The percent increase in sales for the last four years at Amira Busana Muslim shop were: 4.91, 5.75, 8.12 and 21.60.
a. Calculate the geometric mean percent increase.
b. Calculate the arithmetic mean percent increase.
c. Based on (a) and (b), what is the relationship between geometric mean and arithmetic mean?
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a. To calculate the geometric mean percent increase, we multiply all the percent increases and take the fourth root:
Geometric mean percent increase = (1 + 4.91/100) * (1 + 5.75/100) * (1 + 8.12/100) * (1 + 21.60/100)^(1/4) = 1.223
b. To calculate the arithmetic mean percent increase, we sum all the percent increases and divide by 4:
Arithmetic mean percent increase = (4.91 + 5.75 + 8.12 + 21.60)/4 = 10.37
c. The geometric mean percent increase is lower than the arithmetic mean percent increase. This indicates that the individual percent increases have a compounding effect, resulting in a higher overall percent increase.
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