DIDDII .

STATISTICAL TOOLS ~ND INTERPRETATION

Measures of Central Tendency
Positional Average and Partition,,alues
Measures of Dispersion
Measures of Correlation
Introduction to Index Numbers

______ Chapter 8- - - - - -...

MEASURES OF CENTRAL TENDENCY

1. Meaning and Importance
2. Objects and Functions of Averages .,
3. Characteristics of a Representative Average
4. Three Orders of Measurement
5. Arithmetic Average or Mean
6. List of Formulae and Abbreviailons

~ZitW1RiW 11 Mi4•)iiti:At}
We have discussed in Unit-I -how statistics is important in economic analysis,
Unit-II how to collect, classify and organise the data, and in presentation, how to prese
mass and complex data, viz., by tabulation, diagrams and graph~ T~1ty help in visu
comparison and interpretation of data and help us to draw conclusions about the importaJ
features of the universe. Now, one of the most important objectives of statistical analys
is to obtain a single representative value. The one siug'le value that reads the characteristi,
of the complex and varied mass of data is c::illed average or central value. The va/u
always falls between the lowest and highest values of the data. It is generally located u
, the centre. or middle of the observations. An average is a figure that represents the w~ol
1
group is called a measure . of central t~ndency or measure of location or just br1efl)
average. The word average 1s used by ~s m everyday life. For example; the average mark!
of students in a class, represents the marks of all students in the class, average inco~e
of factory workers represents income of all workers in factory, average production_in
f t ory: average rainfall in area. The averages occupy an important place in statisucs.
ac ' · · I l . d d
Many other techniques of stat1st1ca ana ys1s epen upon this measure.
A d
ccor 1·og to Croxton and Cowdon : "An ll faverage
h value
. is a single
. value
. within the
' '• of the data that is used to represent
range h d a .o .t e values
. -tn the sertes. Since.
. the averageI
is somewhere w1'thin the range of t e ata, it ts sometmzes called a measure..of centra
I ,, ' \l,
va ue. d Smith : "An average is sometimes called a measure. o'f central
According to ~ell~y-dan I alues of the variable usually cluster around it.-:" I'll
tendencY because ,ndw1 ua v .l • ·•• '
 Measures of Central Tendency JLJ 131
~ :UHtli~l11IIUtiit•1~'1•)t,9a:M1&r-
11.esct1t the salien~. fcatu~cs of a mass complex data : It determines a 'single
.-f'o rel 0fthe whole senes. It IS a tool to represent the salient features of a mass
I· ,, ' I · hl f l. d ·
6g11re let data. t IS e P u .10 re u~mg ~he mass information into a single value
of ,ornP ·ng general. conclus1ons. It_ is difficult to generalise anything from the
~f
for :ores of Indian People. But ,1f it is said that the average age of an Indian
3ges ars one can draw conclusions about health conditions of the people.
5 ye '
is 55 the purpose O an avera~e Is to represent a group of individual values 111 a
f · .-
~hll le manner~ ~o tha~ the mmd can get a quick understanding of the general
5jJllP f the individuals m the group. ____
size?tac••1i·tate comparison
b : Averages
d . h are useful for comparison. The average of
z, ,oe group can e compar~ WI~ averages of other groups. For example, the
on . marks of students m section A can be compared with the average marks
3verage . B ·1 f
f students in section , easi ! at a glance or the average monthly sales o
0
artn1ent A are compared with average monthly sales of Department B.
vep . & .
0
know about umverse om a sample : Averages also help to obtain a picture __
3, ~ complete gro~p by means of sample data. In statistical enquiries, very often,
~ample metho~ 1s used. The mean of a sample gives a good idea about the mean _-
of the population. _ ·
4. To help in decision making : Averages are helpful_for making decisions in plaD?ing _
. various fields. For example, a sales manager may need to know the average
:umber of calls. made per. day by salesman in the field. A railway ~fficer w_ill
require inf<;>rmanon regarding the average number of passengers carried oy rails
00 the various passenger runs. Averages are valuable in setting stand~rds,
estimating and planning and other managerial decision areas.
5, To trace mathematical relationship : When it is desired to trace the mathematical
relationship between different groups or classes, an average becomes essential.
Comparison of values of different groups can only be possible if, they are expre~sed
in averages.

