Merits and Demerits of Geometric Mean.

Merits of Geometric Mean

• It is rigidly defined.
• It is based on all the items.
• It is capable of further algebraic treatment.
• It gives less weight to large items and more to small items.

Demerits of Geometric Mean

• It is difficult to compute.
• It is not easy to understand.
• If there are negative values in the series, it can not be computed.

Example of Suitable Average

• Geometric mean is considered as the best average in the construction of index numbers.
• When large weights are to be given to small items and small weights to large items, geometric mean is very useful.
• It is useful in averaging rates; ratios and percentages.