IBA, JU Master of Business Administration Course Instructor: Dr Swapan Kumar Dhar

Measures of Central Tendency: It is another way of describing numerical data that provides additional alternatives for summarizing data. Location or position of a frequency distribution is the value of the variable around which most of the values in the distribution tend to cluster. It is a more or less central value and one of the principal characteristics of a frequency distribution. There are several measures, which approximately define the position of a frequency distribution. These measures are variously known as averages, measures of location or measures of central tendency. It is a single value that represents a set of data and it pinpoints the center of the values. It locates and identifies the point around which the data are centered. There are mainly 4 important statistical averages or 4 measures of central tendency or 4 measures of location. (1) Arithmetic Mean (2) Median (3) Mode (4) Geometric Mean Arithmetic Mean: The arithmetic mean is also known simply as the mean or average. For Ungrouped data or raw data: The arithmetic mean or mean of a series of observations is equal to the sum of the observations divided by their number. So, for ungrouped data, the population mean is Sum of all the values in the population Population Mean = Number of values in the population If there are

observations in the population data set, the mean is calculated as X1 + X 2 + ... + XN N =

Population mean =

X
i =1

N Parameter: Numerical descriptive measures computed from population measurements are called parameters. Example 1: Somebody is considering purchasing one of several new luxury automobiles priced over $ 95,000. The 10 automobiles are selected and their prices, top speeds, mileage per gallon (mpg) are: Automobile Price as listed Top speed mpg Mercedes-Benz 143,333 156 13 BMW 123,734 170 11 Jaguar 131,000 154 13 Volvo 109,644 174 13 Toyota 100,000 154 13 Honda 95,995 150 NA Cello 95,000 145 11 Peugot 101,012 156 17 Ford 153,215 172 10 Opel 99,210 140 11 The automobiles considered here are taken as a population (meaning that they consist of all the cars, somebody is interested in). (a) What is the arithmetic mean price or what is the mean price? (b) What is the arithmetic mean of miles per gallon of this population? (c) If you purchase all 10, what would be the total cost? (d) Is this value considered a population parameter? Solution:

(a) The arithmetic mean =

X
N

$1152143 10

= $115214.30 = $115214 .

(b) The arithmetic mean number of miles per gallon is

nine in the population).

X
N

112 9

= 12.44

= 12 (Note there are only

(c) The total price of the 10 automobiles

= $1152143 .

(d) Yes. Because we are considering all the cars of interest, this is population parameter. For raw i.e. for ungrouped data, the mean for a sample is Sample mean =
Sum of all the values in the sample Number of values in the sample

x=

x
n

Example 2: Suppose the scores for five students in a class of 50 students are 70, 62, 56, 85 and 92. Find the mean of these numbers. Solution: We have to find out the sample mean. According to the formula, let x 1 = 70, x 2 = 62, x 3 = 56, x 4 = 85, x 5 = 92 and n = 5 Mean

n n n Mean = 73. Here mean is a statistic because this is a measure based on sample data. For Grouped Data: When the data are arranged or given in the form of frequency distribution i.e. there are k variate values such that a value

x = = x =

x
i =1

x 1 + x 2 + x 3 + x 4 + x5 =

70 + 62 + 56 + 85 + 92 5

= 73 .

Xi

has a frequency
K

f i (i = 1, 2, ..., k ),
i i

the formula for the mean is

A.M . =

f1 X 1 + f 2 X 2 + ... + f K X K f1 + f 2 + ... + f K

fX
i =1

f
i =1

fX
i i =1

N = f1 + f2 + ... + fK

Example 3: The distribution of age at first marriage of 130 males is given below: Age in years (X) Number of males (f ) 18 2 19 1 20 4 21 8 22 10 23 12 24 17 25 19 26 18 27 14 28 13 29 12

Find the mean age of males at first marriage. Solution: The average age can be computed from the formula. fi Xi 18 2 + 19 1 + ... + 29 12 3240 A.M. = = = = 24.92 . N 2 + 1 + ... + 12 13.0 The average age of males at first marriage is 24.92 years. If the data are given with K class intervals, then

The arithmetic Mean

X=

f1 X1 + f1 X2 + ... + fK XK f1 + f2 + ... + fK =

fX
i i =1

Where N =

f
i =1

Example 4: Following is the data showing annual salaries of professors. Average annual salary ($ 000) 20 up to 30 30 up to 40 40 up to 50 50 up to 60 60 up to 70 70 up to 80 80 up to 90 90 up to 100 Number of universities 4 20 41 44 29 16 2 4

