Average vs Weighted Average

The ‘average’ and the ‘weighted average’ of a certain number set of components have the same sense of arriving at an outcome. These terms can be used in mathematics, statistics, in the field of finance and in business. However, there are certain confusions that stir up between these two terms. Moreover, encountering the words ‘average’ and ‘weighted average’ for the first time are quite intimidating. But knowing these terms will definitely give you an edge in mathematics and in business. .

To understand average and weighted average, they must be defined in a mathematical way and in the business aspect way. With this, it will be easier to understand when to use these terms and how they must be used.

When average is used as a mathematical term, it is finding the middle value of the data set. It is also called the central tendency, because it is used to find the central tendency of a certain group of data. Methods of statistics are usually the medium in finding the central tendency of a certain data group. The average value is simply the representation of the entire data set. If the number is in a certain data set, then that number is the average of that set. If ever the number in a certain data set is not the same, then the numbers must be gathered and computed to come up with just one number to represent them all. The method that is used the most is the arithmetic mean. Another method in find the central tendency is the median. This is used when the numbers in a distribution set vary greatly, then the median must be figured out by using certain formulas.

Weighted average on the other hand is used in many different fields, but it is used most especially in the field of accounting. It is normally used in fields where mathematical evaluations and analysis is needed. The main purpose of weighted average is to put value or weight on certain components so that you will be able to come up with the right solution with the problem that you are solving. Assigning a common mean value to each component is not the same as how the weighted average must be used. When it comes to the financial aspect, the weighted average is the average value of the principal repayments of a certain bond or loan until the principal value is paid.

SUMMARY:

1.

Average is used in mathematical equations, while the weighed average is applied in the daily activities of a persons life, like finance.
2.

Average is the main representation of a data set, while weighted average needs to be evaluated first to arrive at a certain solution to a certain problem.
3.

You can solve the average of a data set by using arithmetic formulas like finding the median, while in weighted average, components are given weight of value to arrive in a certain answer.

Sharing is caring!