Business Statistics For Dummies, 2nd Edition

Chapter 3

Identifying the Center of a Data Set

IN THIS CHAPTER

Computing the mean, median, and mode of a data set

Noting the specific characteristics of the mean, median, and mode

The center of a data set (sample or population) provides useful information in many business applications. For example, it may be extremely important for a marketing firm to determine the average age of the customers who buy a specific product. Understanding the average household income of a company’s customers would also be extremely useful in determining which types of new products to introduce. Portfolio managers at a pension fund are extremely interested in knowing the average rate of return of various stocks that they may be thinking about buying.

This chapter focuses on the techniques you use to find the center of a data set. There are several different ways to define the center: the average value, the middle value, the most frequently occurring value, and so on. Three of the most important measures of the center, formally known as measures of central tendency, are the mean, median, and mode.

The mean is the most commonly used measure of the center; it has the advantage of being easy to compute and interpret. In statistics, the word mean is used interchangeably with average. The median and mode ...