What is the average annual salary of professors? Solution: Calculating Table: Average annual salary ($ 000) Number of Universities (f ) 20 up to 30 4 30 up to 40 20 40 up to 50 41 50 up to 60 44 60 up to 70 29 70 up to 80 16 80 up to 90 2 90 up to 100 4 Arithmetic mean of the annual salaries of professors is fi Xi 8700 = 54, 375 (In thousand $). X= = N 160 Mid value (X) 25 35 45 55 65 75 85 95 fX 100 700 1845 2420 1885 1200 170 380

Example 5: Marks

The pass result of 50 students who took up a test is given below. 4 8 5 10 6 9 7 6 8 4 9 3

No. of Students

If the average marks of all the 50 students were 5.16, find out the average marks of the students who failed. Solution: Total Number of students = 50, Average Marks of 50 students = 5.16. Total Marks of 50 students = 5.16 x 50 = 258. We have the following table. X 4 5 6 7 8 9 f 8 10 9 6 4 3 40 fx 32 50 54 42 32 27 237

Total marks of 40 students = 237. Average marks of the students failed =

258 237 10

= 2.1.

Example 6: Calculate the average marks of the students from the following data: Marks No. of Students Below 10 15 Below 20 35 Below 30 60 Below 40 84 Below 50 96 Below 60 127 Below 70 198 Below 80 250 Solution: Determine the simple frequencies from the cumulative frequencies given here and then calculate the mean.

Calculation of Arithmetic Mean Marks 0-10 10-20 20-30 30-40 40-50 50-60 60-70 70-80 No. of Students ( f) 15 20 25 24 12 31 71 52 N = 250 Mid Point (X) 5 15 25 35 45 55 65 75 fx 75 300 625 840 540 1705 4615 3900 12600

We have, X =

12600 250

= 50.40.

Example 7: The marks scored by 60 students in an examination in statistics are given below. Frame class intervals of ten and calculate the arithmetic mean. 06 10 58 56 00 25 32 35 35 09 78 17 60 50 35 38 31 10 48 05 68 48 35 30 31 21 23 23 50 72 19 25 35 40 46 42 45 25 60 41 35 36 38 35 33 46 28 31 35 42 46 38 39 45 48 50 28 29 31 55 Solution: Formation of Frequency Distribution and Calculation of Mean Marks 00-10 10-20 20-30 30-40 40-50 50-60 Tally Marks IIII IIII f 4 4 9 20 12 6 3 2 N=60 Mid-value (X) 5 15 25 35 45 55 65 75 fx 20 60 225 700 540 330 195 150 2220

IIII IIII IIII IIII IIII IIII IIII IIII II IIII

60-70 III 70-80 II Total *Here Lower Limit is inclusive. X=

2220 60

= 37. 65 36 42 39 45 45

Example 8: Following are the marks (out of 100) obtained by 50 students in Statistics: 70 55 51 42 57 45 60 47 63 53 33 82 55 64 50 25 65 75 30 20 58 52 42 35 40 61 53 59 49 41 15 52 46 39 55 65 45 63 54 48 64 35 26 18 (i) Make a frequency distribution taking a class interval of 10 marks. (ii) Draw a histogram and a frequency polygon from the frequency distribution. (iii) Find out the average marks of the students. Solution: (i) Computation of Frequency Distribution (* Lower limit is inclusive) Marks 10-20 20-30 30-40 40-50 Tally Marks II III

IIII II IIII IIII III 4

f 2 3 7 13

50-60 60-70 70-80 80-90 Total

IIII IIII III IIII IIII

11 1

13 9 2 1 N = 60

H istogram
14 12 Frequency 10 8 6 4 2 0 1020 2030 3040 4050 5060 6070 7080 8090

M arks

Frequency Polygon
14 12 Freq uen cy 10
Computation of Mean

8 6 4 2 0

1020

2030

3040

4050 Marks

5060

6070

7080

8090

(c) Computation of Mean Marks 10-20 20-30 30-40 40-50 50-60 60-70 70-80 80-90 Total We have X = X 15 25 35 45 55 65 75 85 f 2 3 7 13 13 9 2 1 N=50 fx 30 75 245 585 715 585 150 85 2470

2470 50

= 49.4.

