Page 54 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Statistical Methods in Economics Dilfraz Singh, Lovely Professional University

Notes Unit 5: Application of Mean, Median and Mode

CONTENTS
Objectives
Introduction
5.1 Application of Mean
5.2 Application of Median
5.3 Application of Mode
5.4 Summary
5.5 Key-Words
5.6 Review Questions
5.7 Further Readings

Objectives

After reading this unit students will be able to:
• Discuss Application of Mean and Median.
• Know the Application of Mode.

Introduction

A measure of central tendency is a single value that attempts to describe a set of data by identifying
the central position within that set of data. As such, measures of central tendency are sometimes
called measures of central location. They are also classed as summary statistics. The mean (often
called the average) is most likely the measure of central tendency that you are most familiar with, but
there are others, such as the median and the mode.
The mean, median and mode are all valid measures of central tendency, but under different conditions,
some measures of central tendency become more appropriate to use than others. In the following
sections, we will look at the mean, mode and median, and learn how to calculate them and under
what conditions they are most appropriate to be used.
5.1 Application of Mean

The most popular and widely used measure for representing the entire data by one value is what
most laymen call an ‘average’ and what statisticians call the arithmetic mean. Its value is obtained by
adding together all the items and by the dividing this total by the number of items. Arithmetic mean
may be either (i) simple arithmetic mean, or (ii) weighted arithmetic mean.
Calculation of Arithmetic Mean—Individual Observations

The process of computing mean in case of individual observations (i.e. where frequencies are not
given) is very simple. Add together the various values of the variable and divide the total by the
number of items. Symbolically:

X + X + X + ... X ∑ X
+
X * = 1 2 3 N =
N N
X = Arithmetic Mean

48 LOVELY PROFESSIONAL UNIVERSITY