TAMIL NADU NATIONAL LAW SCHOOL

__________________________________________________

2016

BUSINESS STATISTICS PROJECT

A STUDY ON MEASURES OF CENTRAL TENDENCY

1
Submitted by- Submitted to-
Mohit Agarwal Dr.T.S. Agilla
BC0140037

DECLARATION

I, Mohit Agarwal hereby declare that the project work entitled A STUDY ON MEASURES
OFCENTRAL TENDENCY submitted to Tamil Nadu National Law School; Tiruchirappalli,
is the record of a bonafide work done by me under the supervision and guidance of Prof. Mrs
T.S AGILLA, Faculty of business statistics, Tamil Nadu National Law School;
Tiruchirappalli.

All information furnished in the project is true to the best of my knowledge and belief devoid
of plagiarism. If under the circumstances plagiarism is truly established, then the Law School
may be pleased to proceed with any action against me according to the Universitys rules and
regulations.

Mohit Agarwal

B.Com.,LL.B(H).

2
 SUPERVISORS CERTIFICATE

This is to certify that the Project entitled: A Study Of Measures of Central tendency
submitted to the Tamil Nadu National Law School; Tiruchchirappalli, in fulfilment of the
requirements for internal component for B.com; LL.B (HONS.), Third year is a bona-fide
research work carried out by Mohit Agarwal under my supervision and guidance. No part of
this study has been submitted to any University for the award of any Degree or Diploma
whatsoever.

Mrs. Agilla ( )

Date:

Place: Tiruchchirappalli

3
 ACKNOWLEDGEMENTS

At the outset, I take this opportunity to thank my Professor T.S AGILLA from the bottom of
my heart who has been of immense help during moments of anxiety and torpidity while the
project was taking its crucial shape.

Secondly, I convey my deepest regards to the administrative staff of TNNLS who held the
project in high esteem by providing reliable information in the form of library infrastructure
and database connections in times of need.

Thirdly, the contribution made by my parents and friends by foregoing their precious time is
unforgettable and highly solicited. Their valuable advice and timely supervision paved the
way for the successful completion of this project. Hence as a student, I am extremely grateful
and forever deeply indebted to him.

4
 PREFACE

This project is intended to carry out an extensive research on the given topic by the
supervisor. The material evidence presented in this project is purely based on secondary
sources and also certain standard of textual analysis have been thoroughly detailed. The
research and analysis conducted by the researchers are bona-fide and purely for academic
purposes.

Every effort is made to keep the project error free. I would gratefully acknowledge the
suggestions to improve the project to make it more useful.

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 TABLE OF CONTENTS:

CHAPTER I

INTRODUCTION.8

CHAPTER II

OBJECTIVES.10
METHODOLOGY.....................10

CHAPTER III

MEAN.11
MERITS AND DEMERITS OF
MEAN.14

CHAPTER IV

MEDIAN15
MERITS AND DEMERITS OF
MEDIAN....21

CHAPTER V

MODE.22
MERITS AND DEMERITS OF
MODE.29

CHAPTER VI

CONCLUSION .......................................................31

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 CHAPTER -1
INTRODUCTION

In the study of a population with respect to one in which we are interested we may get a large
number of observations. It is not possible to grasp any idea about the characteristic when we
look at all the observations. So it is better to get one number for one group. That number must
be a good representative one for all the observations to give a clear picture of that
characteristic. Such representative number can be a central value for all these observations.
This central value is called a measure of central tendency or an average or a measure of
locations. There are five averages. Among them mean, median and mode are called simple
averages and the other two averages geometric mean and harmonic mean are called special
averages.1
The meaning of average is nicely given in the following definitions. A measure of
central tendency is a typical value around which other figures congregate.
An average stands for the whole group of which it forms a part yet represents the
whole.
One of the most widely used set of summary figures known as measures of
location.2
CHARACTERISTICS FOR A GOOD OR AN IDEAL AVERAGE :

The following properties should possess for an ideal average.

