IBA, JU 2

Master of Business Administration

Course Instructor: Dr Swapan Kumar Dhar

Measures of Central Tendency:

It is another way of describing numerical data that provides additional alternatives for summarizing
data. Location or position of a frequency distribution is the value of the variable around which most of
the values in the distribution tend to cluster. It is a more or less central value and one of the principal
characteristics of a frequency distribution. There are several measures, which approximately define
the position of a frequency distribution. These measures are variously known as averages, measures
of location or measures of central tendency. It is a single value that represents a set of data and it
pinpoints the center of the values. It locates and identifies the point around which the data are
centered.
There are mainly 4 important statistical averages or 4 measures of central tendency or 4 measures of
location.
(1) Arithmetic Mean
(2) Median
(3) Mode
(4) Geometric Mean

Arithmetic Mean: The arithmetic mean is also known simply as the mean or average.
For Ungrouped data or raw data:

The arithmetic mean or mean of a series of observations is equal to the sum of the observations
divided by their number. So, for ungrouped data, the population mean is
Sum of all the values in the population
Population Mean =
Number of values in the population
If there are N observations in the population data set, the mean is calculated as
N

Population mean m =
X1 + X 2 + ... + XN X i

N = i =1

N
Parameter: Numerical descriptive measures computed from population measurements are called
parameters.
Example 1: Somebody is considering purchasing one of several new luxury automobiles priced over
$ 95,000. The 10 automobiles are selected and their prices, top speeds, mileage per gallon (mpg) are:
Automobile Price as listed Top speed mpg
Mercedes-Benz 143,333 156 13
BMW 123,734 170 11
Jaguar 131,000 154 13
Volvo 109,644 174 13
Toyota 100,000 154 13
Honda 95,995 150 NA
Cello 95,000 145 11
Peugot 101,012 156 17
Ford 153,215 172 10
Opel 99,210 140 11

The automobiles considered here are taken as a population (meaning that they consist of all the cars,
somebody is interested in).
(a) What is the arithmetic mean price or what is the mean price?
(b) What is the arithmetic mean of miles per gallon of this population?
(c) If you purchase all 10, what would be the total cost?
(d) Is this value considered a population parameter?

Solution:

(a) The arithmetic mean m =

X =
$1152143
= $115214.30 = $115214 .
N 10

1
(b) The arithmetic mean number of miles per gallon is m =
X =
112
= 12.44 = 12 (Note there are
N 9
only nine in the population).
(c) The total price of the 10 automobiles = X = $1152143 .
(d) Yes. Because we are considering all the cars of interest, this is population parameter.
For raw i.e. for ungrouped data, the mean for a sample is

Sample mean =
Sum of all the values in the sample
. x=
x
Number of values in the sample n
Example 2: Suppose the scores for five students in a class of 50 students are 70, 62, 56, 85 and 92.
Find the mean of these numbers.
Solution: We have to find out the sample mean. According to the formula, let
x 1 = 70, x 2 = 62, x 3 = 56, x 4 = 85, x 5 = 92 and n = 5
n

x =
xi 70 + 62 + 56 + 85 + 92
Mean x1 + x 2 + x 3 + x 4 + x 5 = = 73 .
= x= i =1
= 5
n n n
\ Mean = 73.
Here mean is a statistic because this is a measure based on sample data.
For Grouped Data:
When the data are arranged or given in the form of frequency distribution i.e. there are k variate
values such that a value X i has a frequency fi (i = 1, 2, ..., k ), the formula for the mean is
K

f1 X 1 + f 2 X 2 + ... + f K X K f X K

A.M . = = i =1
i i
f X i i
.
f1 + f 2 + ... + f K
K
= i =1
, N = f1 + f2 + ... + fK
f i N
i =1

Example 3: The distribution of age at first marriage of 130 males is given below:
Age in years (X) 18 19 20 21 22 23 24 25 26 27 28 29
Number of males (f ) 2 1 4 8 10 12 17 19 18 14 13 12

Find the mean age of males at first marriage.

Solution: The average age can be computed from the formula.

A.M. =
fi Xi = 18 2 + 19 1 + ... + 29 12 = 3240 = 24.92 .
N 2 + 1 + ... + 12 13.0
\ The average age of males at first marriage is 24.92 years.
If the data are given with K class intervals, then
K

The arithmetic Mean X=

f1 X1 + f1 X 2 + ... + fK XK f X i i

f1 + f2 + ... + fK = i =1

N
K

Where N = f i
.
i =1

Example 4: Following is the data showing annual salaries of professors.

