Question

Which measure of central tendency (mean, median or mode) is most appropriate for income data and why? Give a clear explanation for your decision.

Answer 1

The median is the most appropriate measure for income data.

Explanation:

Looking at income for households/individuals, we know that the majority of people are part of the middle class or lower, meaning income amounts of most people range from almost nothing to a decent, comfortable wage. However, there exist extremely wealthy individuals that make millions and billions of money, but the percentage of these people is small.

Even though there aren't a lot of millionaires in the world, their huge income pulls the mean income up, making the mean a statistic that is not resistant to outliers. However, the median isn't affected by a small numbers of high (or low) outliers, so the median would give a better measure of central tendency for income data.