Example 9: For a distribution based on 200 observations partly reproduced below. Mean is 1.46. Find the missing frequencies. No of Accidents 0 1 2 3 4 5 Frequency 46 ? ? 25 10 5

X denote the number of accidents. Let f 2 and f 3 be the missing frequencies corresponding to X =1 and X = 2 respectively. Necessary computations are given below: xi fi xi f i
Solution: Let 0 1 2 3 4 5 Total We have, 46 0

f2 f3
25 10 5 2

f2 f3
75 40 25

f i = f 2 + f3 + 86 = 200 (Given)

f i xi = f 2 + 2 f3 + 140

(1) f i = f 2 + f3 + 86 = 200 f2 + f3 = 114. f + 2 f3 + 140 f i xi f 2 + 2 f3 + 140 = 1.46 = 2 f 2 + 2 f3 = 152 . (2) We know, X = 200 200 fi Combining (1) and (2), we have f 2 = 76 and f 3 = 38. Thus the missing frequencies corresponding to X =1 and X = 2 are 76 and 38 respectively. Weighted Arithmetic Mean or Weighted Mean: In the discussion of the mean, it is assumed that each observation is equally important. However, in certain cases greater weight may be given to some observations. For example, Construction Company pays hourly employees $ 6.50, $ 7.50 or $ 8.50 an hour. Arithmetic mean hourly wage is

$6.50 + $7.50 + $8.50 3

= $7.50

However, this is true only if there are the same number of employees earning $ 6.50, $ 7.50 and $ 8.50 an hour. Suppose the data are like this, Wage per hour ($) 6.50 7.50 8.50 Number of employees 14 10 2

Here weights are 14, 10 and 2 and the mean obtained is called the weighted arithmetic mean or weighted mean. For this example, the weighted average is

XW =

6.50 14 + 7.50 10 + 8.50 2 14 + 10 + 2

183 26

= $7.038

= $7.04 .

In general, the weighted mean of a set of numbers designated weights

X 1 , X 2 , ..., X n

with corresponding

w1 , w2 , ..., wn w1 X 1 + w2 X 2 + ... + wn X n = w1 + w2 + ... + wn

Xw =

wi X i
i =1

wi

Example 10: Calculate weighted mean and unweighted mean from the following data: Commodity Price in Taka/kg. Quantity consumed (in kg.) A 4.50 100 B 3.00 50 C 5.00 20 D 10.00 5 E 35.00 2 Solution: Computation of Unweighted and Weighted Mean Article A B C D E Total
X =

Price (X) 4.50 3.00 5.00 10.00 35.00

Quantity (W) 100 50 20 5 2

WX 450 150 100 50 70

X = 57.50 = 11.50.
N 5

X = 57.50

W = 177

This is the unweighted mean. Weighted Mean =

Example 11: Comment on the performance of the students of three Universities given below using simple and weighted averages. University A Course of % of pass No. of students(in 00 %of pass study ( 00) M.A. 71 3 82 MBA 83 4 76 BBA 73 5 73 B.A. 74 2 76 B.Sc. 65 3 65 M. Sc. 66 3 60 Solution: University A B Courses X W WX X W M.A. 71 3 213 82 2 MBA 83 4 332 76 3 BBA 73 5 365 73 6 B.A. 74 2 148 76 7 B.Sc. 65 3 195 65 3 M.Sc. 66 3 198 60 7 B No. of students (00) 2 3 6 7 3 7 C No. of students (00) 2 3.5 4.5 2 7 2 C W 2 3.5 4.5 2 7 2

WX = W

WX = 820
4.63.

% of pass 81 76 74 58 70 73

WX 164 228 438 532 195 420

X 81 76 74 58 70 73

XW 162 266 333 116 490 146

Total

=432

X W WX
=20

= 1 45 1

=432

W
=28 432 6

WX
= 72.

=1977

=432

W
=21

WX

= 15 1 3

is the same for all the three universities and X =

But the number of students (weights) is different. Therefore, we have to calculate the weighted mean. For University A, X w =

For University B, X w

For University C, X w

WX W WX = W WX = W

1451 20

= 72.55.

1977 28 1513 21

= 70.60.

= 72.05.

