Page 97 - DCOM203_DMGT204_QUANTITATIVE_TECHNIQUES_I

Quantitative Techniques – I

Notes 6.1.1 Functions of an Average

1. To present huge mass of data in a summarised form: It is very difficult for human mind to
grasp a large body of numerical figures. A measure of average is used to summarise such
data into a single figure which makes it easier to understand and remember.
2. To facilitate comparison: Different sets of data can be compared by comparing their
averages. For example, the level of wages of workers in two factories can be compared by
mean (or average) wages of workers in each of them.
3. To help in decision making: Most of the decisions to be taken in research, planning, etc., are
based on the average value of certain variables. For example, if the average monthly sales
of a company are falling, the sales manager may have to take certain decisions to
improve it.

6.1.2 Characteristics of a Good Average

A good measure of average must posses the following characteristics:
1. It should be rigidly defined, preferably by an algebraic formula, so that different persons
obtain the same value for a given set of data.

2. It should be easy to compute.
3. It should be easy to understand.
4. It should be based on all the observations.
5. It should be capable of further algebraic treatment.
6. It should not be unduly affected by extreme observations.
7. It should not be much affected by the fluctuations of sampling.

6.1.3 Various Measures of Average

Various measures of average can be classified into the following three categories:
1. Mathematical Averages
(a) Arithmetic Mean or Mean

(b) Geometric Mean
(c) Harmonic Mean
(d) Quadratic Mean
2. Positional Averages
(a) Median
(b) Mode
3. Commercial Average

(a) Moving Average
(b) Progressive Average
(c) Composite Average
Out of above mentioned, we will discuss here only mathematical averages and positional
averages.

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