Differences between the mean, median, and mode - Managerial Economics

Differences between the mean, median, and mode reflect skewness.

In addition to knowing the “typical” value for a given sample of data, it is important to know the degree to which individual observations vary around this level. Are the data tightly clustered around the typical value, or are the data widely dispersed? If the data is tightly clustered about the typical level, then measures of central tendency provide a close approximation to individual values drawn from the sample. If the data are widely dispersed around typical values, then measures of central tendency offer only a poor approximation to individual values that might be drawn from the sample. As in the case of measures of central tendency, statisticians have constructed several useful measures of such dispersion. In general, measures of dispersion describe variation in the data in terms of the distance between selected observations or in terms of the average deviation among sample observations. Managers often focus on the range, variance and standard deviation, and coefficient of variation. Which among these is most appropriate for a given task depends on the nature of the underlying data and the need being addressed by the manager.

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