It should be rigidly defined.

It should be easy to understand and compute.
It should be based on all items in the data.
Its definition shall be in the form of a mathematical formula.
It should be capable of further algebraic treatment.
It should have sampling stability.
It should be capable of being used in further statistical computations or processing3
Besides the above requisites, a good average should represent maximum characteristics of the

1 Dr. Gunjan Patil, Lecture on Measures of Central Tendency.

2 Measures of Dispersion, Chapter 13, module IV, Statistics

7
data, its value should be nearest to the most items of the given series.
CHAPTER -2
AIMS AND OBJECTIVE

The main objective of this project will be learning of computing of main essential of
computation of central tendency i.e. learning of computing Mean , Median , Mode .

1. Compute Mean

2. Compute Median

3. Compute Mode4

2.2RESEARCH METHODOLOGY

This is the doctrinal research project and the relevant material for this project has been
collected from the primary as well as secondary sources. The doctrinal research is a research
as we all know that it is based on the principles or the Prepositions made earlier. It is more
based on the sources like book in the library, and through various websites. For the purpose
of the said research project the researcher has collected the relevant material from books on
business statistics, central measures of deviation as well as on measures of dispersion.

3 Ibid

4 Supra FN.1.

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 CHAPTER _-3

ARITHMETIC MEAN OR MEAN :

Arithmetic mean or simply the mean of a variable is defined as the sum of the observations
divided by the number of observations. If the variable x assumes n values x1, x2 ...xn then
the mean, x, is given by5

Short-Cut method :

Under this method an assumed or an arbitrary average (indicated by A) is used as the

basis of calculation of deviations from individual values. The formula is
n

xA d

where, A = the assumed mean or any value in x

d = the deviation of each value from the assumed mean

Example :
A student s marks in 5 subjects are 75, 68, 80, 92, 56. Find his average mark6

5 Supra FN.1.

6 Measures of Dispersion, Chapter 13, module IV, Statistics

9
 Solution:
X d=x-A
75 7
A 68 0
80 12
92 24
56 -12
Total 31

d
xA
n
31
= 68 + 5
=
= 68 + 6.2
= 74.2

Grouped Data :
The mean for grouped data is obtained from the following formula:7

x fx
N
where x = the mid-point of individual class
f = the frequency of individual class
N = the sum of the frequencies or total frequencies

Short-cut method :
fd
A c
N
where ,A = any value in x
N = total frequency
C= width of class interval ,
an
d
d x A
c

7 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module IV,
Statistics

10
Example :
8
Given the following frequency distribution, calculate the arithmetic mean

Marks : 64 63 62 61 60 59

Number of :8 18 12 9 7 6

Solution:

X F Fx d=x-A Fd
64 8 512 2 16
63 18 1134 1 18
62 12 744 0 0
61 9 549 1 9
60 7 420 2 14
59 6 354 3 18

60 3713 -7

Direct method
x fx = 3713 61.88
N 60

Short-cut method
fd 7
x A N = 62 60 = 61.88

8 Ibid

11
MERITS AND DEMERITS OF ARITHMETIC MEAN :

Merits:

1. It is rigidly defined.
2. It is easy to understand and easy to calculate.
3. If the number of items is sufficiently large, it is more accurate and more reliable
4. It is a calculated value and is not based on its position in the series. 9
5. It is possible to calculate even if some of the details of the data are lacking.
6. Of all averages, it is affected least by fluctuations of sampling.
7. It provides a good basis for comparison.

