Quantitative Methods for

Business and Management

Unit 4: Measures of Location

INTRODUCTION
 Σ is a Greek letter (pronounced
"sigma") and is used to denote the
summation of a number of terms.

 X1 + X2 + X3 + X4

 X3 + X4 + X5 + X6 + X7
USE OF MEASURES OF
LOCATION
 The main measures of location are
the:

 Mean
 Median
 Mode.
USE OF MEASURES OF
LOCATION
 Descriptive Use
 Comparison of Distributions
MEANS
 Arithmetic Mean
 The arithmetic mean of a set of
observations is the total sum of the
observations divided by the number
of observations.
MEANS – Example 1

Find the mean monthly rainfall in

Town A from the twelve monthly
observations given in Table
4.1:
MEANS – Example 2

Using this data, find the

mean number of days on
which an employee is late
in a month.
MEANS – Example 2
MEANS – Example 3
MEAN
 Advantages and Disadvantages of the Arithmetic Mean

(a) Advantages
 (i) It is easy to calculate as the only information you need is
the sum of all the observations and the number of
observations.
 (ii) It is a well known statistic and it is easily manipulated to
calculate other useful statistical measures.
 (iii) It uses the values of all the observations.

(b) Disadvantages
 (i) A few extreme values can cause distortion which makes it
unrepresentative of the data set.
 (ii) When the data is discrete it may produce a value which
appears to be unrealistic, e.g. in Example 2, the mean number
of days on which an employee is late is 2.47.
 (iii) It cannot be read from a graph.
Weighted Mean

A firm owns six

factories at which the
basic weekly wages
are given in column 2

Find the mean basic

wage earned by
employees of the firm.
Weighted Mean
Geometric Mean

The geometric mean is seldom used outside of

specialist applications. It is appropriate when
dealing with data such as that which shows
exponential growth (that is where the rate of
growth depends on the value of the variable
itself)
Harmonic Mean
Harmonic Mean
Another measure of central tendency which is only occasionally
used is the harmonic mean.

It is most frequently employed for averaging speeds where the

distances for each section of the journey are equal.
Harmonic Mean - Example
An aeroplane travels a distance of 900 miles. If it covers the first
third and the last third of the trip at a speed of 250 mph and the
middle third at a speed of 300 mph, find the average speed.
MEDIAN
 Definition
 If a set of n observations is arranged
in order of size then,
 if n is odd, the median is the value of the
middle observation;
 if n is even, the median is the value of
the arithmetic mean of the two middle
observations.
MEDIAN
Median – Example 1
Median – Example 2
Median – Example 3
Median – Example 3
Other Way
Median
(a) Advantages
 (i) Its value is not distorted by extreme values, open-
ended classes or classes of irregular width.
 (ii) All the observations are used to order the data even
though only the middle one or two observations are used
in the calculation.
 (iii) It can be illustrated graphically in a very simple way.

(b) Disadvantages
 (i) In a grouped frequency distribution the value of the
median within the median class can only be an estimate,
whether it is calculated or read from a graph.
 (ii) Although the median is easy to calculate it is difficult
to manipulate arithmetically. It is of little use in
calculating other statistical measures.
QUANTILES
Definitions
 If a set of data is arranged in

ascending order of size, quantiles are

the values of the observations which
divide the number of observations
into a given number of equal parts.
QUANTILES
Deciles and Percentiles
QUANTILES – Example 1
QUANTILES – Example 1
QUANTILES – Example 1
QUANTILES – Example 1
MODE
 Definition
 If the variable is discrete, the mode is
that value of the variable which occurs
most frequently. This value can be
found by ordering the observations or
inspecting the simple frequency
distribution or its histogram.
MODE
 As it is possible for several values of
the variable or several class intervals
to have the same frequency, a set of
data may have several modes.
 A set of observations with one mode
is called unimodal.
 A set of observations with two modes
is called bimodal.
 A set of observations with more than
two modes is called multimodal.
MODE – Example 1
MODE – Example 1
Continuous Variable
Mode
(a) Advantages
 It is not distorted by extreme values of the
observations.
 It is easy to calculate.

(b) Disadvantages
 It cannot be used to calculate any further
statistic.
 It may have more than one value (although
this feature helps to show the shape of the
distribution).
END