How to Calculate Weighted Average

The weighted average is used in statistical calculations

When you need to average data, sometimes a collection of values will vary significantly in their distribution. So instead of using a simple average formula for the terms, you can use the weighted average method. This more adequately represents the dispersion of values where the frequency of the values is different.

Instructions

1. Organize your data. Suppose you want to calculate the average of household income in a neighborhood. You find that three households make $90,000 per year and 40 households make $40,000 per year. Put the numbers in a chart. Label the first column "Variable (n) - households" and the second column "Value (N) - Income." In the first row under those labels, write "3" and "$90,000." In the second row, write "40" and then "$40,000."

2. Apply the basic formula for calculating weighted average:

   Weighted Average = [(n1 x N1) + (n2 x N2)] / (n1 + n2).

   For the example, [(3 x $90,000) + (40 x $40,000)] / (40 + 3) = $43,488. This may be viewed as more meaningful than a simple average of the two income levels, which would equal $65,000. The weighted average more accurately shows the vast majority of households earn $40,000 per year while taking into account the few households that make $90,000.

3. Use the weighted average as a statistical tool for any set of variables and values.

References

• OnlineMathLearning.com: Weighted Average Problems