Demerits:

1. It cannot be obtained by inspection nor located through a frequency graph.

2. It cannot be in the study of qualitative phenomena not capable of numerical measurement i.e.
Intelligence, beauty, honesty etc.,

3. It can ignore any single item only at the risk of losing its accuracy.

4. It is affected very much by extreme values.

5. It cannot be calculated for open-end classes.

6. It may lead to fallacious conclusions, if the details of the data from which it is computed are
not given.

9 Kanhaiya lal ,Measures of Central tendency: Mean ,Median, Mode

12
 CHAPTER -4 MEDIAN

The median is that value of the variety which divides the group into two equal parts, one part
comprising all values greater, and the other, all values less than median.10

Ungrouped or Raw data :

Arrange the given values in the increasing or decreasing order. If the number of values are
odd, median is the middle value. If the number of values are even, median is the mean of
middle two values.11

By formula

n 1 th item.
Median = Md =

Example :When odd number of values are given. Find median for the following

25, 18, 27, 10, 8, 30, 42, 20, 53

Solution:
Arranging the data in the increasing order 8, 10, 18, 20, 25, 27, 30, 42, 53

10 Supra F.N.1

11 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

13
 th
The middle value is the 5 item i.e., 25 is the median Using formula

n 1 th item.
Md =

9 1 th item.
=

10 th
= Item
2
th
= 5 item

= 25

EXAMPLE
The following table represents the marks obtained by a batch of 10 students in
certain class tests in statistics and Accountancy.12

Serial No 1 2 3 4 5 6 7 8 9 10
Marks 53 55 52 32 30 60 47 46 35 28
(Statistics)
Marks 57 45 24 31 25 84 43 80 32 72
(Accountancy)
Indicate in which subject is the level of knowledge higher ?

For such question, median is the most suitable measure of central tendency. The mark in
the two subjects are first arranged in
increasing order as follows:

Serial No 1 2 3 4 5 6 7 8 9 10
Marks in 28 30 32 35 46 47 52 53 55 60
Statistics
Marks in 24 25 31 32 43 45 57 72 80 84
Accountancy

T
n 1 th 10 1 h
Median = 2 item = 2

12 https://statistics.laerd.com/statistical-guides/measures-central-tendency-
mean-mode-median.php

14


item =
5
th th
Value of 5 item value of 6 item
=

= 46 47 = 46.5
Md (Statistics)
2
Md (Accountancy) = 43 45 = 44
2

Therefore the level of knowledge in Statistics is higher than that in Accountancy.

Grouped Data:
In a grouped distribution, values are associated with frequencies. Grouping can be in the
form of a discrete frequency distribution or a continuous frequency distribution. Whatever
may be the type of distribution , cumulative frequencies have to be calculated to know the
total number of items.
Cumulative frequency : (cf)
Cumulative frequency of each class is the sum of the frequency of the class and the
frequencies of the pervious classes, ie adding the frequencies successively, so that the last
cumulative frequency gives the total number of items

Continuous Series:
The steps given below are followed for the calculation of median in continuous
series.
Step1: Find cumulative frequencies.
N
Step2: Find
2
Step3: See in the cumulative frequency the value first greater than
N

, Then the corresponding class interval is called the Median
2
class. Then apply the formula
Nm
Median = l 2 c
f
Where l = Lower limit of the median class
m = cumulative frequency preceding the median c = width of the median
class
f =frequency in the median class. N=Total frequency.
Note :If the class intervals are given in inclusive type convert them into exclusive type and
call it as true class interval and consider lower limit in this.

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The following table gives the frequency distribution of 325 workers of a factory, according
to their average monthly income in a certain year.
Income group (in Rs) Number of workers
Below 100 1
100-150 20
150-200 42
200-250 55
250-300 62
300-350 45
350-400 30
400-450 25
450-500 15
500-550 18
550-600 10
600 and above 2
325
Calculate median income
Solution:
Income group Number of Cumulative
(Class-interval) Workers frequency
(Frequency) c.f
Below 100 1 1
100-150 20 21
150-200 42 63
200-250 55 118
250-300 62 180
300-350 45 225
350-400 30 255
400-450 25 280
450-500 15 295
500-550 18 313
550-600 10 323
600 and above 2 325
325

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 N 325
=162.5
2 2

Here l = 250, N = 325, f = 62, c = 50, m = 118

162.5 118 50
Md = 250+
62
= 250+35.89
= 285.8913

Merits of Median :

1. Median is not influenced by extreme values because it is a positional average.

2. Median can be calculated in case of distribution with open-end intervals.
3. Median can be located even if the data are incomplete.