University A is the best university because the weighted mean is greater than the other two universities. Example 12: An examination was held to decide the award of a scholarship. The weights of various subjects were different. The marks obtained by 3 candidates (out of 100 in each subject) are given below: Student Subject Weight A B C Mathematics 4 60 57 62 Physics 3 62 61 67 Statistics 2 55 53 60 English 1 67 77 49 Determine the way to award the scholarship. Solution: Here weighted mean is appropriate to select one to award the scholarship. The calculation of the weighted mean is shown in the following Table. Weight A Mark Student B C

Subject Mathematics Physics Statistics English Total

(w i )
4 3 2 1 10

(x i )

xi w i
240 186 110 67 603

Mark (x i ) 57 61 53 77 248

xi w i
228 183 106 77 594

Mark (x i ) 62 67 60 49 238

xi w i
248 201 120 49 618

60 62 55 67 244

Applying the formula for weighted mean and simple mean, we get

x wA = x wB x wC

603 244 = 60.3; xA = = 61. 10 4 594 248 = = 59.4; xB = = 62. 10 4 618 238 = = 61.8; xC = = 59.5 10 4

From the above calculations, it may be noted that student B should get the scholarship as per simple arithmetic mean, but according to weighted mean, student C should get the scholarship because all the subjects of examination are not of equal importance. Pooled or Combined Mean If we have arithmetic means variable), based on sizes

X1
and

and

X2

of two groups (having the same unit of measurement of a

N1

N2

observations respectively, we can compare the mean

X C of the

variate values of the groups taken together from the individual means by the formula,

XC =

N1 X1 + N2 X2 . N1 + N2

Example 13: There are two branches of a company, employing 280 and 320 persons respectively. If the arithmetic mean of the monthly salaries paid by the two companies are Taka. 750 and Taka 937.5 respectively, find the arithmetic mean of the salaries of the employees of the companies as a whole. Solution:

XC =

The average salaries of the employees of the companies as a whole = Taka 850. Example 14: The mean mark of 50 students in statistics is 72 and that of 35 boys is 75. Find the mean marks of girls in the class. Solution: let n1 be the number of boys and n2 be the number of girls. Also let x1 be the mean marks for boys and x2 be the mean marks for girls. For this problem we have to use combined mean. The formula for combined mean is

N1 X1 + N2 X2 280 750 + 320 937.5 510000 = = Taka 850. = N1 + N2 280 320 600

Xc =

n1 x1 + n2 x2 35 75 + 15 x2 72 = x2 = 65. n1 + n2 50

Therefore, the mean mark for the girls is 65. Example 15: The average sale of a product for a particular week, excluding Friday, is reported by the city departmental store as 150 units. Friday being a holiday, there is heavy rush of sales, which has inflated average sales for the entire week to 210 units. Find the sales for Friday. Solution: The week long sales can be divided into two parts i.e. six days excluding Friday and the seventh day which is Friday itself. Given average sales for the whole week X c = 210 units, average sales for the first six days excluding

x1 = 150 units. Also n1 = 6 and n2 = 1 . n1 x1 + n2 x2 6 150 + 1 x2 210 = x2 = 570 . Hence, X c = n1 + n2 7

Friday Thus, the sale for Friday is 570 units. Merits (a) It takes into account all the observations of the data. (b) It is a very useful measure for comparing two or more populations. (c) It is very easy to calculate. (d) It is the only measure where the sum of deviations of each value from the mean will be always equal (Xi X) = 0 zero i.e. Demerits (a) This measure is greatly affected by unusually large or small values (b) It is also inappropriate if there is an open-ended class for data tallied into a frequency distribution. Median For Ungrouped Data Median is the mid point of the values after they have been ordered from the smallest to the largest or the largest to the smallest. One half of observations will be above the median and one-half will be below the median. Example 16: Actual waiting time for the first job on the selected sample of 9 people having different field of specializations was as given below: Waiting time (in months): 11.6, 11.3, 10.7, 18.0, 3.3, 9.2, 8.3, 3.8, 6.8 Find the median of waiting time. Solution: The median waiting time can be calculated by arranging the data first in ascending order and then taking the mid value. 3.3, 3.8, 6.8, 8.3, 9.2, 10.7, 11.3, 11.6, 18.0 Median waiting time = 9.2 months. If the data is arranged in descending order, the same value will be the median. Example 17: The export of agricultural products in million dollars from a country during eight quarters in 1974 and 1975 is 29.7, 16.6, 2.3, 14.1, 36.6, 18.7, 3.5, 21.3 Find the median of the given set of values. Solution: We arrange the data in ascending and descending order

2.3, 3.5, 14.1, 16.6, 18.7, 21.3, 29.7, 36.6 and 36.6, 29.7, 21.3, 18.7, 16.6, 14.1, 3.5, 2.3 Median = order.

