Based on 2015 data, we construct a frequency distribution of home values in Miam

Question

Based on 2015 data, we construct a frequency distribution of home values in Miami, FL. We find that the distribution is roughly symmetric, and the mean home value is about equal to the median home value. Suppose a new housing development was completed on the edge of Miami last year, and all ten of the new homes have values that are much higher than the values of the existing homes in town. What is the likely impact of these new homes on the frequency distribution of home values? What is the likely impact of this change on the mean and median home value in this community? Please explain the response.

Explanation / Answer

The ten of houses will have values that are much higher that the values of existing homes so they can be considered as outliers of this data.

Hence,

The freqency distribution will become skewed to the right. Also, mean is affected with the presence of extreme values so mean will become larger.

At the same time, median don't get affected much by the extreme values because it represents the middlemost value. So, median would be almost unchanged.

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