School of Management Sciences,

Varanasi

Measures of Central Tendency–

Business Statistics
(BCOMH-22-201) - 2023

Presented by:- Veeresh Tripathi, Assistant Professor, SMS - Varanasi

Syllabus
❖Unit 2: Measures of Central Tendency & Dispersion –

Measures of Central Tendencies - Mean, Median, Mode; Dispersion - Range, Quartile,

percentile, Quartile Deviation, Mean Deviation, Standard Deviation and its Co-
efficient, Co-efficient of Variation and Variance, Test of Skewness and Dispersion, Co-
efficient of Skewness: Karl Pearson's Method.
Flow Of The Presentation

❖Measures of Central Tendency –

❖Mean,

❖Median,

❖Mode,
Measures of Central Tendency
❖An average is a single value which is used to represent all of the values in the series.
Since the average lies somewhere in between the two extremes i.e. the largest and the
smallest items, it is sometimes called as a measure of central tendency.
❖Objectives of an Average
1) To determine one single value that may be used to describe the characteristics of the
entire series.
2) To facilitate comparison at a particular point of time or over a period of time.
3) To facilitate statistical inference: An average obtained from a sample is used in
estimating the average of the population.
4) To help the decision-making process: The averages help the managers in decision-
making. The managers are often interested in knowing normal output of a plant,
representative sales volume, overall productivity index, price index, etc. These all
are the connotations of an average.
Central Tendency
Requisites of an Ideal Average
1) It should be easy to understand.
2) It should be simple to compute.
3) It should be based on all the items of the series.
4) It should not be unduly affected by extreme items. If the average is changing with the
inclusion or exclusion of an extreme item, then it is not a truly representative value of the
entire series.
5) It should be rigidly defined by a mathematical formula so that the same answer is derived
by different persons who try to compute it. It should not depend on the personal prejudice
or bias of a person computing it.
6) It should be capable of further algebraic treatment, so that its utility is enhanced. For
example, if the average income and number of workers of two factories are given, it should
be possible to calculate the combined average income.
7) It should have sampling stability. It means that if one takes different samples from the
same population, the average of any sample should approximately turn out to be the same
as those of other samples.
Measures of Central Tendency
Measures of Descriptive Statistics
1. Measures of Frequency:
❖Count, Percent, Frequency
❖Shows how often something occurs
❖Use this when you want to show how often a response is given
2. Measures of Central Tendency
❖Mean, Median, and Mode
❖Locates the distribution by various points
❖Use this when you want to show how an average or most commonly indicated response
3. Measures of Dispersion or Variation
❖Range, Variance, Standard Deviation
❖Identifies the spread of scores by stating intervals
❖Variance or Standard Deviation = difference between observed score and mean
❖Use this when you want to show how "spread out" the data are. It is helpful to know when your data
are so spread out that it affects the mean
4. Measures of Position
❖Percentile Ranks, Quartile Ranks
❖Describes how scores fall in relation to one another. Relies on standardized scores
❖Use this when you need to compare scores to a normalized score (e.g., a national norm)
Arithmetic Mean
❖ The arithmetic mean is a measure of central tendency and is popularly known as mean.
❖ Arithmetic mean is obtained by dividing the sum of the values of all items of a series by the
number of items of that series.
❖ Normally, arithmetic mean is denoted by 𝑥ҧ which is read as ‘X bar’.
❖ It can be computed for unclassified or ungrouped data or individual series as well as
classified or grouped data or discrete or continuous series.

