MODULE 6

Measures of Location

TABLE OF CONTENTS

MODULE OUTLINE

Overview 3 Module Duration 3 Learning Objectives 3 Input Information 3 Learning Activities 3

Assessment/Evaluation 3 Assignment 3 Learning Resources 3

MODULE PROPER

Mean (Arithmetic Mean) 4 Median 5 Mode 6 Geometric Mean 8

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Musones, MBA
Measures of Location
MODULE 6 OUTLINE
OVERVIEW
Measure of central value (often called measures of central tendency or measures of location) are descriptive that indicate the
central location of a distribution of observations. There are four commonly used measures of central tendency. They are the
mean, the median, the mode, and the midrange.

MODULE DURATION

I. November 15 to November 27, 2021- Synchronous Meeting and Asynchronous Learning

II. For asynchronous learning inquiries, you may reach me through messenger group/personal message from Monday thru
Thursday at 5:00PM to 8:00PM.

LEARNING OBJECTIVES

After completing this module, you are expected to:

I. compute mean; mode; median; and
II. compute the geometric mean.

INPUT INFORMATION

Measures of Location

LEARNING ACTIVITIES
I. Collaborative discussion during synchronous meeting.
II. Asynchronous Learning

ASSESSMENT/EVALUATION
I. Synchronous Test with time limit.
A long test link will be provided through our group chat. This is a synchronous test with a time limit.

II. Asynchronous Learning

See Assignment below

ASSIGNMENT
Individual Activity: See below: Individual Assignment No. 1 and 2.
Group Activity: See below: Strivers and Trippi Mutual Fund

Deadline of Submission: To be announced in the GC.

LEARNING RESOURCES
Book/E-book:
1. Fundamentals of Business Intelligence by Wilfried Grossmann, Stefanie Rinderle-Ma, Springer Heidelberg New York
Dordrecht London© Springer-Verlag Berlin Heidelberg 2015
2. Introduction to Business Analytics by Jonathan P. Pinder, Copyright,© 2017 Elsevier Inc., England

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Musones, MBA
BUSINESS ANALYTICS – Measures of Location
MODULE 6 PROPER
Mean (Arithmetic Mean)
The most commonly used measure of location is the mean (arithmetic mean), or average value, for a variable. The mean
provides a measure of central location for the data. If the data are for a sample (typically the case), the mean is denoted by
x. The sample mean is a point estimate of the (typically unknown) population mean for the variable of interest. If the data for
the entire population are available, the population mean is computed in the same manner, but denoted by the Greek letter
µ.

In statistical formulas, it is customary to denote the value of variable x for the first observation by x1, the value of variable x
for the second observation by x2, and so on. In general, the value of variable x for the ith observation is denoted by xi. For
a sample with n observations, the formula for the sample mean is as follows.

To illustrate the computation of a sample mean, suppose a sample of home sales is taken for a suburb of Cincinnati, Ohio.
Table 2.9 shows the collected data. The mean home selling price for the sample of 12 home sales is

The mean can be found in Excel using the AVERAGE function. Figure 2.15 shows the Home Sales data from Table 2.9 in
an Excel spreadsheet. The value for the mean in cell E2 is calculated using the formula =AVERAGE(B2:B13).

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Musones, MBA

Median
The median, another measure of central location, is the value in the middle when the data are arranged in ascending order
(smallest to largest value). With an odd number of observations, the median is the middle value. An even number of
observations has no single middle value. In this case, we follow convention and define the median as the average of the
values for the middle two observations.

Let us apply this definition to compute the median class size for a sample of five college classes. Arranging the data in
ascending order provides the following list:

32 42 46 46 54
Because n = 5 is odd, the median is the middle value. Thus the median class size is 46 students. Even though this data set
contains two observations with values of 46, each observation is treated separately when we arrange the data in ascending
order.

Suppose we also compute the median value for the 12 home sales in Table 2.9. We first arrange the data in ascending
order.

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Musones, MBA

The median of a data set can be found in Excel using the function MEDIAN. In Figure 2.15, the value for the median in cell
E3 is found using the formula =MEDIAN(B2:B13).

Although the mean is the more commonly used measure of central location, in some situations the median is preferred. The
mean is influenced by extremely small and large data values. Notice that the median is smaller than the mean in Figure
2.15. This is because the one large value of $456,250 in our data set inflates the mean but does not have the same effect
on the median. Notice also that the median would remain unchanged if we replaced the $456,250 with a sales price of $1.5
million. In this case, the median selling price would remain $203,750, but the mean would increase to $306,916.67. If you
were looking to buy a home in this suburb, the median gives a better indication of the central selling price of the homes
there. We can generalize, saying that whenever a data set contains extreme values or is severely skewed, the median is
often the preferred measure of central location.

Mode
A third measure of location, the mode, is the value that occurs most frequently in a data set. To illustrate the identification of the mode,
consider the sample of five class sizes.

32 42 46 46 54
The only value that occurs more than once is 46. Because this value, occurring with a frequency of 2, has the greatest frequency, it is
the mode. To find the mode for a data set with only one most often occurring value in Excel, we use the MODE.SNGL function.

Occasionally the greatest frequency occurs at two or more different values, in which case more than one mode exists. If data contain at
least two modes, we say that they are multimodal. A special case of multimodal data occurs when the data contain exactly two modes;
in such cases we say that the data are bimodal. In multimodal cases when there are more than two modes, the mode is almost never
reported because listing three or more modes is not particularly helpful in describing a location for the data. Also, if no value in the data
occurs more than once, we say the data have no mode.

The Excel MODE.SNGL function will return only a single most-often-occurring value. For multimodal distributions, we must use the
MODE.MULT command in Excel to return more than one mode. For example, two home selling prices occur twice in Table 2.9:
$138,000 and $254,000. Hence, these data are bimodal. To find both of the modes in Excel, we take these steps:

Step 1. Select cells E4 and E5

Step 2. Enter the formula 5MODE.MULT(B2:B13)
Step 3. Press CTRL+SHIFT+ENTER

Excel enters the values for both modes of this data set in cells E4 and E5: $138,000 and $254,000.

Geometric Mean

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Musones, MBA
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Musones, MBA
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Musones, MBA

Individual Activity No. 1

Individual Activity No. 2

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Musones, MBA

Group Activity:
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Musones, MBA