+1 862 207 3288 Example where Geometric Mean is better than Average Mean
Consider two companies to be compared which are rated from 0-5 for their social sensitivity, on a scale of 0-100 for financial viability. If Arithmetic Mean is used here it would give undue weightage to financial viability since arithmetic mean is influenced by extreme values. So even a small percentage change in financial viability (for example coming to 90 from 95) will affect.
Arithmetic Mean is a very high percentage than a considerate change in social sensitivity rating (going from 5 to 1). Geometric Mean ‘normalizes’ the average in such cases such that no undue weightage is given to larger ranges and hence all chances occurring have the same effect on Geometric Mean.
