumed mean from the
mid-point is taken and divided by the width of the class interval.
The standard deviation is then calculated using the formula below:
Merits of Standard Deviation:
1. Standard deviation is based on all the values in the data set.
2. It is definite and rigidly defined.
3. It supports further algebraic treatment.
4. Squaring of deviations eliminates the problem of algebraic signs that arises in mean deviation.
Demerits of Standard Deviation:
1. It gives more weight to the extreme items.
2. Calculation of standard deviation is cumbersome as compared to other measures of dispersion.

Method # 5. Coefficient of Variation:

Coefficient of Variation (C.V.) is measured by the ratio of the standard deviation to the mean. While the
standard deviation is an absolute measure, the coefficient of variation is a relative measure. It is useful
in comparing the variability between two sets of data.

Computation of Coefficient of Variation:

Merits of Coefficient of Variation:

1. Coefficient of variation is independent of unit of measurement as it is expressed as a percentage.
2. It facilitates comparison of data sets with different units of measurement and significantly different
means.
3. It helps in measuring risk, especially in stock market investments.
Demerits of Coefficient of Variation:
1. Coefficient of variation cannot be computed if the mean of a data set is zero.
2. It is misleading when there are positive and negative values in a data set.
3. It cannot be used to determine the confidence interval for mean as in case of standard deviation.

Method # 6. Lorenz Curve:

Lorenz curve is a graphical method of studying the dispersion of data, named after Dr. Max O. Lorenz,
who developed it in 1905. He studied the dispersion of wealth by graphical method. In order to
construct a Lorenz curve, the items as well as the frequencies are cumulated and the total is considered
as 100 percentages.
Then percentages are calculated for the cumulated values. These percentages are plotted on a graph
paper. If there is equal distribution of frequencies, the points would lie on a straight line. This line is
known as the line of equal distribution or the line of equality.

However, if the distribution is unequal, the curve would be away from the line of equality. The farther
the curve from the line of equal distribution, the higher is the inequality or dispersion. Given below is
the Lorenz curve depicting income distribution among households.