16.6 + 18.7 2

= 17.65 for ascending order and Median = n

18.7 + 16.6 2

= 17.65 for descending

Median = 17.65.
Median = L + 2 F1 fm C

For Grouped Data, the median is, where

L = Lower limit of the median class, n =Total frequency F1 = Cumulative frequency for the class just above the median class

fm =

Frequency of the median class, C

= Class interval of the median class.

Example 18: Following is the table showing the annual salaries of professors at 160 colleges. What is the median annual salary? Average annual salary Number of universities Cumulative frequency ($ thousands) 20 up to 30 4 4 30 up to 40 20 24 40 up to 50 41 65 50 up to 60 44 109 60 up to 70 29 138 70 up to 80 16 154 80 up to 90 2 156 90 up to 100 4 160 Solution: To find the median class, we have to calculate

n 2

160 2

= 80.

So blocked row is the median

class because 80 lies in this class. According to the formula,

n
Median =

L+ 2

F1 fm

160 C
=

$50000 + 2

65

44

$10000

= $53409.

Example 19: Given the distribution of income of different occupational groups for the families in a region as: Professional groups Income/year(000Tk.) Number of families Cumulative frequency Manager 169.1 82 82 Professional 136.3 62 144 Middle management 79.1 235 379 Manual work 35.7 179 558 Shop Keeper 34.0 96 654 Shelf-employment 24.9 195 849 Small farmer 19.2 714 1563 Farm labor 14.2 147 1710 Find the median. Solution: The data are written in descending order. Here

n = 1710,

The number 855 is contained in the smallest cumulative frequency 1563 and this (Block one) is the median class. Hence median = 19.2 = 19.2 thousand Taka/year. Merits (a) It is a positional average and hence it is not influenced by the extreme values. (b) It can be calculated even in the case of open-end intervals. Demerits (a) It is not a good measure if the number of item is small. (b) It is not amenable to further algebraic treatment.

n = 855. 2

10

3. Mode: The mode is another measure of central tendency. It is the value of the variable that occurs most frequently i.e., for which the frequency is a maximum. It is the most fashionable value of the variable. For Ungrouped Data Example 20: The number of children in 15 families is: 3, 4, 1, 0, 3, 2, 3, 5, 7, 2, 6, 8, 4, 3, 2 Find the mode value. Solution: From the data it reveals that the number 3 occurs most frequently i.e., it appears more often (4 times) than any other number. Therefore the mode is 3. For Grouped Data with class intervals If the distribution is with continuous class intervals, mode can easily be calculated. The class intervals for all the classes are equal. If they are unequal, they should be made equal. Mode can be obtained by the following formula: Mode

= L0 +

Where

The class with highest frequency is called the modal class.

L0 = lower limit of the modal class f 0 = Frequency of the modal class f 1 = Frequency of the class immediately preceding the modal class f 2 = Frequency of the class immediately following the modal class C = Class interval.

f 0 f1 C . ( f 0 f1 ) + ( f 0 f 2 )

Example 21: The birth weights (kg) of 30 children were recorded as follows: 2.0 2.1 2.3 3.0 3.1 2.7 2.8 3.5 3.1 3.7 4.0 2.3 3.5 4.2 3.7 3.2 2.7 2.5 2.7 3.8 3.1 3.0 2.9 2.8 2.9 3.5 4.1 3.9 2.8 2.2 (a) How many classes would you recommend forming a frequency distribution? (b) What class interval would be easier to work with? (c) Form the frequency distribution on the basis of (a) and (b). (d) What will be modal birth weight? Solution: We have the formula for taking the class interval and the total number of classes. We have to use the 2 to the k rule for suggested class, That is 2 k > n . For this example, There are 30 observations so n=30. Two raised to the fifth power is 32. Therefore, we should have at least 5 classes, i.e., k=5. Here class interval is obtained by subtracting the lower limit of a class from the lower limit of the next class. These class intervals should be uniform. For our case,

i H L = 4.2 2.0 = 0.44 0.50. .

k
5

(a) Recommended class = 5 (b) Suggested Class Interval 0.50. (c) Hence 5 classes with a class interval 0.4 kg are to be taken in the frequency distribution. The distribution with the help of Tally marks is: Class Number of children Tally marks (Weight in kg) (Frequency) 2.0 - 2.5 2.5 - 3.0 3.0 - 3.5 3.5 - 4.0 4.0 4.5

IIII IIII //// IIII I IIII //

///

5 9 6 7 3

11

* Here the lower limit of a class is included in that class. (d) For finding the mode, first we have to locate the modal class. Here the modal is 2.5 - 3.0, because for this frequency is maximum.