Average annual salary ($ 000) Number of universities
20 up to 30 4
30 up to 40 20
40 up to 50 41
50 up to 60 44
60 up to 70 29
70 up to 80 16
80 up to 90 2
90 up to 100 4
What is the average annual salary of professors?

2
Solution:
Calculating Table:

Average annual salary ($ 000) Number of Universities (f ) Mid value (X) fX

20 up to 30 4 25 100
30 up to 40 20 35 700
40 up to 50 41 45 1845
50 up to 60 44 55 2420
60 up to 70 29 65 1885
70 up to 80 16 75 1200
80 up to 90 2 85 170
90 up to 100 4 95 380
Arithmetic mean of the annual salaries of professors is

X=
fi Xi
=
8700
= 54, 375 (In thousand $).
N 160
Example 5: The pass result of 50 students who took up a test is given below.

Marks 4 5 6 7 8 9
No. of Students 8 10 9 6 4 3
If the average marks of all the 50 students were 5.16, find out the average marks of the students who
failed.
Solution: Total Number of students = 50, Average Marks of 50 students = 5.16.
Total Marks of 50 students = 5.16 x 50= 258.
We have the following table.

X f fx
4 8 32
5 10 50
6 9 54
7 6 42
8 4 32
9 3 27
40 237

258 - 237
Total marks of 40 students = 237. Average marks of the students failed = = 2.1.
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Example 6: Calculate the average marks of the students from the following data:
Marks No. of Students
Below 10 15
Below 20 35
Below 30 60
Below 40 84
Below 50 96
Below 60 127
Below 70 198
Below 80 250
Solution: Determine the simple frequencies from the cumulative frequencies given here and then
calculate the mean.

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 Calculation of Arithmetic Mean
Marks No. of Students ( f) Mid Point (X) fx
0-10 15 5 75
10-20 20 15 300
20-30 25 25 625
30-40 24 35 840
40-50 12 45 540
50-60 31 55 1705
60-70 71 65 4615
70-80 52 75 3900
N = 250 12600
12600
We have, X = = 50.40.
250
Example 7: The marks scored by 60 students in an examination in statistics are given below. Frame
class intervals of ten and calculate the arithmetic mean.
06 10 58 56 00 25 32 35 35 09 78 17 60
50 35 38 31 10 48 05 68 48 35 30 31 21
23 23 50 72 19 25 35 40 46 42 45 25 60
41 35 36 38 35 33 46 28 31 35 42 46 38
39 45 48 50 28 29 31 55
Solution:
Formation of Frequency Distribution and Calculation of Mean
Marks Tally Marks f Mid-value (X) fx
00-10 IIII 4 5 20
10-20 IIII 4 15 60
20-30 IIII IIII 9 25 225
30-40 20 35 700
IIII IIII IIII IIII
40-50 12 45 540
IIII IIII II
50-60 IIII 6 55 330
60-70 III 3 65 195
70-80 II 2 75 150
Total N=60 2220
*Here Lower Limit is inclusive.
2220
X= = 37.
60
Example 8: Following are the marks (out of 100) obtained by 50 students in Statistics:
70 55 51 42 57 45 60 47 63 53 33 65 39
82 55 64 50 25 65 75 30 20 58 52 36 45
42 35 40 61 53 59 49 41 15 52 46 42 45
39 55 65 45 63 54 48 64 35 26 18
(i) Make a frequency distribution taking a class interval of 10 marks.
(ii) Draw a histogram and a frequency polygon from the frequency distribution.
(iii) Find out the average marks of the students.

Solution: (i) Computation of Frequency Distribution (* Lower limit is inclusive)

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 Marks Tally Marks f
10-20 II 2
20-30 III 3
30-40 IIII II 7
40-50 13
IIII IIII III
50-60 13
IIII IIII III
60-70 IIII IIII 9
70-80 11 2
80-90 1 1
Total N = 60

Frequency Polygon

14

12

10
Freq
uen
cy

Computation of Mean
0
10- 20- 30- 40-
(c) Computation50-
of Mean 60- 70- 80-
20 30 40 50 60 70 80 90
Marks X f fx
Marks

