Question

With the salary distribution for residents being $900 and $548, determine which value is the mean and median, and explain which is which?

** Proposed Answer - Mean (average) $900, Median (middle value) $548. Unsure on how to provide justification for answers.**

Answer 1

The distribution of salaries from a population is generally positively skewed. That means, there will be some values in the distribution that are low in frequency, but are very large in quantity. In case of salary, there will be some individuals with extra ordinarily high salary compared to the general population. These are big company CEOs, businessmen etc, who earn 10s or 100 times more than an individual from general population. When we calculate the mean salary, the inclusion of salaries of high income people, even though the number is low, will cause a large increase in the mean salary. Median is a measure of central tendency that is least affected by the presence of such extreme values (outliers) and will have a lower value compared to the mean. Therefore, here the large value is mean salary and the smaller value is median salary.

Mean = $900

Median = $548