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Income distribution: The difference between mean and median

Income distribution: The difference between mean and median

From the course: Business Math

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Income distribution: The difference between mean and median

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- Recall that to compute an average, you take all the values, add them up and then divide by the number of values. So let's practice computing an average. Here are five famous people. Let's compute their average height in inches. The sum of their heights is 358 inches, divide that by five to get an average height of 71.6 inches which is just a shade less than an even six feet tall. Hmmm, this average seems a little misleading. Four of the five people are nowhere near six feet tall. The tallest of these four, Meg Ryan, is just five feet eight inches. The reason the average in this case is misleading is because we have one very tall observation, Yao Ming, a famous Chinese basketball player at seven feet six inches, who pulls the average up for everyone. The distribution of heights for these five people is called a skewed distribution. An extreme observation is pulling the mean up. A distribution can also be skewed downward, if for example we included the height of Princess Charlotte of…

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