FUNCTIONS AND CHARACTERSTICS OF AN AVERAGE - Quantitative Techniques for management

  1. To present huge mass of data in a summarized form: It is very difficult for human mind to grasp a large body of numerical figures. A measure of average is used to summarize such data into a single figure which makes it easier to understand and remember.
  2. To facilitate comparison: Different sets of data can be compared by comparing their averages. For example, the level of wages of workers in two factories can be compared by mean (or average) wages of workers in each of them.
  3. To help in decision-making: Most of the decisions to be taken in research, planning, etc., are based on the average value of certain variables. For example, if the average monthly sales of a company are falling, the sales manager may have to take certain decisions to improve it.

Characteristics of a Good Average

A good measure of average must posses the following characteristics:

  1. It should be rigidly defined, preferably by an algebraic formula, so that different persons obtain the same value for a given set of data
  2. It should be easy to compute.
  3. It should be easy to understand.
  4. It should be based on all the observations.
  5. It should be capable of further algebraic treatment.
  6. It should not be unduly affected by extreme observations.
  7. It should not be much affected by the fluctuations of sampling.

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Quantitative Techniques for management Topics