4. Median can be located even for qualitative factors such as ability, honesty etc. 14

Demerits of Median :

1. A slight change in the series may bring drastic change in median value.
2. In case of even number of items or continuous series, median is an estimated value
other than any value in the series.
3. It is not suitable for further mathematical treatment except its use in mean deviation15.

13 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

14 Supra.F.N.1

15 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

17
 CHAPTER - 3
MODE

The mode refers to that value in a distribution, which occur most frequently. It is an actual
value, which has the highest concentration of items in and around it.16

According to Croxton and Cowden

The mode of a distribution is the value at the point around which the items tend to be
most heavily concentrated. It may be regarded at the most typical of a series of values.17

It shows the centre of concentration of the frequency in around a given value. Therefore,
where the purpose is to know the point of the highest concentration it is preferred. It is,
thus, a positional measure.18
Its importance is very great in marketing studies where a manager is interested in
knowing about the size, which has the highest concentration of items. For example, in
placing an order for shoes or ready-made garments the modal size helps because this sizes
and other sizes around in common demand

16 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

17 Ibid

18 Supra F.N.1

18
Computation of the mode

Ungrouped or Raw Data:

For ungrouped data or a series of individual observations, mode is often found by
mere inspection.19

Example

2 , 7, 10, 15, 10, 17, 8, 10, 2 Mode = M0 =10

In some cases the mode may be absent while in some cases there may be more than
one mode.20

Grouped Data:
For Discrete distribution, see the highest frequency and corresponding value of X is mode.

Continuous distribution :

See the highest frequency then the corresponding value of class interval is called the modal
class. Then apply the formula.
1
Mode = M 0 = l + C
1+ 2

l = Lower limit of the model class

1 = f1-f0 2 =f1-f2 f1 =

frequency
of the modal class

f0 = frequency of the class preceding the modal class f 2 = frequency of the class
succeeding the modal class
The above formula can also be written as

0
Mode = l + f1 -f

19 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

20 Ibid

19
 c
2f 1 - f 0 - f 2

1. If (2f1-f0-f2) comes out to be zero, then mode is obtained by the following formula
taking absolute differences within vertical lines.
2. M0= l + ( f1 f0 )
c
| f1 f 0 | | f1 f2 |
If mode lies in the first class interval, then f0 is taken a zero
The computation of mode poses no problem in distribution with open - end classes ,
unless the modal value lies in the open -end class.21

.Example :
Calculate mode for the following :

C- I f
0-50 5
50-100 14
100-150 40
150-200 91
200-250 150
250-300 87
300-350 60
350-400 38
400 and above 15

Solution:
The highest frequency is 150 and corresponding class interval is 200 250, which is the
modal class.

Here,

l=200,
f1=150,

f0=91,

f2=87,
C=50

Mode = M0 = l + f1 -f0 c

21 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

20
 2f 1 - f 0 - f 2
200
= 150-91 50
2 150 91 87

=200+24.18
=224.1822

Determination of Modal class :

For a frequency distribution modal class corresponds to the maximum frequency. But
in any one (or more) of the following cases
i. If the maximum frequency is repeated
ii. If the maximum frequency occurs in the beginning or at the end of the distribution
iii. If there are irregularities in the distribution, the modal class is determined by the
method of grouping.23
Steps for Calculation :