5
 10-20 15 2 30
20-30 25 3 75
30-40 35 7 245
40-50 45 13 585
50-60 55 13 715
60-70 65 9 585
70-80 75 2 150
80-90 85 1 85
Total N=50 2470
2470
We have X = = 49.4.
50
Example 9: For a distribution based on 200 observations partly reproduced below. Mean is 1.46. Find
the missing frequencies.
No of Accidents 0 1 2 3 4 5
Frequency 46 ? ? 25 10 5
Solution: Let X denote the number of accidents. Let f 2 and f 3 be the missing frequencies
corresponding to X =1 and X = 2 respectively. Necessary computations are given below:
xi fi xi f i
0 46 0
1 f2 f2
2 f3 2 f3
3 25 75
4 10 40
5 5 25
Total f i = f 2 + f 3 + 86 = 200 (Given) f i xi = f 2 + 2 f3 + 140

We have, f i = f 2 + f3 + 86 = 200 f 2 + f 3 = 114. (1)

f i xi f 2 + 2 f 3 + 140 f + 2 f 3 + 140
We know, X = = 1.46 = 2 f 2 + 2 f 3 = 152 . (2)
f i 200 200
Combining (1) and (2), we have f 2 = 76 and f3 = 38.
Thus the missing frequencies corresponding to X =1 and X = 2 are 76 and 38 respectively.

Weighted Arithmetic Mean or Weighted Mean:

In the discussion of the mean, it is assumed that each observation is equally important. However, in
certain cases greater weight may be given to some observations. For example, Construction
Company pays hourly employees $ 6.50, $ 7.50 or $ 8.50 an hour. Arithmetic mean hourly wage is
$6.50 + $7.50 + $8.50
= $7.50
3
However, this is true only if there are the same number of employees earning $ 6.50, $ 7.50 and $
8.50 an hour. Suppose the data are like this,

Wage per hour ($) Number of employees

6.50 14
7.50 10
8.50 2

Here weights are 14, 10 and 2 and the mean obtained is called the weighted arithmetic mean or
weighted mean. For this example, the weighted average is
6.50 14 + 7.50 10 + 8.50 2 183
XW = = = $7.038 = $7.04 .
14 + 10 + 2 26

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In general, the weighted mean of a set of numbers designated X 1 , X 2 , ..., X n with corresponding
weights w1 , w2 , ..., wn
n

Xw =
w1 X 1 + w2 X 2 + ... + wn X n wi X i
i =1
w1 + w2 + ... + wn = .
wi
Example 10: Calculate weighted mean and unweighted mean from the following data:
Commodity Price in Taka/kg. Quantity consumed (in kg.)
A 4.50 100
B 3.00 50
C 5.00 20
D 10.00 5
E 35.00 2
Solution:
Computation of Unweighted and Weighted Mean
Article Price (X) Quantity (W) WX
A 4.50 100 450
B 3.00 50 150
C 5.00 20 100
D 10.00 5 50
E 35.00 2 70

Total
X = 57.50 W = 177 WX = 820
X = 57.50 = 11.50. This is the unweighted mean. Weighted Mean =
WX = 4.63.
X =
N 5 W
Example 11: Comment on the performance of the students of three Universities given below using
simple and weighted averages.

University A B C
Course of % of pass No. of students(in 00 %of pass No. of students % of pass No. of students
study ( 00) (00) (00)
M.A. 71 3 82 2 81 2
MBA 83 4 76 3 76 3.5
BBA 73 5 73 6 74 4.5
B.A. 74 2 76 7 58 2
B.Sc. 65 3 65 3 70 7
M. Sc. 66 3 60 7 73 2
Solution:
University A B C
Courses X W WX X W WX X W XW
M.A. 71 3 213 82 2 164 81 2 162
MBA 83 4 332 76 3 228 76 3.5 266
BBA 73 5 365 73 6 438 74 4.5 333
B.A. 74 2 148 76 7 532 58 2 116
B.Sc. 65 3 195 65 3 195 70 7 490
M.Sc. 66 3 198 60 7 420 73 2 146

Total
X W WX X W WX X W WX
=432 =20 =1451 =432 =28 =1977 =432 =21 =1513

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 432
X is the same for all the three universities and X = = 72.
6
But the number of students (weights) is different. Therefore, we have to calculate the weighted mean.