ii:M:fiti jjil hjGJ•) l,Jjjj :jtiUI ti j,a,wi iJ;@~

As the average represents statistical information and it is used for comparison, it must
ijisfy the following conditions :
1. It should be simple to calculate and easy to understand : An average should b~
calculable with reasonable ease and rapidity only then it can be widely used. It
~hould not involve heavy arithmetical calculations. If the calculation of the average_
mvolved' tedious mathematical processes it will not be readily understood and its
use will be confined only to a limited number of persons. It can never be popular.
Further, the properties •of the average should be such that they can be easily
nd
2 u erstood by persons of ordinary intelligence.
· [~sh~ttld, be rigidly defined : The definition should be clear and unambiguous so
at It .leads' to one and only one interpretation by different persons. It should
a~~h~e~~te and fixed value. In other words, the definition shou~d not l_e~ve
sh lllg to the discretion of the investigator or observer. Preferably, its definmon
/uld
•erage befr in the form of ·an algebraic formula, so that anybody calculating the
3, ft h om a set of data, arrives at the same figure.
thesi~uld be .base~ on a~ ~he observations : An a~erage ~hould be bas~ on all
represems of a senes. If It 1s not. based on all the items, 1t cannot be sa!d to be
all h ntative of the whole group. Some measures of averages are not based on
t e val h .f ..
ues, ence they are considered unsat1s actory.
132 J11. S~tistics for Economics-XI
1 . t affected bv fluctuations of sample . An
4. It shouldb bef·l ctue,lSations of salllple as little as possi~le. if ,.. ••e,
affected
I Y U · th . ''"O <te
samp es are taken from same umverse,
. e1r averages
I . should ta~d
v o~I!~{j
0 ih Th difference in the averages m two samp es 1s technic U <ty t

( er. /e' If it is less then they are considered better th a YCalJed~~at 1

0 sa,np e : . . ' •n tho 'n I
difference 1s more. Se ; \1
s. It should be capabl~ of further algebraic_tr~atment : If an average 1
th . lity its use 1s bound to be very hm1ted. In other Word does
quasome important mathemattca
is ess
Poss . I properties . so that Its
. Uses, .the aver~Gt
theory is enhanced. For exampIe, the ant. hmet1c . means of twInfullh~ag11
ar
e ·known then it should be possible to calculate the avera O 0r llio 1~:
combined. 'In statISllcal
. . analysis. that average 1s. used more Which ge of .~..te ,,
funher mathematical treatment. is~~
6. It sbould not be affected much by extreme values of data : By •l<trellJ
(values) we mean very small or very large values. Thus, a few Ve e b"ii
0
large obsfrvations should not unduly affect the value of a good ry '""11
One more thing to remember about averages 1st . hat the items
. whos, aaverao,t. 0.
calculated should form a homogeneous group. If the data from which an a:"•i:ei
calculated are not homogeneous, misleading conclusions are likely to b,";i:e i
example, to find out the average production of cotton cloth per mill, if b~ ~"i
mills are not separated the average would be unrepresentanve. Similarly, to,
level in cotton mill industry in India, separate averages should be calculated lo
and female-_workers, adult workers should be separately studied etc.
i
11 '

itiiH:UC lMlitJ1ll1\IUi
There are three orders of measurement.
1
1UMWI}

1. Measures of first order.

2. Measures of second order.
3. Measures of third order.
1. Measures of the first order are used for studying the values of the obsm,
around which most of the items concentrate. It is the first stage of sra~
calculations and is known the measure of central tendency or ""erages.
2. Measures of the second order are used for studying the disparity of values aro
the average. It is the second stage of statistical calculation and is known are,
of dispersion.