Mode = L0 +
where

L0 = 2.5,

f 0 f1 C ( f 0 f1 ) + ( f 0 f 2 ) f 0 = 9, f 1 = 5, f 2 = 6, C = 0.5.
4 4+3

Hence, Mode = 2.5 +

0.5 = 2.5 + 0.286 = 2.786. kg.

The modal birth weight = 2.786 kg.

Merits (a) It is not affected by extreme values of a set of observations (b) It can be calculated for distributions with open-end classes. Demerits (a) Sometimes it does not exist (b) Often its value is not unique (c) It does not account all the values of data. Relative Positions of the Mean, Median and Mode: Let us consider the following three frequency distributions: Frequency Distribution I II III 24 8 6 7 46 10 14 10 Class Interval 68 8 10 14 10 12 10 12 14 10 12 8 8 7 Total 50 50 50

Fig 1: Histogram of Distribution 1

16 14 12 Frequency 10 8 6 4 2 0 Clas s Interval

12

Fig 1: Histogram of Dis tribution II 16 14 12 Frequency 10 8 6 4 2 0 Clas s Interval

Fig 1: Histogram of Distribution III 16 14 12 Frequency 10 8 6 4 2 0 Class Interval

First histogram is a symmetric distribution. For this distribution, the mean, mode and median are located at the center and are always equal. They are all equal to 7. That is, Mode = Median = Mean. The second histogram is not a symmetric distribution. It is positively skewed distribution. Here mean = 7, Median = 6.83 and Mode = 5.60. So, Mode< Median< Mean. The third histogram is also not a symmetric distribution. It is negatively skewed distribution. Here mean = 7.6, Median = 7.30 and Mode = 8.44. So, Mode> Median> Mean. Geometric Mean: If we are interested in finding average percentage changes in sales, salaries or economic figures such as GDP, which compound or build on each other, geometric mean is the appropriate mean. The G.M. will always be less than or equal to the A.M. Also all the data values must be positive. Illustration: Suppose you receive a 5 percent increase in salary last year and a 15 percent increase this year. Apparently you can think that the average annual percent increase is 10.0. But it is not. Actual average annual percent increase is 9.886. But how and why? Let us calculate G.M. Years Last This G.M. = (x
1 1 2

Percent increase 5 15

Increased Salary (x) 105.00 115.00

x 2 ) = (105.00 115.00)0.50 = 109.8863.

That is, average annual percent increase is 9.886. This can be verified by assuming that your monthly earning was $3000 to start and you received two increases of 5 percent and 15 percent. Raise 1 = $3000(0.05) = $150.00 Raise 2 = $3150(0.15) = $472.50 ----------Total $ 622.50

13

Your total salary increase is $622.50. This is equivalent to: $3000.000(0.098863) = $296.589 $3296.589(0.098863) = $325.912 ------------Total $622.501 So the two totals are same. A second application of the geometric mean is to find an average percent increase over a period of time. For example, if you earned $30,000 in 2005 and $50,000 in 2009, what is your annual rate of increase over the period? The rate of increase is determined from the following formula: * Average Percent Increase Over Time: Where n is the number of periods. Sometimes this formula can be written as For Ungrouped Data Suppose GM = GM=

n Value at the end of period 1.

Value at the start of period Pn 1. P0

X 1 , X 2 , ..., X N

are

variate values, then the geometric mean is given as

1 ) N . N = total frequency

G = N X 1 . X 2 . ... .X N

= ( X 1 X 2 ... X N

Example 22: Decadal percentage growth of urban population from 1921 to 1961 for some city is given below: Years Decadal percent increase 1921 8.25 1931 19.08 1941 32.09 1951 41.49 1961 25.85

Find the average percent growth rate of urban population within the last 5 decades. Solution: Here geometric mean is appropriate. We have N = 5.