For University A, X w =
WX =
1451
= 72.55.
W 20

For University B, X w =
WX =
1977
= 70.60.
W 28

For University C, X w =
WX =
1513
= 72.05.
W 21
University A is the best university because the weighted mean is greater than the other two
universities.
Example 12: An examination was held to decide the award of a scholarship. The weights of various
subjects were different. The marks obtained by 3 candidates (out of 100 in each subject) are given
below:
Student
Subject Weight
A B C
Mathematics 4 60 57 62
Physics 3 62 61 67
Statistics 2 55 53 60
English 1 67 77 49

Determine the way to award the scholarship.

Solution: Here weighted mean is appropriate to select one to award the scholarship. The calculation
of the weighted mean is shown in the following Table.

Student
Weight
Subject A B C
(w i )
Mark (x i ) xi w i Mark (x i ) xi w i Mark (x i ) xi w i
Mathematics 4 60 240 57 228 62 248
Physics 3 62 186 61 183 67 201
Statistics 2 55 110 53 106 60 120
English 1 67 67 77 77 49 49
Total 10 244 603 248 594 238 618

Applying the formula for weighted mean and simple mean, we get
603 244
x wA = = 60.3; x A = = 61.
10 4
594 248
x wB = = 59.4; xB = = 62.
10 4
618 238
x wC = = 61.8; xC = = 59.5
10 4
From the above calculations, it may be noted that student B should get the scholarship as per simple
arithmetic mean, but according to weighted mean, student C should get the scholarship because all
the subjects of examination are not of equal importance.
Pooled or Combined Mean
If we have arithmetic means X 1 and X 2 of two groups (having the same unit of measurement of a
variable), based on sizes N 1 and N 2 observations respectively, we can compare the mean X C of
the variate values of the groups taken together from the individual means by the formula,

8
 N1 X1 + N2 X 2
XC = .
N1 + N2
Example 13: There are two branches of a company, employing 280 and 320 persons respectively. If
the arithmetic mean of the monthly salaries paid by the two companies are Taka. 750 and Taka 937.5
respectively, find the arithmetic mean of the salaries of the employees of the companies as a whole.
Solution:
N1 X1 + N2 X 2 280 750 + 320 937.5 510000
XC = = = = Taka 850.
N1 + N2 280 320 600
The average salaries of the employees of the companies as a whole = Taka 850.
Example 14: The mean mark of 50 students in statistics is 72 and that of 35 boys is 75. Find the
mean marks of girls in the class.
Solution: let n1 be the number of boys and n2 be the number of girls. Also let x1 be the mean marks
for boys and x2 be the mean marks for girls.
For this problem we have to use combined mean. The formula for combined mean is
n1 x1 + n2 x2 35 75 + 15 x2
Xc = 72 = x2 = 65.
n1 + n2 50
Therefore, the mean mark for the girls is 65.
Example 15: The average sale of a product for a particular week, excluding Friday, is reported by the
city departmental store as 150 units. Friday being a holiday, there is heavy rush of sales, which has
inflated average sales for the entire week to 210 units. Find the sales for Friday.
Solution: The week long sales can be divided into two parts i.e. six days excluding Friday and the
seventh day which is Friday itself.
Given average sales for the whole week X c = 210 units, average sales for the first six days excluding
Friday x1 = 150 units. Also n1 = 6 and n2 = 1 .
n1 x1 + n2 x2 6 150 + 1x2
Hence, X c = 210 = x2 = 570 .
n1 + n2 7
Thus, the sale for Friday is 570 units.
Merits
(a) It takes into account all the observations of the data.
(b) It is a very useful measure for comparing two or more populations.
(c) It is very easy to calculate.
(d) It is the only measure where the sum of deviations of each value from the mean will be always
equal zero i.e. (Xi - X) = 0
Demerits
(a) This measure is greatly affected by unusually large or small values
(b) It is also inappropriate if there is an open-ended class for data tallied into a frequency
distribution.
Median
For Ungrouped Data
Median is the mid point of the values after they have been ordered from the smallest to the largest or
the largest to the smallest. One half of observations will be above the median and one-half will be
below the median.
Example 16: Actual waiting time for the first job on the selected sample of 9 people having different
field of specializations was as given below:
Waiting time (in months): 11.6, 11.3, 10.7, 18.0, 3.3, 9.2, 8.3, 3.8, 6.8
Find the median of waiting time.
Solution: The median waiting time can be calculated by arranging the data first in ascending order
and then taking the mid value.
3.3, 3.8, 6.8, 8.3, 9.2, 10.7, 11.3, 11.6, 18.0
Median waiting time = 9.2 months.
If the data is arranged in descending order, the same value will be the median.
Example 17: The export of agricultural products in million dollars from a country during eight quarters
in 1974 and 1975 is