3. Measures of the third order are used L ,tudyirig the concentration of freq~,
It is the third stage of statistical calculations and iS known measure of sk"'

r
[I. Mathema tical Averages1
f"
Simple
-1
l
Weighted
. l..~,
1

f"
II. Positonal Averages

. l
111. Other A
Moving Average

. CT-
~ed
~ian
(ME) .
GMode]
(MO)
·Progressive
.
• Avera·1
g1
---...
Composite Avera

!Artth~~ Mea-; [GeometricMean1 [H a ~ear1]

Quadratic Mean
or Mean X L (GM~ J ~ H-~ • Specialised Avera9
·
· (Index Numbers)
 Measures of Central Tendency 133
and kurtosis. ·(It is omitted in the textbook as it is not in the syllabus for Class
,a students). . .
the above m~ntlo~ed averages mea1\ median, mode are most popularly used. Only
of e discussed m this chap~er and in Chapter 9. Geometric Mean, Harmonic Mean
~ese ~er averages are not discussed as they are not in the syllabus fo~ Class XI
,~d ;ts,
sllld o
f a suitable Average
.
koice . . 1 h .
- ,,, different stati stica averages ave different characteristics. There is no all purpose
'1l 'be. The choice· Of a particu · 1ar average is· usually determined all by the purpose f
0
,1erage, •on and also the nature of distribution
• ·gatl - - ·
in\TeSO •thn1etic Mean (Mean) : If all the values in a series are to be given equal importance,
/>JI . ·11 b
arithmetic mean wt e a suitable choice, e.g., average export, average marks,
then e wages, etc. '
i\Te~ ~dian : In cas~ of ~ualitative data which cannot be measured quantitatively (e.g., ·
r firiding av~rage_ mtelhgence_, honesty, beauty etc.) median is the only _average to. be
f~ed, lf ,the ob1ect is to determme an avera~e that would indicate_ its position or ranking
lation to all the values, naturally, median should be the ch01ce.
10
rMode ': Mode is particularly used iri'""business to determine niost stylish or moS t
ently occurring items, e.g., modal (maximum) accidental spot, most stylish shirt
:::h has highest demand, most fashionable garment, etc. .

4tJ;Jii:t..liitiMiifuijJ,1;1MiUl
1. Meaning
2 Calculation of Arithmetic Mean
3: Mathe:natical Properties of Arithmetic Mean
4. Miscellaneous Problems
5. Merits and Demerits of Arithmetic Mean . _
Meaning : ''Arithmetic Mean is the number obtained by dividing the total values of
different items by their number" we use this method in our everyday life. It is a popular
and most widely used measure. Arithmetic means are of two kinds :
(A) Simple arithmetic average or Mean. · ·
(B) Weighted arithmetic average or Weighted Mean.
(Al SIMPLE ARITHMETIC AVERAGE OR MEAN
(CALCULATION OF ARITHMETIC MEAN)
Simple Arithmetic Mean can be calculated by any of the following methods :
(a) Direct Method
(b) Short Cut Method (Assumed Mean Method)
(c)_Step Deviation Method
Let us see the calculations in the following series.
(A) Series of Individual Observations.
(B) Discrete Series.
(C) Continuous Series.
A,Series of Individual Observations
In individual observations arithmetic mean is easy to calculate. We get the total of
~alues ~nd divide this total by number of observations. Suppose thr~e workers A, B a~d
get Rs 1010 Rs 1020 and Rs 1030 as wages per week respectively. The arithmetic
m~th f ' .
ere ore, is · . . · . .
. ,,J.
 134 lltl. Statistics for Economics-XI
3060
1010+1020+ 1030 = = Rs 1020
\1 3 3
the workers is- Rs 1020.
. e average wage taken by
,. ., Direct Meth () d . Symbolically,
Wages (Rs). X
-
Worker
-
A 1010 x1
B 1020 X2
C 1030 X3
I
I N =3 IX= 3060
I
II

I
1. Obtain IX by adding all the values of variables. .
I.
2. Divide the total by number of observations (N). Symboltcally,
' X= xl +X2 +X3 +......xn
N

- X =·IX = 3060 = Rs 1020

- N 3
Therefore, average of the workers is Rs 1020
where, X = Arithmetic mean
rx = sum of all the values of observations
i.e., . xi + x2 + x3 + ..... xn
N = Number of observations
Alternative equation

I \ x = ;Ix;
where, the symbol 1: is the 'Greek alphabet called sigma and is used in mathemat
denote the sum of values.
n =total number of o~servations
I,'
Ix.= the sum of
I
n values
1 .
= J X (1010 + 1020 + 1030)
3060
= 3
=Rs 1020
Special Features of Arithmetic Mean

