An average can describe different populations. Averaging two listed prices is not the same as averaging the price paid across all items sold. Identify what receives one unit of weight.
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Use totals for the item-level average
A fictional shop sells 100 items at 10 currency units each and 10 items at 20 each. Revenue is 1000 + 200 = 1200 from 110 items.
The average price per item is 1200/110, approximately 10.91. The unweighted mean of 10 and 20 is 15, but it gives the two price categories equal weight rather than weighting each item equally.
Explain the weighted calculation
The weights are 100/110 and 10/110, which sum to one. Multiplying each price by its item share produces the same 10.91 result.
The answer lies closer to 10 because many more items were sold at that price. A result outside 10 to 20 would signal an error under these assumptions.
Read real averages carefully
Check the unit, population and period behind a reported average. Revenue weights, unit weights and equal category weights answer different questions.
This fictional calculation is general public learning material, not investment advice, client analysis or a competition submission. Wharton participants should follow official rules and their school advisor's permitted role and produce their own work.
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