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29.7, 16.6, 2.3, 14.1, 36.6, 18.7, 3.5, 21.3
Find the median of the given set of values.
Solution: We arrange the data in ascending and descending order
2.3, 3.5, 14.1, 16.6, 18.7, 21.3, 29.7, 36.6 and 36.6, 29.7, 21.3, 18.7, 16.6, 14.1, 3.5, 2.3
16.6 + 18.7 18.7 + 16.6
Median = = 17.65 for ascending order and Median = = 17.65 for
2 2
descending order. \ Median = 17.65.
n
- F1
For Grouped Data, the median is,
Median = L + 2 C
fm
where L = Lower limit of the median class, n =Total frequency
F1 = Cumulative frequency for the class just above the median class
f m = Frequency of the median class, C = Class interval of the median class.
Example 18: Following is the table showing the annual salaries of professors at 160 colleges. What is
the median annual salary?
Average annual salary
Number of universities Cumulative frequency
($ thousands)
20 up to 30 4 4
30 up to 40 20 24
40 up to 50 41 65
50 up to 60 44 109
60 up to 70 29 138
70 up to 80 16 154
80 up to 90 2 156
90 up to 100 4 160
n 160
Solution: To find the median class, we have to calculate = = 80. So blocked row is the
2 2
median class because 80 lies in this class. According to the formula,
n 160
- F1 - 65
Median = = = $53409.
L+ 2 C $50000 + 2 $10000
fm 44
Example 19: Given the distribution of income of different occupational groups for the families in a
region as:
Professional groups Income/year(000Tk.) Number of families Cumulative frequency
Manager 169.1 82 82
Professional 136.3 62 144
Middle management 79.1 235 379
Manual work 35.7 179 558
Shop Keeper 34.0 96 654
Shelf-employment 24.9 195 849
Small farmer 19.2 714 1563
Farm labor 14.2 147 1710

Find the median.

n
Solution: The data are written in descending order. Here n = 1710, = 855.
2
The number 855 is contained in the smallest cumulative frequency 1563 and this (Block one) is the
median class.
Hence median = 19.2 = 19.2 thousand Taka/year.
Merits
(a) It is a positional average and hence it is not influenced by the extreme values.
(b) It can be calculated even in the case of open-end intervals.

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Demerits
(a) It is not a good measure if the number of item is small.
(b) It is not amenable to further algebraic treatment.
3. Mode: The mode is another measure of central tendency. It is the value of the variable that occurs
most frequently i.e., for which the frequency is a maximum. It is the most fashionable value of the
variable.
For Ungrouped Data
Example 20: The number of children in 15 families is: 3, 4, 1, 0, 3, 2, 3, 5, 7, 2, 6, 8, 4, 3, 2
Find the mode value.
Solution: From the data it reveals that the number 3 occurs most frequently i.e., it appears more
often (4 times) than any other number.
Therefore the mode is 3.
For Grouped Data with class intervals
If the distribution is with continuous class intervals, mode can easily be calculated. The class intervals
for all the classes are equal. If they are unequal, they should be made equal. Mode can be obtained
by the following formula:
f 0 - f1
Mode = L0 + C .
( f 0 - f1 ) + ( f 0 - f 2 )
Where L0 = lower limit of the modal class
f 0 = Frequency of the modal class
f 1 = Frequency of the class immediately preceding the modal class
f 2 = Frequency of the class immediately following the modal class
C = Class interval.
The class with highest frequency is called the modal class.

Example 21: The birth weights (kg) of 30 children were recorded as follows:

2.0 2.1 2.3 3.0 3.1 2.7 2.8 3.5 3.1 3.7
4.0 2.3 3.5 4.2 3.7 3.2 2.7 2.5 2.7 3.8
3.1 3.0 2.9 2.8 2.9 3.5 4.1 3.9 2.8 2.2
(a) How many classes would you recommend forming a frequency distribution?
(b) What class interval would be easier to work with?
(c) Form the frequency distribution on the basis of (a) and (b).
(d) What will be modal birth weight?
Solution: We have the formula for taking the class interval and the total number of classes.
We have to use the 2 to the k rule for suggested class, That is 2 k > n .
For this example,
There are 30 observations so n=30.
Two raised to the fifth power is 32.
Therefore, we should have at least 5 classes, i.e., k=5.
Here class interval is obtained by subtracting the lower limit of a class from the lower limit of the next
class. These class intervals should be uniform.