G .M . = 5 (8.25)(19.08)(32.09)(41.49)(25.85) = (8.25)(19.08)(32.09)(41.49)(25.85) 5

Geometric mean percent growth rate = 22.22.

In case

= (8.25)(19.08)(32.09)(41.49)(25.85).20 = 22.22 .

X 1 , X 2 , ..., X K
,

have the corresponding frequencies

fK GM = N X 1f1 X 2f 2 ... X K

For Grouped Data

fK GM = N X 1f1 X 2f 2 ... X K

N = fi N = fi

f 1 , f 2 , ..., f K , then

In case of grouped data, mid values of the class intervals are considered as ,

Xi

and the formula is

Merits (a) If the variate values are measured as ratios, proportions or percentages, geometric mean gives a better measure than any,other measure. (b) It is based on all the observations. Demerits If one of the numbers is zero or negative, geometric mean cannot be calculated. Example 23: The annual percentage change in the sales of a popular brand of toys for five successive years was observed as 19.5, 20.8, 30.6, 28.5, and 27.2. Find the average annual percentage change in sales. Solution: Since the five-year data are in percentages, average annual percentage change can be found by computing the geometric mean. Thus, the necessary computations are as follows:

14

Years 1 2 3 4 5 GM=
1

Percentage 19.5 20.8 30.6 28.5 27.2

Sales at the year end(x) 119.5 120.8 130.6 128.5 127.2

(x1 x 2 x 3 x 4 x5 ) 5 = (119.5 120.8 130.6 128.5 127.2)0.20 = 125.2431.

It means sales have increased by (125.2431-100.0000) = 25.24%. Example 24: After the commencement of its operations, a companys net worth increased by 15 percent in the first year, 20 percent in the second year, 35 percent in the third year and 25 percent in the fourth year. Find the average growth rate in net-worth of the company over the fourth - year period. Solution: Let the year to year growth in net-worth be X. Thus, the necessary computations are as follows: Years Net worth increase Percentage Growth(x) 1 15 115 2 20 120 3 35 135 4 25 125

GM = (x1 x 2 x3 x 4 ) 4 = (115 120 135 125)0.25 = 123.5324

Thus, the average growth rate r is: r = GM 100 = 23.53%. Example 25: An industrys gross output increased from 120 million tones to 1500 million tones over a period of 10 years. Find the average growth rate in gross output per annum. Solution: Given Pn = 1500 million tones, P0 = 120 million tones and n = 10. The required growth rate r is

P n 1500 10 r = n 1 = 1 = 1.287333294-1=28.73%. 120 P0

Example 26: The gross profit of a company increased 10 times over a period of 3 years. What is the average percentage growth rate in gross profit per annum? Solution: If the companys initial gross profit is Taka 10, according to the problem, it is increased to Taka 100 over the next three years. Thus, Pn = 100,P0 = 10 and n = 3 years. The desired average percentage growth rate is

P n 100 3 r = n 1 = 1 = 2.15443469-1=1.1544=115.27%. 10 P0
Example 27: It was reported that the earning per share (EPS) of a company increased by 18 percent in the first year, declined by 20 percent in the second year and again increased by 35 percent in the third year. Find the average annual growth rate in EPS. Solution: Since the three-year data are in percentages, average annual percentage change can be found by computing the geometric mean. Thus, the necessary computations are as follows: Years 1 2 3 r=
1

Percentage increase 18 - 20 35
1

Annual increase (x) 118 80 135

(x1 x 2 x 3 ) 3 1 = (118 80 135)3 1 = 108.4181- 100 = 8.41%.

Example 28: The following are the weekly wages in Taka of 30 workers of a firm:

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140 144 85

139 148 106

126 134 123

114 63 133

100 69

88 148

62 132

77 118

99 142

103 116

108 123

129 104

80 95

The firm gave bonus of Taka 10, 15, 20, 25, 30, and 35 for individuals in the respective salary slabs: exceeding 60 but not exceeding 75; exceeding 75 but not exceeding 90; and so on up to exceeding 135 and not exceeding 150. Find the average bonus paid. Solution: Let us prepare a frequency distribution as follows: Weekly Wages(In Taka) 061 075 076 090 091 105 106 120 121 135 136 150 Average bonus paid = Frequency (f) 3 4 5 5 7 6 Bonus Paid(x) 10 15 20 25 30 35

fx = 375 = 24.5 Taka.

