Measure of Location Only describes the center of the data.

Its valuable from that standpoint, but it does not tell us anything about the spread of the data MEAN, MEDIAN, MODE These measures give us a typical value, a measure of central tendency one value that can represent all the data points. Mean Arithmetic Mean Good for quantitative data when there are not extreme values extreme values can make the mean look too big or too small If the measures are computed for data from a sample , they are sample stastics If the measures are computed for data from a population , they are population parameters A sample statistic is referred to as the point estimator of the corresponding population parameter Since it is usually impossible to get all the numbers for a population, we have to use sample statistics to reasonably estimate the population parameter! Example: calculate an sample average of number of tuna in Laut Jawa and use it as the estimate of the population average of number of tuna in Laut Jawa - "We can't count all the fish in the sea!!"

In mathematics and statistics, the arithmetic mean, often referred to as simply the mean or average. The term "arithmetic mean" is preferred in mathematics and statistics because it helps distinguish it from other means such as the geometric and harmonic mean. Arithmetic mean is also known as arithmetic average and it is the sum of all the values in a list of numerical values divided by the number of items in the list. For example, if we have the two values, eight and six, then their arithmetic average is: 8 + 6 / 2 = 7. Definition If x1, x2, x3, ..., xn are n values of a variable X, then the arithmetic mean or simply the mean of these values is denoted by and is defined as

Here, the symbol

denotes the sum x1, x2, x3, ..., xn.

Or we can say, the arithmetic mean of a set of observations is equal to their sum divided by the total number of observations. Important properties Mean as a balance point If numbers have mean X, then . Since xi X is the distance from a given number to the mean, one way to interpret

this property is as saying that the numbers to the left of the mean are balanced by the numbers to the right of the mean. The mean is the only single number for which the residuals defined this way sum to zero. Ex: the mean of 2, 3, and 7 is 4. Then: (24) + (34) + (74) = 0

Mean unduly affected by unusually large or small values The mean does have weakness. Recall that the mean uses the value of every item in sample, or population, in its computation. If one or two of these values are either extremely large or extremely small compared to majority data, the mean might not be an appropriate to represent the data. Ex: The ages of a small group of employees at Westinghouse are : 25, 30, 27, and 50. The mean age is 33. Obviously, its not representative of this group, because all but one employees age is in the 25 to 30 range. One employees age (50) is unduly affecting the mean.

Problems The arithmetic mean may be misinterpreted as the median to imply that most values are higher or lower than is actually the case. If elements in the sample space increase arithmetically, when placed in some order, then the median and arithmetic average are equal. For example, consider the sample space {1,2,3,4}. The average is 2.5, as is the median. However, when we consider a sample space that cannot be arranged into an arithmetic progression, such as {1,2,4,8,16}, the median and arithmetic average can differ significantly. In this case the arithmetic average is 6.2 and the median is 4.

When do we use it? If it is required to use a single number X as an estimate for the value of numbers , then the arithmetic mean does this best.

Weighted Mean It occurs when there are several observations of the same value. In this case weights are frequency counts. The denominator of a weighted mean is always the sum of the weights.

Definition

When do we use it? If values occure more than once, you may use this model.

Geometric Mean (GM) 1. The Geometric Mean is useful in finding the averages of increases in : -percents -ratios -indexes -growth rates 2. The GM will always be less than or equal to (never more than) the arithmetic mean 3. The GM gives a more conservative figure that is not drawn up by large values in The GM of a set of n positive numbers is defined as the nth root of the product of n values. The formula is : GM%+1 =

GM%

Define Variables & Symbols GM = Geometric Mean = A particular number ( 1 + %) = A particular number ( 1 + %) n = Number of positive numbers in set

Geometric Mean Example : Percentage Increase Starting Salary Increase in salary Year 1 Increase in salary Year 2 $41,000.00 5% 15%

GM =

= 1.09886

Verify Geometric Mean is More Accurate Verify 1 Raise 1 = $41,000.00 * Raise 2 = 43,050. 00* Total 5% = $2,050.00 15% = 6,457.50 $8,507.50

Verify 2 (Using Geometric Mean) Raise 1 = $41,000.00 * 0.09886 = $4,053.39

Raise 2 = 45,053.39 * 0.09886 = 4,454.11 Total $8,507.50

If we used Arithmetic Mean (5% + 15%)/2 = 10% Raise 1 = $41,000.00 * Raise 2 = 45,100.00 * Total 10% = $4,100.00 10% = 4,510.00 $8,610.00

Another Use Of GM Ave. % Increase Over Time

Another use of the geometric mean is to determine the percent increase in sales, production or other business or economic series from one time period to another Where n = number of periods

GM =

Example for GM : Ave. % Increase Over Time The total number of females enrolled in Indonesian colleges increased from 755,000 in 1992 to 835,000 in 2000. That is, the geometric mean rate of increase is 1.27%.

GM =

1 = 0.012668825

The annual rate of increase is 1.27%. For the years 1992 through 2000, the rate of female enrollment growth at Indonesian colleges was 1.27% per year.

When do we use it? Use if you are averaging percentage increase over time Use if you have begin number and end number , and you know the number of periods

Median Good for quantitative data when there are extreme values (like house price and salaries)
Salaries at Accounting Firm $790.500 $550.250 $255.800 $144.354 $139.330 $138.409 $126.737 $120.102 $119.831 $119.001 $109.151 $105.127 $103.332 $96.842 $93.949 $92.784

$59.915 $59.196 $58.072 $54.594 $51.671

House Prices $99.857 $109.159 $114.460 $118.492 $143.400 $144.244 $144.686 $170.143 $178.708 $193.308 $198.345 $201.661 $224.649 $239.136 $277.309 $297.873 $394.136 $750.022 $1.258.963 $2.589.657

Mode One that occurs most frequently (can be bimodal, multimodal) Good for Categorical Data (Nominal and Ordinal)

Trimmed Mean

This is an alternative method besides we use Median if the data have extreme values Remove 5% of smallest and largest values from data set. Then calculate the Mean
No Salaries 1 $1.020,00 2 $1.030,00 3 $2.150,00 4 $2.861,00 5 $2.864,00 6 $2.964,00 7 $2.983,00 8 $3.087,00 9 $3.167,00 10 $3.222,00 11 $3.234,00 12 $3.267,00 13 $3.275,00 14 $3.283,00 15 $3.334,00 16 $3.336,00 17 $3.337,00 18 $3.440,00 19 $3.442,00 20 $3.480,00 21 $3.485,00 22 $3.509,00 23 $3.546,00 24 $3.609,00 25 $3.626,00 26 $3.628,00 27 $3.633,00 28 $3.658,00 29 $3.796,00 30 $3.814,00 31 $3.875,00 32 $3.901,00 33 $3.946,00 34 $5.900,00 35 $6.200,00 36 $7.200,00 37 $8.440,00

Trim 0,05 n= 37 # values to drop 1,85 Round up to integer 2 Method 1 Trimmed Mean $3.540,97

The Standard Deviation tells you: 1) how spread out the data is; 2) what the mean deviation is; 3) does the average represent its data points fairly