For our case, i H - L = 4.2 - 2.0 = 0.44 0.50. .

k 5
(a) Recommended class = 5
(b) Suggested Class Interval 0.50.
(c) Hence 5 classes with a class interval 0.4 kg are to be taken in the frequency distribution. The
distribution with the help of Tally marks is:
Class Number of children
Tally marks
(Weight in kg) (Frequency)
2.0 - 2.5 IIII 5
2.5 - 3.0 IIII //// 9
3.0 - 3.5 IIII I 6

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 3.5 - 4.0 IIII // 7
4.0 4.5 /// 3

* Here the lower limit of a class is included in that class.

(d) For finding the mode, first we have to locate the modal class. Here the modal is 2.5 - 3.0, because
for this frequency is maximum.
f 0 - f1
\ Mode = L0 + ( f C
0 - f1 ) + ( f 0 - f 2 )
where L0 = 2.5, f 0 = 9, f 1 = 5, f 2 = 6, C = 0.5.
4
Hence, Mode = 2.5 + 0.5 = 2.5 + 0.286 = 2.786. kg.
4+3
\ The modal birth weight = 2.786 kg.
Merits
(a) It is not affected by extreme values of a set of observations
(b) It can be calculated for distributions with open-end classes.
Demerits
(a) Sometimes it does not exist
(b) Often its value is not unique
(c) It does not account all the values of data.

Relative Positions of the Mean, Median and Mode:

Let us consider the following three frequency distributions:
Class Interval
Frequency Distribution
24 46 68 8 10 10 12 Total
I 8 10 14 10 8 50
II 6 14 12 10 8 50
III 7 10 12 14 7 50

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 Fig 1: Histogram of Distribution III

16
14
12
10
Frequency

8
6
4
2
0

Class Interval

First histogram is a symmetric distribution. For this distribution, the mean, mode and median are
located at the center and are always equal. They are all equal to 7. That is, Mode = Median = Mean.
The second histogram is not a symmetric distribution. It is positively skewed distribution. Here mean =
7, Median = 6.83 and Mode = 5.60. So, Mode< Median< Mean.
The third histogram is also not a symmetric distribution. It is negatively skewed distribution. Here
mean = 7.6, Median = 7.30 and Mode = 8.44. So, Mode> Median> Mean.
Geometric Mean:
If we are interested in finding average percentage changes in sales, salaries or economic figures such
as GDP, which compound or build on each other, geometric mean is the appropriate mean.
The G.M. will always be less than or equal to the A.M. Also all the data values must be positive.
Illustration: Suppose you receive a 5 percent increase in salary last year and a 15 percent increase
this year. Apparently you can think that the average annual percent increase is 10.0. But it is not.
Actual average annual percent increase is 9.886. But how and why? Let us calculate G.M.

Years Percent increase Increased Salary (x)

Last 5 105.00
This 15 115.00
1
G.M. = (x 115.00)0.50 = 109.8863.
1 x 2 ) = (105.00
2

That is, average annual percent increase is 9.886.

This can be verified by assuming that your monthly earning was $3000 to start and you received two
increases of 5 percent and 15 percent.
Raise 1 = $3000(0.05) = $150.00
Raise 2 = $3150(0.15) = $472.50

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 -----------
Total $ 622.50

Your total salary increase is $622.50. This is equivalent to:

$3000.000(0.098863) = $296.589
$3296.589(0.098863) = $325.912
-------------
Total $622.501
So the two totals are same.
A second application of the geometric mean is to find an average percent increase over a period of
time. For example, if you earned $30,000 in 2005 and $50,000 in 2009, what is your annual rate of
increase over the period? The rate of increase is determined from the following formula:

* Average Percent Increase Over Time: GM= n Value at the end of period - 1.
Value at the start of period
Where n is the number of periods.
Pn
Sometimes this formula can be written as GM = n - 1.
P0
For Ungrouped Data
Suppose X 1 , X 2 , ..., X N are N variate values, then the geometric mean is given as
1
G = N X 1 . X 2 . ... .X N = ( X X ... X ) N . N = total frequency
1 2 N

Example 22: Decadal percentage growth of urban population from 1921 to 1961 for some city is
given below:

Years 1921 1931 1941 1951 1961

Decadal percent increase 8.25 19.08 32.09 41.49 25.85

Find the average percent growth rate of urban population within the last 5 decades.

