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For the present time, we‟ll proceed to describe one of each of the above descriptive statistics.
The rest will be discussed in later sections.
Since we‟re most used to finding a simple average, or the mean, we will do that here. Recall, that
the mean can be found by summing the observations and dividing by the number of
observations:
Recall that when we find an average, we are placing all values into a common “pot.” We then
divide the pot into equal parts. That is to say, if each company had spent the same amount of
money on each purchase, they would each spend $5,750. We like to think of this as a measure of
the center value. Spending less than this amount puts a company below the average and spending
more puts the company above the average.
Mean (Simple Average)
The mean, or simple average, of a quantitative variable is expressed as:
This value represents the amount allocated to each observation, if each observation were to
receive an equal share of the total. We think of this as the “center” value.
In conjunction with measures that summarize the center, it is critical to focus also on how spread
out the data is. One such measure is the range. The range is simply the difference between the
minimum and maximum values in the dataset. In this instance, we have:
Minimum: $2,230
Maximimum: $9,590
The difference is:
Thus, the range of the dataset is $7,360. This tells us that the amount spent varied by as much as
$7,360 from company-to-company.
Range
Range, a measure of the variability (or spread) of a dataset, is measured by taking the difference
between the largest and smallest observed value. That is,
Statistics for Decision-Making in Business © Milos Podmanik Page 15