We prepare a grouping table with 6 columns

1. In column I, we write down the given frequencies.
2. Column II is obtained by combining the frequencies two by two.
st
3. Leave the 1 frequency and combine the remaining frequencies two by two and
write in column III
4. Column IV is obtained by combining the frequencies three by three.
5. Leave the 1st frequency and combine the remaining frequencies three by three and
write in column V
nd
6. Leave the 1st and 2 frequencies and combine the remaining frequencies three by
three and write in
column VI24
Mark the highest frequency in each column. Then form an analysis table to find the
modal class. After finding the modal class use the formula to calculate the modal value.
22 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module
IV, Statistics

23 Supra F.N.1

24 S.P. GUPTA,STATISTICAL METHODS ,Measures of Central Tendency, Chapter 13, module

IV, Statistics

21
Example:
Calculate mode for the following frequency distribution

Class 0- 5- 10- 15- 20- 25- 30- 35-

Interval 5 10 15 20 25 30 35 40
Frequency 9 12 15 16 17 15 10 13

Grouping Table

CI f 2 3 4 5 6
0- 5 9
5-10 12 21 36
27
10-15 15 43
15-20 16 31 48
20-25 17 33 48
32
25-30 15 42 38
30-35 10 25
23
35-40 13

Analysis Table

Columns 0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40

1 1
2 1 1
3 1 1
4 1 1 1
5 1 1 1
6 1 1 1
Total 1 2 4 5 2

The maximum occurred corresponding to 20-25, and hence it is the modal class.
1 C
Mode = Mo = l + 1 +2

Here l = 20; 1 = f1 f0 = 17 16 = 1
= f1f2 = 17 15 = 2
2

M0 = 20 + 1 5
12
= 20 + 1.67 = 21.6725

Merits of Mode:
1. It is easy to calculate and in some cases it can be located mere inspection
25 Ibid

22
2. Mode is not at all affected by extreme values.
3. It can be calculated for open-end classes.
4. It is usually an actual value of an important part of the series.
5. In some circumstances it is the best representative of data.
Demerits of mode:
1. It is not based on all observations.
2. It is not capable of further mathematical treatment.
3. Mode is ill-defined generally, it is not possible to find mode in some cases.
4. As compared with mean, mode is affected to a great extent, by sampling
fluctuations.
It is unsuitable in cases where relative importance of items has to be considered

CONCLUSION

Statistics has become indispensable in all phases of human endeavour. In business world,
Statistical methods are playing an ever-increasing role in framing suitable polices. Statistics is
concerned with scientific methods for collecting, organising, summarising, presenting and
analysing data as well as deriving valid conclusions and making reasonable decisions on the
basis of this analysis. Statistics is concerned with the systematic collection of numerical data
and its interpretation. A measure of central tendency is a single value that attempts to describe
a set of data by identifying the central position within that set of data. As such, measures of
central tendency are sometimes called measures of central location. They are also classed as
summary statistics. The mean (often called the average) is most likely the measure of central
tendency that you are most familiar with, but there are others, such as the median and the
mode

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Thus , we conclude that the mean, median and mode are all valid measures of central
tendency, but under different conditions, some measures of central tendency become more
appropriate to use than others. In the following sections, we will look at the mean, mode and
median, and learn how to calculate them and under what conditions they are most appropriate
to be used.

BIBLIOGRAPHY

BOOKS REFERRED:

1. S P Gupta: Statistical Methods- Sultan Chand, Delhi

2. Dr. B N Gupta: Statistics (Sahityta Bhavan), Agra.
3. S.C Gupta: Business Statistics, Himalaya Publishing House.
4. Levin, Richard and David S. Rubin. Statistics for Management. 7th Edition.
Prentice Hall of India.
5. Siegel, Andrew F. Practical Business Statistics. International Edition. (4th Ed.). Irwin
McGraw Hill.
6. Berenson and Levine. Basic Business Statistics: Concepts and Applications. Prentice Hall.

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7. Spiegel M.D. Theory and Problems of Statistics. Schaums Outlines Series. McGraw Hill
Publishing Co.

WEBLIOGRAPHY

www.Jstor.org

www.heinonline.com

www.legalservicesindia.com

www.wikipedia.com

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