Solution: Here geometric mean is appropriate. We have N = 5.

1
\ G .M . = 5 (8.25)(19.08)(32.09)(41.49)(25.85) = (8.25)(19.08)(32.09)(41.49)(25.85) 5
= (8.25)(19.08)(32.09)(41.49)(25.85).20 = 22.22 .
\ Geometric mean percent growth rate = 22.22.
In case X 1 , X 2 , ..., X K have the corresponding frequencies f 1 , f 2 , ..., f K , then

GM = N X 1f1 X 2f 2 ... X Kf K , N = fi
For Grouped Data
In case of grouped data, mid values of the class intervals are considered as X i and the formula is

GM = N X 1f1 X 2f 2 ... X Kf K , N = fi
Merits
(a) If the variate values are measured as ratios, proportions or percentages, geometric mean gives a
better measure than any,other measure.
(b) It is based on all the observations.
Demerits
If one of the numbers is zero or negative, geometric mean cannot be calculated.
Example 23: The annual percentage change in the sales of a popular brand of toys for five
successive years was observed as 19.5, 20.8, 30.6, 28.5, and 27.2. Find the average annual
percentage change in sales.
Solution: Since the five-year data are in percentages, average annual percentage change can be
found by computing the geometric mean. Thus, the necessary computations are as follows:

14
 Years Percentage Sales at the year end(x)
1 19.5 119.5
2 20.8 120.8
3 30.6 130.6
4 28.5 128.5
5 27.2 127.2

1
GM= (x1 x 2 x 3 x 4 x 5 ) = (119.5 120.8 130.6 128.5 127.2)0.20 = 125.2431.
5

It means sales have increased by (125.2431-100.0000) = 25.24%.

Example 24: After the commencement of its operations, a companys net worth increased by 15
percent in the first year, 20 percent in the second year, 35 percent in the third year and 25 percent in
the fourth year. Find the average growth rate in net-worth of the company over the fourth - year
period.
Solution: Let the year to year growth in net-worth be X. Thus, the necessary computations are as
follows:
Years Net worth increase Percentage Growth(x)
1 15 115
2 20 120
3 35 135
4 25 125

1
GM = (x1 x 2 x 3 x 4 ) 4 = (115 120 135 125) 0.25 = 123.5324
Thus, the average growth rate r is:
r = GM 100 = 23.53%.

Example 25: An industrys gross output increased from 120 million tones to 1500 million tones over a
period of 10 years. Find the average growth rate in gross output per annum.
Solution: Given Pn = 1500 million tones, P0 = 120 million tones and n = 10. The required growth
rate r is
1 1
P n
1500
10
r = n - 1 = - 1 = 1.287333294-1=28.73%.
P0 120

Example 26: The gross profit of a company increased 10 times over a period of 3 years. What is the
average percentage growth rate in gross profit per annum?
Solution: If the companys initial gross profit is Taka 10, according to the problem, it is increased to
Taka 100 over the next three years. Thus, Pn = 100,P0 = 10 and n = 3 years. The desired average
percentage growth rate is

1 1
P n
100
3
r = n - 1 = - 1 = 2.15443469-1=1.1544=115.27%.
P0 10
Example 27: It was reported that the earning per share (EPS) of a company increased by 18 percent
in the first year, declined by 20 percent in the second year and again increased by 35 percent in the
third year. Find the average annual growth rate in EPS.
Solution: Since the three-year data are in percentages, average annual percentage change can be
found by computing the geometric mean. Thus, the necessary computations are as follows:

Years Percentage increase Annual increase (x)

1 18 118
2 - 20 80
3 35 135

15
 1 1
r= (x1 x 2 x 3 ) - 1 = (118 80 135) - 1 = 108.4181- 100 = 8.41%.
3 3

Example 28: The following are the weekly wages in Taka of 30 workers of a firm:

140 139 126 114 100 88 62 77 99 103 108 129 80

144 148 134 63 69 148 132 118 142 116 123 104 95
85 106 123 133

The firm gave bonus of Taka 10, 15, 20, 25, 30, and 35 for individuals in the respective salary slabs:
exceeding 60 but not exceeding 75; exceeding 75 but not exceeding 90; and so on up to exceeding
135 and not exceeding 150. Find the average bonus paid.

