Business Applications of Measure 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.

Don't use plagiarized sources. Get Your Custom Essay on
Business Applications of Measure of Central Tendency
Just from $13/Page
Order Essay

To make easy comparisons between data.

There are different types of averages; each has its own business applications.

Arithmetic Mean
Geometric Mean
Harmonic Mean

Arithmetic Mean
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 population, the mean is denoted by the Greek letter μ. (David R. Anderson et al)
Business Applications of Mean
Arithmetic mean is considered a deal average. It is frequently used in all the aspects of business i.e. number of items produced per day on a large assembly line, number of orders received per month for a firm. further In economic analysis arithmetic mean is used extensively to calculate average production, average wage, average cost, per capital income exports, imports, consumption, prices, etc. (
Say we want to find the average annual salary of all secretaries. We believe we can do this on the basis of our knowledge of annual salaries of 6 particular secretaries, who each earn $.10400, $34000, $14000, $25800 respectively.
Our result is a sample mean because we are interested in finding the mean
annual income of all secretaries on the basis of the annual income of a smaller sample consisting of only 6 secretaries. (Cheng F. Lee et al, 1993)
The median is another measure of central location. The median is the value in the middle when the data are arranged in ascending order. With an odd number of observations, the median is the middle value. An even number of observations has no single middle value. In this case, we follow convention and define the median as the average of the values for the middle two observations. (David R. Anderson et al)
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. (
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.” ( 1.3 Mode
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. ( 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 less important when setting pricing in terms of what most customers paid. (
Mode is used to calculate the ‘modal size of a collar’, ‘modal size of shoe’, or ‘modal size of ready-made garments’ etc.The mode may be beneficial for a manager of a shoe store. For example, you would not see size 17 shoes stocked on the floor. Why? Because very few people have a size 17 shoe size. Therefore, store managers may look at data and determine which shoe size is sold the most. Managers would want to stock the floor with the best selling shoe size. (
Geometric Mean
Geometric mean is well defined only for sets of positive real numbers. This is calculated by multiplying all the numbers (call the number of numbers n), and taking the nth root of the total. (
Business Applications of Geometric Mean
Geometric Mean is used in the construction of index number. The averages of proportions, percentages and compound rates are computed by geometric mean. The growth of population is measured in it as population increases in geometric progression.
Harmonic Mean
Harmonic mean is used to calculate the average of a set of numbers. Here the number of elements will be averaged and divided by the sum of the reciprocals of the elements. The Harmonic mean is always the lowest mean. (
Business Applications of Harmonic Mean
Harmonic mean is applied in the problems where small items must get more relative importance than the large ones. It is useful in cases where time, speed, values given in quantities, rate and prices are involved. But in practice, it has little applicability.

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more
error: Content is protected !!
Live Chat+1(978) 822-0999EmailWhatsApp

Order your essay today and save 20% with the discount code THANKYOU