Skip to content

Economics · Ch 10 — Statistics for Economics

Arithmetic Mean — Computation for Individual, Discrete and Continuous Series

7

Arithmetic Mean — Computation for Individual, Discrete and Continuous Series

The arithmetic mean (Xˉ\bar X) is the value obtained by dividing the sum of all observations by their number. Its method of computation depends on how the data is organised.

Individual series (data listed item by item, ungrouped):

  • Direct method:

Xˉ=ΣXN\bar X = \frac{\Sigma X}{N}

  • Short-cut (assumed mean) method — useful when the values are large or inconvenient to add directly. An assumed mean AA is chosen (ideally close to the likely mean), and the deviation d=X−Ad = X - A is found for every item:

Xˉ=A+ΣdN\bar X = A + \frac{\Sigma d}{N}

Discrete series (distinct values XX, each with frequency ff):

  • Direct method:

Xˉ=ΣfXN,where N=Σf\bar X = \frac{\Sigma fX}{N}, \quad \text{where } N=\Sigma f

  • Short-cut method, with d=X−Ad=X-A:

Xˉ=A+ΣfdN\bar X = A + \frac{\Sigma fd}{N}

Continuous (grouped) series (class intervals, each with mid-value mm and frequency ff): the same two formulas apply using the class mid-value in place of XX, and a third, quicker method is commonly used —

  • Step-deviation method. Take an assumed mean AA (usually the mid-value of the class with the highest frequency) and a common class width hh; compute d′=m−Ahd' = \dfrac{m-A}{h} for every class, which reduces the deviations to small whole numbers:

Xˉ=A+Σfd′N×h\bar X = A + \frac{\Sigma fd'}{N} \times h

All three methods, applied correctly to the same data, always give the identical final mean — the short-cut and step-deviation methods only make the arithmetic lighter, they do not change the answer. …

Definition 1Direct Method vs. Short-cut (Assumed Mean) Method

The direct method sums all values (or frequency-weighted values) and divides by N. The short-cut method picks a convenient assumed mean A, sums the deviations of each value from A, and adds the average deviation back to …

Definition 2Step-Deviation Method

Used for a continuous series: deviations of class mid-values from an assumed mean are divided by the common class width h to give small whole-number step-deviations d′, which are then scaled back up by h in the final formula — the fastest of the thr …