THIRD SEMESTER BCOM

CORE COURSE – CO3CRT08 - QUANTTATIVE TECHNIQUES FOR BUSINESS 1

Module 3
Measures of central tendency
1. Define Central tendency. (2 marks)
Most of the statistical data have a tendency to concentrate around the central
value of the distribution. This tendency of the data is known as central tendency.
2. What is an average? What are the chief features of an average? (2 marks)
An average is a single figure which represents the characteristics of whole group
Chief features of an average:
(i)It is a single figure which represents whole series and sums up all the characteristics of the
data.
(ii) It is neither the lowest value nor the highest value. It lies somewhere in the middle of the
distribution.
(iii) Average is a part of the whole group.

3. What are the importance of averages (2 marks)

1. Average gives a general idea about the whole group .

2. Averages can be used for summarising the data.
3. Averages help comparison. Averages help in decision making .
4. Averages constitutes the basis of statistical analysis .
5. Averages represent the universe.

4. Give the essential properties of a good average(Requisites) (5 marks)

1. It should be clearly defined .
2. It should be based on all the observations of the data .
3. It should be easy to calculate and simple to understand
4. It should not be influenced by sampling fluctuations .
5. It should be able to further algebraic treatment.
6. It should not be affected by Extreme items.

5. What are the Important measures of Central tendency (2 marks)

 1. Arithmetic Mean
2. Median
3. Mode
4. Geometric mean
5. Harmonic mean
6. Define Arithmetic Mean (2 marks)
Arithmetic mean is one of the measures of Central tendency . It is a mathematical average.
Arithmetic mean of a set of values is defined as the ratio between sum of those values and their
number.

7. Discuss the merits and demerits of Arithmetic mean (5 marks)

Merits of Arithmetic mean

1. Arithmetic mean is simple to understand.
2. Arithmetic mean can be easily calculated
3. Arithmetic mean can be determined in most of the cases .
4. It is based on all the observations of the series.
5. It is capable of more algebraic treatment.
6. Arithmetic Mean is stable.
Demerits of arithmetic Mean
1. Arithmetic mean is affected by Extreme values .
2. Usually mean does not coincide with any of the observed values.
3. It is not suitable for averaging ratios and percentages.
4. It cannot be calculated for qualitative data which cannot be measured numerically.
5. It may offer misleading and absurd results in some cases.
6. In the case of frequency distributions with open end classes the mid values of all classes cannot
be obtained.
8. Define Weighted Mean (2 marks)
Weighted average plays an important role in economic studies. it is used whenever the
relative importance of the items in a series differ.
Weighted means are obtained by taking into account the weights or importance.

9. Define Median ( 2 marks)

Median of a series is the size of that item of the series which occupies the central position
of the series when the items are arranged in ascending or descending order of their magnitude.
The median is that value of the variable which divides the values of the variable into two equal parts
one part containing all values greater than the median value and the other part containing all the
values smaller than the median values .
Median is a positional average.
10. Discuss the merits and demerits of median ( 5 marks)
Merits of median
1. It is very simple measure.
2. Sometimes it can be located even by a mere glance.
3. It is not affected by Extreme items.
4. It is suitable for even such data which are not capable of numerical expression .
5. It can be determined graphically also .
6. Median is the suitable average in the case of open-end class series.
Demerits of median
 1. Median is not based on all the observations.
2. It is not capable of algebraic treatments.
3. It requires arraying.
4. In the case of continuous series interpolation formula is to be used. The value thus obtained
may give only an approximate value.

11. Define mode. (2 marks)

Mode is the value of that item of a series which occurs most frequently in the series.
Therefore model value has highest frequency.

12. Discuss the merits and demerits of mode. (5 marks)

Merits of mode
1. Mode is very simple among measures of Central tendency .
2. Mode is less affected by Extreme values in the series .
3. Mode can be located graphically also.
4. Usually mode coincides with one of the values of the series.
5. Mode is the value which occurs most frequently. So mode is the best representative.
Demerits of Mode
1. Mode is uncertain and vague measure of Central tendency.
2. Mode is not capable of further algebraic treatment.
3. Sometimes grouping becomes unnecessary to identify the modal value .
4. Mode is not based on all the values of the series .
5. When the extreme value appears most frequently it becomes mode which gives an absurd
result.
13. Compare and contrast Mean, Median and Mode (5 marks)
Mean is a mathematical average while median and mode are not. Mean is based on all
observations while median is the middle item and mode is commonly found item . Mean is capable of
further mathematical treatment. Median and mode are not capable of more mathematical treatments .
Median and mode are values found in the series while Mean is not necessarily be such a value.
Median and mode can be graphically located. But mean cannot generally be located graphically.
Median and mean can be obtained by mere inspection while mean can be obtained by calculation.
Mean is affected by Extreme items while median and mode are not much affected by Extreme items.
Mode is ill defined in some cases but median and mean are well defined in all cases.
14 . Explain geometric mean. (2 marks)
Geometric mean is one of the measures of central tendency. If there are ‘n’ values in a series,
then their geometric mean is the nth root of product of those n values.
Geometric mean is useful to find the average percentage increase in sales, production etc. and to find
the index number.
15. Give the merits and limitations of geometric mean.(2 marks)
Merits: Geometric mean is based on all observations. It is rigidly defined. It is useful in
averaging ratios and percentages. It is not affected very much by extreme values. It is capable of
algebraic treatment.
Limitations: Geometric mean has its own demerits also. It is difficult to understand. It cannot
be computed when there are both negative and positive values or when one or more of the values is
zero.
16.What do you mean by harmonic mean?(2 maks)
Harmonic mean of a set of n values is defined as the reciprocal of the mean of the reciprocals
of these values.
Harmonic mean is mainly used, when it is desire to give the greatest weight to the smallest items. It is
applied in averaging rates, times etc.