Economics 6 Marks Question

The merits of arithmetic mean are:
1. Arithmetic mean is based on all the items in a series.
2. Being stable and certain, arithmetic mean can be easily used for comparison.
3. Arithmetic mean can be tested for its accuracy as a representative value of the series.
4. Arithmetic mean is capable of further algebraic treatment. Therefore, it is extensively used in statistical analysis.
5. Of all the averages, arithmetic mean is least affected by sampling fluctuation.
Limitations of Arithmetic mean are as follows:
1. Since Arithmetic average is calculated from all the items of a series, it is unduly affected by extreme values, i.e. very small or very large items.
2. In case of open ended classes, the arithmetic mean cannot be calculated unless assumptions are made regarding the magnitude of class intervals of the open end classes.
3. Arithmetic mean sometimes gives such results which appear almost absurd.
4. Arithmetic mean cannot be computed for qualitative data; like data on intelligence, honesty, smoking habit etc.
5. The arithmetic mean gives more importance to higher items of a series as compared to smaller items.