Unformatted text preview: TD-Central Tendency?
From a business perspective, which measurement is more important the Mode, the Mean, or
the Median? Provide examples (business related) that demonstrate the appropriateness of one
of these measures and the inappropriateness of the other two in a particular situation.
Can you think of situations where another one of the measures is more appropriate or
In what I discovered within business statistics, the mean is most prevalent to use in calculating
costs or price. It seems to be the most commonly used measure of central tendency. This is
where we are talking about the average of selected data. The median is used only when seeking
the middle, not the average, of a range of data points. Mode is the most frequently occurring
value in the set of data.
One business example I discovered is the cost analysis of patients within health care trials. A
study was done called "Analysis and interpretation of cost data in randomised controlled trials."
With the continuing development of new treatments and medical technologies, health economic
evaluations have become increasingly important. For cost data, the crucial information is the
arithmetic mean—that is, the simple average cost (the mean). This is because policy makers,
purchasers, and providers need to know the total cost of implementing the treatment. This total
cost is estimated as the arithmetic mean cost in the trial, multiplied by the number of patients to
be treated. Measures other than the arithmetic mean (such as the median, mode, or geometric
mean) cannot provide an estimate of total cost.
Barber, J. A., & Thompson, S. G. (1998, October 31). Analysis and interpretation of cost data in
randomised controlled trials: review of published studies. Retrieved August 7, 211, from British
Medical Journal: http://www.ncbi.nlm.nih.gov/pmc/articles/PMC28702/ ...
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- Spring '11