n 30
Bonus(in Taka) 40 45 50 60 70 80 100

Example 29: A factory pays workers on piece rate basis and also a bonus to each worker on the basis of individual output in each quarter. The rate of bonus payable is as follows: Output(in units) 70 74 75 79 80 84 85 89 90 94 95 99 100 104 The individual output of a batch of 50 workers is given below

94 84 99 72

83 92 81 85

78 80 87 83

76 85 90 75

88 83 84 72

86 98 97 83

93 103 80 98

80 87 75 77

91 88 93 87

82 88 101 71

89 81 82 80

97 95 82

92 86 89

By suitable classification, find out (i) Average bonus per worker for the quarter (ii) Average output per worker. Solution: First we make a frequency distribution of bonus and output. Output(in units) 70 74 75 79 80 84 85 89 90 94 95 99 100 104 (a) Average bonus/worker for quarter, x = (b) Total quarterly bonus paid Frequency (f) 3 5 15 12 7 6 2 Bonus(in Taka)(x) 40 45 50 60 70 80 100

fx = 2985 = 59.7 Taka.

n 50

59.7 50 = 2985 Taka.

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(c) Output(in units) 70 74 75 79 80 84 85 89 90 94 95 99 100 104 Total Average output/worker,

x =

fx
n

Frequency (f) 3 5 15 12 7 6 2 50
= 4305 50 = 86.1 units.

Mid-value(x) 40 45 50 60 70 80 100

fx

4305

Example 30: The following is the age distribution of 1000 persons working in an organization. Age Group 20 25 25 30 30 35 35 40 40 45 45 50 50 55 55 60 60 65 Number of Persons 30 160 210 180 145 105 70 60 40

Due to continuous losses, it is desired to bring down the manpower strength to 30 percent of the present number according to the following scheme. (a) Retrench the first 15 per cent from the lower age group, (b) Absorb the next 45 per cent in other branches, (c) Make 10 per cent from the highest age group retire permanently, if necessary. Calculate the age limits of the persons retained and those to be transferred to other departments. Also find the average age of those retained. 15 Solution: (a) The first 15% persons to be retrenched from the lower age groups are 1000 = 150. 100 But the lowest age group 20 25 has only 30 persons and therefore the remaining 150 30 = 120 will be taken from the next higher age group, that is, from 25 30 , which has 160 persons. (b) The next 45%, that is, 450 persons who are to be absorbed in other branches, belong to the following age groups. Age Group 25 30 30 35 35 40 40 45 Total Number of Persons (160 120) = 40 210 180 20 450

(c) Those who are likely to be retired are 10 per cent, that is, 100 persons and belong to the following highest groups. Age Group 50 - 60 60 - 65 Total Number of Persons 100 40 = 60 40 100

Hence, the following table gives the number of persons who are retained in the organization.

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Age Group 40 - 45 45 50 50 55 Total

Number of Persons 145 20 = 125 105 70 300

Hence, the calculations of the average age of those retained are shown in the following Table. Age Group 40 - 45 45 50 50 55 Total The required average age is X = Mid-value (x) 42.5 47.5 52.5 Number of Persons(f) 145 20 = 125 105 70 300 = 13975 fx 5312.5 4987.5 3675 13975

= 46.58 47 years (approx.) 300 Example 31: 168 handloom factories have the following distribution of average number of workers in various income groups: Income Groups Number of Firms 800 - 1000 40 1000 1200 32 1200 1400 26 1400 1600 28 1600 1800 42

fx f

Average Number of 8 12 8 8 4 Workers Find the mean salary paid to the workers. Solution: Since the total number of workers working in different income groups is not given, therefore these have to be determined as shown in the following table. Income Group 0800 1000 1000 1200 1200 1400 1400 1600 1600 1800 Number of Firms 40 32 26 28 42 Average Number of Workers 8 12 8 8 4 Frequency 320 384 208 224 168

Computation of mean value is given the following table. Income Group 0800 1000 1000 1200 1200 1400 1400 1600 1600 1800 Total The required average salary is X = Mid-value(x) 900 1100 1300 1500 1700 Frequency(f) 320 384 208 224 168 1304 fx 288000 422400 270400 336000 285600 1602400

fx f

1602400 1304

= 1228.83.

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