GEOMETRIC MEAN

AND HARMONIC
MEAN
 Meaning of Geometric Mean
• Geometric Mean (GM) is a value that represents nth
root of the product of a set of n numbers

• GM is a measure of central tendency that show

multiplicative effects over time in inflation calculations

• Here inflation means such problems were quantities

change over a period of time with a rate where to find
an average percentage change is more useful than to
find the simple average value
 Geometric Mean

GM is the nth root of the product of n items of

a series

GM  n x1  x2  x3 .....xn
 Advantages of G.M.
• The value of G.M. is not much affected by extreme
observations and is computed by taking all the
observations into account
• It is useful for averaging ratio and percentage as
well as in determining rate of increase and decrease
• In the calculation of G.M. more weight is given to
smaller values and less weight to higher values.
• It is suitable for algebraic manipulations, for e.g.
calculation of weighted G.M. & combined G.M.
 Disadvantages of G.M.
• The calculation of G.M. as compared to A.M. is
more difficult and intricate.
• The value of G.M. cannot be calculated when
any of the observations in the data set is
either negative or zero.
• While calculating weighted geometric mean,
mean equal importance (or weight) is not
given to each observation in the data set.
 Calculation of G.M.
• The formula for GM for ungrouped data can
be expressed in terms of logarithm as shown
below:
Log (GM) =
 
log (x1. x2. x3…. xn)

= (log x1 + log x2 +….+ log xn)

and therefore G.M. = antilog

When observations occur with frequencies

•  
 Some Problems…
Q1)The rate of increase in population of a country
during the last three decades is 5 %, 8%, and 12%. Find
the average rate of growth the during last decades.

Decade Rate of Increase Population at the End of logX

in Population (%) Decade (X) Taking Preceding
Decade as 100

1 5 105 2.0212

2 8 108 2.0334

3 12 112 2.0492
----------
6.1038
 SOLUTION:
Since the data is given in terms of percentage,therefore
geometric mean is more appropriate

  Logx 
G.M  Anti log 


 n 
 6.1038 
G.M  Anti log  
 3 
G.M .  Anti log  2.0346   108.2
Q2) A given machine is assumed to depreciate 40 % in the first year, 25
% in the second year, and 10 % per year for the next three years,
each percentage being calculated on the diminishing value. What is
the average depreciation recorded on the diminishing value for the
period of five years?

Rate of Depreciation Number of Years (f) logx f.logx

(x ) (In Percentage)

40 1 1.6021 1.6021

25 1 1.3979 1.3979

10 3 1.0000 3.0000

6.0000
 SOLUTION

Calculation of geometric mean:

1  1 
G.M  Anti log   fLogx   Anti log   6.0000  
n  5 
G.M  Anti log 1.2   15.82
 Combined Geometric Mean

• The combined geometric mean of observations

formed by pooling the geometric means of
different sets of data is defined as:

 N1LogG1  N 2 LogG 2 
Log G.M. = ANTILOG  
 N1  N 2
 Example
Three sets of data contain 8, 7, & 5 observations
and their geometric means are 8.52, 10.12, 7.75,
respectively. Find the combined geometric mean
of 20 observations.
no.of observtions in G.M. of ith data, (Gi) log Gi
the data, (ni)

8 8.52 0.9304

7 10.12 1.0051

5 7.75 0.8893
 SOLUTION:

Applying combined geometric mean formula:

  8  0.9304    7 1.0051   5  0.8893 

G.M  Anti log  
 8  7  5 
 18.9254 
G.M  Anti log    Anti log  0.94627   8.835
 20 
 Applications of GM
• The concept of G.M. is used in the
construction of index numbers.
• Since G.M. ≤ A.M. Therefore G.M. Is useful in
those cases where smaller number is to be
given importance.
• The G.M. Of a data set is useful in estimating
the average rate of growth in the initial value
of an observation per unit per period.
 Harmonic Mean

The Harmonic Mean of any series is the

reciprocal of the arithmetic mean of the
reciprocal of the variate

1 1 1 1
 AM of , ,.....,
H x1 x2 xn
Calculation of H.M: 1 1 1
  ..... 
1 x1 x2 xn

H n
 Merits and Demerits of HM
Merits Demerits
• It is rigidly defined • It is difficult to compute
• It is based on all • When there are positive
observations and negative values
• It is capable of further together in a series or one
arithmetic treatment or more items are zero,
• It gives more importance to then it is difficult to
smaller values compute
 Harmonic Mean Example:

To find the Harmonic Mean of 1,2,3,4,5.

Step 1: Calculate the total number of values.

N=5
Step 2: Now find Harmonic Mean using the above
formula.N/(1/a1+1/a2+1/a3+1/a4+1/a5)

= 5/(1/1+1/2+1/3+1/4+1/5)
=5/(1+0.5+0.33+0.25+0.2)
=5/2.28
So, Harmonic Mean = 2.19
When observations occur with frequencies

• If f1,f2,f3..............,fn are the frequencies of

the oberservations x1,x2,x3.............xn, then
the harmonic mean is defined as:

n
H .M  n
 1 
i 1
fi  
 xi 
 Some Problems…
Q1) An investor buys Rs.20,000 worth of shares of the company
each month. During the first 3 months he bought the shares at the
price of Rs120, Rs160, and Rs210. After 3 months what is the price
paid by him for the shares?

Solution: since the value of shares is changing after every month,

therefore the required average price pershare is harmonic of the
H .M 
3

3
(1  120)  (1  160 )  (1  210) 0.008  0.006  0.004

prices paid in first three months.

3
H .M   rs.166.66
0.018

3 3
H .M  
(1  120)  (1  160)  (1  210) 0.008  0.006  0.004

3
H .M   rs.166.66
0.018
Q2) Find the harmonic mean from the
following data

CLASS MID VALUE NUMBER OF RECIPROCAL f(1/m)

INTERVAL (m) COMPANY (1/m)
(f)

2-6 4 10 1/4 2.5

6-10 8 12 1/8 1.5

10-14 12 18 1/12 1.5

---------
N=40 5.5
 SOLUTION:

H.M= n
3
 1 
i 1
fi  
 mi 
=40/5.5=7.27
hence the average dividend yield of 40 companies is
7.27
 Application of H.M
• The harmonic mean is particularly useful for
comparison of average rates and ratios.Such
rates and ratios are generally used to express
realtion between two different types of
measuring units that can be expressed
reciprocally. For example, distance (in km),
and time( in hours).
THANK YOU
FROM - TUSHAR &
VAIBHAV