Now let us discuss the major objectives of computing averages. The following are the main objectives:
1) To supply one single value that describes the characteristics of the entire data: An average reduces the complex mass of data into a single representative value which enables us to grasp the salient features of data, without getting lost in its details. Thousands or lakhs of values can be, thus, represented by a single value. For example, it is almost impossible to remember monthly salary of each and every worker of a big factory. But if the average salary is obtained by dividing the total pay bill of all the workers by the number of workers, it enables us to know, on an average, how much the worker is getting.
2) To facilitate comparison: It is not easy to compare the two sets of huge raw data. But the two different data sets could be easily compared by working out their averages. Comparison can be made either at a point of time or over a period of time. For example, the current year sales of two business firms A and B can be compared by comparing their average sales. The current year sale of a unit can be compared with its own sales in the previous year by working out the average sale during the previous year and the current year's average. It is important to note that the same measure of average should be used for comparing the average of two data sets, the same method of computation should be followed. For example, comparing the mean income of the people of one locality with the median income of the people of another locality is not reasonable.
3) To facilitate statistical inference: To draw inferences about the unknown measures or ‘parameters’ of the population, we depend on values calculated from sample. This process is known as statistical inference. An average obtained from a sample is helpful in estimating the average of the population.
4) To help the decision-making process: The averages are computed to help the, managers in decision-making. The managers are often interested in knowing normal output of a plant, representative sales volume, overall productivity index, price index, etc. These all are the connotations of an average.