x1 + x2 + x3 + ............. + xn
x=
n
σ𝑛𝑖=1 𝑥𝑖
𝑥lj =
𝑛
Arithmetic Mean: Direct Method
Arithmetic Mean: Direct Method
Arithmetic Mean:
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Assumed Mean Method
Arithmetic Mean: Discrete Series
Arithmetic Mean: Discrete Series
Arithmetic Mean: Discrete Series
Arithmetic Mean: Discrete Series
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Discrete Series
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Discrete Series
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Continuous Series
Arithmetic Mean: Continuous Series
Arithmetic Mean: Continuous Series
Arithmetic Mean: Continuous Series
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Continuous Series
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Continuous Series
Short-cut Method or Assumed Mean Method
Arithmetic Mean: Continuous Series
Step-Deviation Method
Arithmetic Mean: Continuous Series
Step-Deviation Method
Arithmetic Mean: Continuous Series
Step-Deviation Method
Arithmetic Mean: Continuous Series
Step-Deviation Method
Questions:
Questions:
Practical Steps Involved In The Calculation Of
Arithmetic Mean In Case Of Continuous Exclusive Series
When Class Intervals Are Unequal
Question:
Question:
Mathematical Properties Of Arithmetic Mean
Merits Of Arithmetic Mean
1) It is easy to understand.
2) It is simple to calculate.
3) It is based on all the items of the series.
4) It is rigidly defined by a mathematical formula so that the same answer is derived by every
one who computes it.
5) It is capable of further algebraic treatment so that its utility is enhanced. The formula of
arithmetic mean can be extended to compute the combined average of two or more related
series.
6) It has sampling stability. It is least affected by sampling fluctuations.
7) Its computation does not require arrangement of items since it is not based on position in
the series.
8) It is characterized as a centre of gravity – a point of balance, balancing the value on either
side of it.
 Limitations Of Arithmetic Mean
1) Arithmetic Mean is affected by extreme values i.e. very small or very big values in the data unduly
affect the value of mean because it is based on all the items of the series. Therefore, for the
distribution where concentration is on small or big values, the mean will not be a proper average to
yield a representative figure.
2) For the open-ended distribution, mean cannot be computed with accuracy. For example, in an
income distribution starting with the class ‘below 100’ and ending with the class ‘above 1,000’
mean cannot be computed without making assumptions regarding the values of two extremes. As a
result, error may creep in.
3) For a U-shaped distribution (which has high frequency in the beginning, low in the middle and
again high towards and end) it hardly succeeds to be a point of location around which other
individual values congregate.
4) Mean is not useful for studying the qualitative phenomena e.g., beauty, honesty, intelligence, etc.
5) Mean does not lead a life of its own. For example, the statement that the average number of
children in Indian family is 3.6 does not imply that there is even a single family having 3.6
children.
6) For non-homogeneous data, average may give misleading conclusion.
Practical Steps Involved In The Computation Of
Combined Average Of Two Or More Related Groups
Combined Arithmetic Mean
Combined Arithmetic Mean
Correcting Incorrect Values
Correcting Incorrect Values
Question: The mean marks of 99 students was found to be 60. Later on it was discovered
that a score of 35 was misread as 53 and another score was taken as 63 instead of 36 and
score of 5 was not taken into account. Find the correct mean.
Weighted Arithmetic Mean
Question: A consumer buys a commodity @ Rs. 4.80, Rs. 6, Rs. 8, Rs. 12 and Rs. 24 per unit in each of five
successive years. Calculate the average cost per unit if he buys (a) 1000 units each year (b) 1000 units, 800 units,
600 units, 400 units and 200 units in each of five successive years.
Weighted Arithmetic Mean
Question: A consumer buys a commodity @ Rs. 4.80, Rs. 6, Rs. 8, Rs. 12 and Rs. 24 per unit in each of five
successive years. Calculate the average cost per unit if he buys (a) 1000 units each year (b) 1000 units, 800 units,
600 units, 400 units and 200 units in each of five successive years.
Median

❖ Median is the central value of the variable that divides the series into two equal parts in
such a way that half of the items lie above this value and the remaining half lie below
this value.
❖ Median is called a positional average because it is based on the position of a given
observation in a series arranged in an ascending or descending order and the position of
the median is such that an equal number of items lie on either side of it.
❖ Median is usually denoted by Med. or ‘Md’. Median can be computed for both
ungrouped data (or Individual Series) and grouped data (or Discrete/Continous Series)
Computation Of Median: An Individual Series
Computation Of Median: An Individual Series
Computation Of Median: An Individual Series
Computation Of Median: Discrete Series
Computation Of Median: Discrete Series
Computation Of Median: Discrete Series
Computation Of Median: Continuous Series
Computation Of Median: Continuous Series
Computation Of Median: Continuous Series
Computation Of Median: Continuous Series
Mathematical Properties Of Median

❖ The sum of the absolute deviations (i.e. deviations ignoring signs) from the median is
minimum.
❖ i.e.
Merits Of Median

1) Median is useful in case of open-ended series such as income distribution since

median is based on the position and not on the values of items.

2) Median is easier to compute than mean in case of unequal class-intervals.

3) It is not affected by extreme values.

4) It is most suitable average for dealing with qualitative data i.e. where ranks are
given.

5) It can be determined graphically.

6) It minimises the total absolute deviations.

 Limitations Of Median

1) It requires the arrangement of data in ascending/descending order.