' ··-.· '- 1. If we replace each item of- obs~rvation by the calculated mean, then the tot
_ ___ the_se replaced values will be equal to the sum of the given observations.
,I Workers Wages -(Rs)
I Mean
I
I
X x
A
1010. 1020
B
1020 1020
C
1030 1020
N =3
rx = 3060 3060
'
NX = I:X
3 .x 1v~v .- 3060
 •• a..es a1 Central Teftdenq lhl as
g::tl of ck,;iatiom of itans from . al
11 · Aritlunttic Mean is always tqu to
/ .

,r~
Warga (ls}
~ ~ - ;; : ; : :: - -- - ; ;
, ,- - : : - - : - - - - - - - -- ,
, W"crhrs
X-X
X
-- A
i

lOlOXI
B -10
1020 X2
C 0
1030 X1
. ... 10
N =l
I(X - X) = O

~ =0 -
f.(X - X> = (X1 - X)+ (X2 - X)+(X3 -X) + ...(X,,-X)=:0
= (l Ol O - lOlO) + (1020 - 1020) + (1030 - 1020) = 0
_,,. .,..;...-tl,·,;.
,trc~ ;;
:- ux,-il = o
ux,-i) = {x:i -i)+ {x2 -x)+ (X3 -.i)+ ...(xll -x)
= (x1 + Xz + X 3 + ...x.) - n x
= (1010 + 1020 + 1030) - 3 X 1020
= 3060 - 3060
:0
,, --'-Cut Method (Assumed Mean Method)
;MH
The direct method of computation of arithmetic mean can be used when the items
, the series are less. If items are more and figures are big, there would be difficulty in
~ ting the mean. This difficulty can be solved by using the short-cut method. We
can assume any figure as the mean and deviations from this arbitrary mean is calculated.
To gee the arithmetic mean the total of the deviations from assumed mean i~calculated.
1bis total is divided by the number of observations and finally the product is added to
the assumed mean.
Symbolically (Assumed Mean= Rs 1010)
Worker Wages (Rs) X-A
X (d)
A 1010 0
B 1020 10
C 1030 20
N =3
i
l, r.d =30
Steps :

1. Decide assumed mean (A), i.e., Rs j1010.

2. Calculate deviations of items from assumed mean (d).
3, Ger the sum of the deviation (I:d), i.e., 30.
4. Use of following formula. .,

X =A + 'U =1010 + 3o = 1010 +10 = 1020

N . 3 .
i.e., average wage taken by the workers is Rs 1020.
t-.,.__ J ,
136. 1W. Statistics for Economics-XI

where, A - assumed mean . bl £ ,

- A d
d _ X _ , ev1a , tions of X vana es
f h d . . rom assuth
•••ed
- A) ,· e sum o t e ev1at1ons of )( lllea
Id = :i; (X - ' . ., ~ari;b I
assumed mean. . les
N = number of observations

Deviation Method . , d
St,p . ·J'fy the short cut or assume mean method ,\J
We can further s1msi~ided by common factor. . Id~¼[
by assumed mean are , . . . I,

Symbolically (Assumed mean = Rs 1010)

Worker Wages X-A
Rs X (d)
\.

A 1010 0
B 1020 10
1
C 1030 20
2
N =3
!d':: 3
Steps :

1. Decide assumed mean, i.e., Rs 1010.

2._Calculate the ·deviati~ns of.items from assumed mean (d).
3. Divide these deviations by common factor, .i.e., C = 10.
4. Get the sum of step deviation (!.d'), i.e., 3.
5. Use of following formula :
- I.d'
X=A+-xC
N
: 1010 + X 10
3
= 1010 + 10 = Rs· 1020
i.e., average taken by the workers is Rs 1020.
where, X = Arithmetic Mean

d = X - A, deviations of X variables from assumed mean

d'
=' C
X - A , dev1at1ons -. bl es £rom assumed mean are ai
. . of X vana
1

by common factor
C = Common factor
N = Number of observations
Let us examine the calculation of arithmetic mean in the following illustrariOIII 1
by three methods. These methods are : . . . ·
(a) Direct method '
(b) Short-cut method (assumed mean method)
(c) Step deviation method
Direct Method

