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Essay on Business Applications of Measure of Central Tendency

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1 Measures of Central Tendency “Measures of central tendency (averages) are statistical constants which enable us to figure out in a single effort the significance of the whole.” (Prof Bowley)
The main objectives of measure of central tendency are
To reduce data in a single value.
To make easy comparisons between data.
There are different types of averages; each has its own business applications.
1. Arithmetic Mean
2. Median
3. Mode
4. Geometric Mean
5. Harmonic Mean
1.1 Arithmetic Mean
1.1.1 Definition
Most important measure of location is the 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, the mean is denoted by; if the data are for a …show more content…

(David R. Anderson et al)
1.2.2 Business Applications of Median
Median is positional measures of central tendency. The median salary gives a value close to the average salary commonly paid, without taking the extreme values into consideration. There are mainly used in the qualitative cases like honesty, intelligence, ability, etc. These are also suitable for the problems of distribution of income, wealth, investment, etc. (www.publishyourarticles.net)
1.2.2.1 Example The U.S. Census Bureau finds the median household income. According to the U.S. Census Bureau, "median household income" is defined as "the amount which divides the income distribution into two equal groups, half having income above that amount, and half having income below that amount." (www.ehow.com)
1.3 Mode
1.3.1 Definition
The mode is defined as the element that appears most frequently in a given set of elements. Mode can also be defined as the element with the largest frequency in a given data set. (www.wyzant.com)
1.3.2 Business Applications of Mode
The mode is the most important when an analysis is looking for what happens most often. In analyzing prices, most of the sales occur at a particular list price or possibly at a reduced, sale price. While there may have been sales at other prices, very few customers will have paid an average or a mean price. Those values are therefore

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