2) It is not based on all items of the series.
3) It is not capable of algebraic treatment. Its formula cannot be extended to calculate
combined Median of two or more related groups.
4) It is affected more by sampling fluctuations than the value of mean.
5) The computational formula of a median is in a way an interpolation under the
assumption that the items in the median class are uniformly distributed, which is not
very true.
Partition Values: Quartiles
❖ Partition values are the positional measures which divide the series into equal parts say 4
equal parts or 8 equal parts or 10 equal parts or 100 equal parts. The most popular
partition values are – Quartiles, Octiles, Deciles and Percentiles.
❖ Meaning of Quartiles
❖ The values of a variate that divide the series or the distribution into 4 equal parts are
known as Quartiles. Since three points are required to divide the data into 4 equal parts,
we have three quartiles Q1, Q2, Q3.
❖ The first quartile (Q1), known as a lower quartile, is the value of a variate below which
there are 25% of the observations and above which there are 75% of the observations.
❖ The second quartile (Q2) known as middle quartile or median is the value of a variate
which divides the distribution into two equal parts. It means, there are 50% observations
above it and 50% below it.
❖ The third quartile (Q3), known as an upper quartile, is the value of a variate below which
there are 75% observations and above which there are 25% observations.
❖ It is clear that Q1 < Q2 < Q3
Computation of Quartiles
Individual Series
Discrete Series
Continuous Series
Continuous Series
Continuous Series
Mode
❖ Mode is often said to be that value in a series which occurs most frequently or which has
the greatest frequency.
❖ But it is not exactly true for every frequency distribution. Rather it is that value around
which the items tend to concentrate most heavily. It is also called the most typical or
fashionable value of a distribution because it is the value which has the greatest frequency
density in its immediate neighbourhood.
❖ It is usually denoted by Mo.
❖ It may be noted that a distribution may have one mode or two modes or several modes.
❖ Unimodal—A distribution is said to be unimodal if it has only one mode.
❖ Bimodal—A distribution is said to be biomodal if it has two modes.
❖ Multimodal—A distribution is said to be multimodal if it has more than two modes.
❖ Mode may be calculated for ungrouped data or individual series and grouped data or
discrete and continuous series.
Mode: Individual Series
Mode: Individual Series
Mode: Individual Series
Mode: Discrete Series
Mode: Discrete Series
Mode: Grouping Table And Analysis Table
To avoid, an error of judgment in the calculation of Mode by inspection in those cases
where the difference between the maximum frequency and the frequency preceding it
or succeeding it is very small and the items are heavily concentrated on either side,
Modal Class should be located by preparing a grouping table and an analysis table.
Mode: Grouping Table And Analysis Table
Mode:
Grouping
Table
And
Analysis
Table
Calculation of Mode
Calculation
of Mode
Calculation of Mode
Mode: Continuous Series
Mode: Continuous Series
Mode: Continuous Series
Mode: Continuous Series
Question
Solution
By inspection, it is difficult to
ascertain the modal class.
Therefore, we have to resort to
grouping.
Relationship Between Mean, Median And Mode

Symmetrical Moderately
skewed/asymmetrical
Mean = Median = Mode

Asymmetrical/skewed
Mean ≠ Median ≠ Mode
Relationship Between Mean, Median And Mode

Symmetrical
Mean = Median = Mode
Moderately Asymmetrical/skewed

Mean ≠ Median ≠ Mode

Relationship Between Mean, Median And Mode

Moderately skewed/asymmetrical
Relationship Between Mean, Median And Mode

The distance between Mean and the Median is about one-third the
distance between the mean and the mode.
Thus, Karl Pearson has expressed the relationship as follows:

Mean – Mode = 3 ( Mean – Median)

Mode = 3 Median – 2 Mean

Median = (Mode + 2 Mean)/3

Mean = (3 Median – Mode)/2

 Question

1. Calculate Mode if Mean is 20 and Median is 23.

2. Calculate Mean if Median is 54 and Mode is 62.
3. Calculate Median if Mean is 12 and Mode is 15
Questions
1) Write short notes on Measures of Central Tendency.

2) Distinguish between Mean, Median & Mode & their relationship.

3) Compare Inclusive Series Versus Exclusive Series in Continuous Frequency

Distribution.

4) Discuss the steps involved in computation of Mean/Median/Mode for a continuous

series data. Illustrate with the help of suitable example.
Recommended Texts:
❖Business Statistics by Dr. P.C. Tulsian & Bharat Jhunjhnuwala.

❖Business Statistics by J K Sharma

❖G C Beri – Business Statistics, 3rd ed, TATA McGraw Hill.

❖Levin and Rubin – statistics for Management, 7th ed., Pearson.

❖S. C. Gupta – Fundamentals of Statistics, Himalaya Publishing.

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