IDustration 1 The foll · bl • · · a /,~

Find the ant· hmet1c
·. mean owmg ta e gives
by direct method. the daily income of ten workers 10
 Measures of Central Tendency .ILi 137 \
A B C D E F G H I J
(in Rs) 120 150 180 200 370 260
250 300 220 350

Workers Daily Income (Rs)

X
A
120
B
150
C
180
D
200
E
250
F
300
t,•.:. G 220
H 350
I 370
J 260
N =10 U =2400
steps :
. 1. Obtain rx by adding all the values of variable X.
2.. Divide the total by number of observations:
2400
X = LX
N = -- =240 rupees.
10
The average daily income of workers is ,Rs 240.
Illustration 2. Calculate the arithmeti~ niean of the marks given in illustration 1 by
the short-cut method (Assumed Mean Method).

Worker Daily income (Rs.) X-A

X \
(d) :
A 120 -80 1"'
B 150 -50
C 180 -20
D 200 ,. 0
E 250 +50
F 300 +100
G 220 +20
H 350 +150
I 370 +170
I
J 260 +60 ·
N = 10 r.d :;=., +400

Steps:
1. Decide assumed mean, supp<=>se -A1 = 200.
2. Calculate the deviations from assumed mean,' i.e., X - A = d.
3. Get the total of 'the deviations calculated from assumed mean (d)_.

i
 138 J1t Stattsttcs for Economics-XI

4 U e the following formula :

• s _ Id + 400
X = A + N = 200 10
= 200 + 40 = 240 rupees
The average dat.1Y wage of workers is Rs 240.
. 3• Calculate the arithmetic mean of the marks &iven IQ. ill
llluslf.\llon
st<p deviation method. "'~i
Worker Marks X-A t11

X (d)
A 120 -80
B 150 -50
C 180 -20 'ij
D 200 'S
0
E 250 '4
+50
F 300 +100 0
G 220 i-S
+20 i-}Q
H 350 +150 i,i
I 370 +170
J 260 +60
i-}5
i-}7

Steps:

1. Decide assumed mean, suppose A = 200.

2. Calculate the deviations from assumed mean, i.e;, X - A ::: d.
3. Divide these deviations by common factor, i.e., C = 10.
4. Get the sum of step deviation (Id') = 40.
5. Use the following formula :
.- Li'
X:A+-xC -'
N
: 200 + -40 X lQ
10
= 200 + 40
= 240 rupees '
The average daily wage of workers is Rs 240.
The answer got by the direct and assumed mean and step. deviation method i1
same. We can save much time in the calculation of arithmetic mean in discrete seriei
continuous series by using short-cut method and step deviation method.
B. Discrete Series

I~ discrete series we multiply the variables by their respective frequencies and~

sum of the
i.e., the totalproducts. The total so obtained is divided by th~ number of observaw
of frequencies.
Ill
· ·4. After gettmg
ustratton · the frequency distribution
· of the followmg
· marks in Eni
obtained by ten students, calculate arithmetic mean by direct method.
Students : A B C D E p G H I
Marks : 50 100 50 150 · 100 50 150 100 l~
50
It
 ,.--
Measures of Central Tendency llil. 139

sohtrioll•
-- Marks Tally bars Students
~

X
-- 50 x1 1111
f
4ft
fX
200 f1X1
100 x2 1111 4(2 400 f2X2
150 X3 II
- 2(3
N:!(=10
300 (3X3
r.{X = 900

NOW, 4 students get 50 marks each, 4 students get 100 marks each and 2 ~tudents
marks each.
get 150
steps :
1. Multiply the frequencies with variables ((X.).
2. Get the sum of the products ('t(X.).
3. Divide the total by number of observations (!.f or N).
X = f1X1 +f2X2 +{3X3 +... fnXn
f1+f2+{3+ ... fn
= r.rx or r.rx
!f N
= 9oo = 90 marks
10
where, · !.fX. = sum of the products of variables and their frequencies
f = Frequency
N = !.f, i.e., Number of observations
fX = Product of variables with their respective frequencies