Solution: Let us prepare a frequency distribution as follows:

Weekly Wages(In Taka) Frequency (f) Bonus Paid(x)

061 075 3 10
076 090 4 15
091 105 5 20
106 120 5 25
121 135 7 30
136 150 6 35

Average bonus paid = fx = 375 = 24.5 Taka.

n 30
Example 29: A factory pays workers on piece rate basis and also a bonus to each worker on the basis
of individual output in each quarter. The rate of bonus payable is as follows:

Output(in units) Bonus(in Taka)

70 74 40
75 79 45
80 84 50
85 89 60
90 94 70
95 99 80
100 104 100

The individual output of a batch of 50 workers is given below

94 83 78 76 88 86 93 80 91 82 89 97 92
84 92 80 85 83 98 103 87 88 88 81 95 86
99 81 87 90 84 97 80 75 93 101 82 82 89
72 85 83 75 72 83 98 77 87 71 80

By suitable classification, find out (i) Average bonus per worker for the quarter (ii) Average output per
worker.
Solution: First we make a frequency distribution of bonus and output.

Output(in units) Frequency (f) Bonus(in Taka)(x)

70 74 3 40
75 79 5 45
80 84 15 50
85 89 12 60
90 94 7 70
95 99 6 80
100 104 2 100

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(a) Average bonus/worker for quarter, x =
fx = 2985 = 59.7 Taka.
n 50
(b) Total quarterly bonus paid = 59.7 50 = 2985 Taka.

(c)
Output(in units) Frequency (f) Mid-value(x) fx
70 74 3 40
75 79 5 45
80 84 15 50
85 89 12 60
90 94 7 70
95 99 6 80
100 104 2 100
Total 50 4305

Average output/worker, x =
fx =
4305
= 86.1 units.
n 50
Example 30: The following is the age distribution of 1000 persons working in an organization.

Age Group Number of Persons

20 25 30
25 30 160
30 35 210
35 40 180
40 45 145
45 50 105
50 55 70
55 60 60
60 65 40

Due to continuous losses, it is desired to bring down the manpower strength to 30 percent of the
present number according to the following scheme.
(a) Retrench the first 15 per cent from the lower age group,
(b) Absorb the next 45 per cent in other branches,
(c) Make 10 per cent from the highest age group retire permanently, if necessary.
Calculate the age limits of the persons retained and those to be transferred to other departments. Also
find the average age of those retained.
Solution: (a) The first 15% persons to be retrenched from the lower age groups are
15
1000 = 150.
100
But the lowest age group 20 25 has only 30 persons and therefore the remaining 150 30 = 120 will
be taken from the next higher age group, that is, from 25 30 , which has 160 persons.

(b) The next 45%, that is, 450 persons who are to be absorbed in other branches, belong to the
following age groups.

Age Group Number of Persons

25 30 (160 120) = 40
30 35 210
35 40 180
40 45 20
Total 450

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(c) Those who are likely to be retired are 10 per cent, that is, 100 persons and belong to the following
highest groups.

Age Group Number of Persons

50 - 60 100 40 = 60
60 - 65 40
Total 100
Hence, the following table gives the number of persons who are retained in the organization.

Age Group Number of Persons

40 - 45 145 20 = 125
45 50 105
50 55 70
Total 300
Hence, the calculations of the average age of those retained are shown in the following Table.

Age Group Mid-value (x) Number of Persons(f) fx

40 - 45 42.5 145 20 = 125 5312.5
45 50 47.5 105 4987.5
50 55 52.5 70 3675
Total 300 13975

The required average age is X =

fx =
13975
= 46.58 47 years (approx.)
f300
Example 31: 168 handloom factories have the following distribution of average number of workers in
various income groups:
Income Groups 800 - 1000 1000 1200 1200 1400 1400 1600 1600 1800
Number of Firms 40 32 26 28 42
Average Number of 8 12 8 8 4
Workers
Find the mean salary paid to the workers.
Solution: Since the total number of workers working in different income groups is not given, therefore
these have to be determined as shown in the following table.
Income Group Number of Firms Average Number of Frequency
Workers
0800 1000 40 8 320
1000 1200 32 12 384
1200 1400 26 8 208
1400 1600 28 8 224
1600 1800 42 4 168
Computation of mean value is given the following table.

Income Group Mid-value(x) Frequency(f) fx

0800 1000 900 320 288000
1000 1200 1100 384 422400
1200 1400 1300 208 270400
1400 1600 1500 224 336000

18
 1600 1800 1700 168 285600
Total 1304 1602400

The required average salary is X =

fx =
1602400
= 1228.83.
f 1304

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