Direct method :
Illustration. 5. Following tables gives the marks obtained by 100 students in a class.
Calculate the arithmetic mean.
Marks 10 20 30 40 so
No. of Students 5 10 40 20 25

Solution.
Marks No. of Stl'_dents
fX
ft

X f
"f
'
10 X1 5 f1 50 f1X1
20 x2 10 f2 200 f2X2
30 X3 40 (3 1200 f3X3
40 X4 20 (4 800 {4X4
so XS 25 fs 1250 (5X5
--
'f.f = N = 100 , r.rx = 3soo
!n
I
 140 .lld Statistics for Economics-XI

Steps :
. 'th the variable X.
1. Multiply the frequency w1
2 Get the sum of the product (I(X). . .
3.. Divide
. I fX by tota l number of observattons, t.e., "i.f or (N) .
. - f1X1+f2X2 +{3X3 +... fnXfl,
X = /1 +f2 +f3 +... f,,
- l:{X l:fX
X =· N or l:/
= 3500 =35
100
:. Avera~e marks of students is 35.

Alternative equation :

x- = -V-x-
1
n '' '
where, n = total no. of observations, i.e., sum of frequency,
'1:.f = N -
Yx . = Sum of the products of variables and their respectiv f
I, ' e rec
x = ! x '[/1x1 + f2x2 + f3x3 ·+ ... fnxn]
n

: _1 X [(lQ X 5) + (20 X 10) + (30 X 40) ·+ (40 X 20) +(S(

100 - . .· .
: _l X [50 + 200 + 120Q + 800 + 1250]
100 ·
= _l x 3500 =35 Marks
100
I
Special Features of Arithm,tic Mean
1. The total of frequencies multiplied by Arithmetic Mean is always equal t
of the products of variables and their respective frequencies.
NX = r.(X
100 X 35 = 3500
2. The sum of the deviations of items from arithmetic mean ,being multiplied ~l
respective frequencies is always ZERO.
'f.f(X-X:). = 0
. r.f(X-X) = ft·(X1 -X)+f2(X2 -X)+f3(X3-X)+ ... fn(Xn -X): 0
= 5(1.0 -3~+ 1:0(20-35) + 40(30-3,5.) +.20(40-35) +25(SO-:
= -125 - 150 - 200 + 100 + 375
= -475 + 475 = 0
S~ort-Cut Method (Assumed Mean Method) : WT th. method to calcl
· hni ... . . we can use 1s . c rnu
ant
~d: ettc mean m order to simplify arithmetic calculatio 'ns . The following ior
I

.. ·
 Measures of Central Tendency .lW. 141
A = Assumed Mean
0ere, N = Number of observations
f = frequency
d = X - A, i.e., deviatio
f · ·
S
~,u -
..., f h
0
_ ns O variables taken from assumed mean
um o t e product 0 ff .
requenc1es and their respective deviations
. 6 Calculate the average k f
u
1 05traoon · mar s O students given in Illustration 5 by short
ethod,
,01 J1l
Short-Cut Method (Assumed Mean Meth 0 d)
"

Marks No. of X-A

-

--
Students
f
. (X - 30) fd
X d
- . - -- . - ·- -
10.
5 -20 -100
20 10 -10 -100
30 40 0 0
40 20 +10 +200

-- 50 25 +20 +500
N = 100 "ifd - 500

· Steps:
1. Decide assumed mean, suppose A = 30.
2. Calculate the deviations from assumed mean, i.e., X - A = d.
3. Multiple deviations by frequency and get fd.
4. Add the product of deviations and frequency.
5. Use the following formula :
X =A+ "ifd
N
= 30 + 500
100
= 30 + 5 = 35
Average marks of students is 35. \
Step Deviation Method : We can further simplify the short-cut method. All deviations
taken by assumed mean are divided by common factor. The following formula is used
to calculate the arithmetic mean by step deviation method.

Here, X = A + J:.fd x C
N
A = Assumed Mean
N = Number of observations
C = Common factor
f = ·frequency
d' = X - A , i.e., Step deviation
C
I.fd' = Sum of the product of the deviations and their respective I

frequencies i
I