I have read Why is an average of an average usually incorrect?
What I am trying to understand is what the individual calculations show me. From the question:
$$\frac{n_1}{n_1+n_2+n_3}a_1+\frac{n_2}{n_1+n_2+n_3}a_2+\frac{n_3}{n_1+n_2+n_3}a_3$$
The average of the averages is:
$$\frac{1}{3}a_1 + \frac{1}{3}a_2 + \frac{1}{3}a_3$$
What does the individual number mean?
$$\frac{n_1}{n_1+n_2+n_3}a_1$$
Is this number useful outside of the calculation of the whole? For example, if I have this,
+-----+--------------+-------------+
| avg | total in set | weighted? |
+-----+--------------+-------------+
| 50 | 1500 | 31.91489362 |
| 8 | 700 | 2.382978723 |
| 3 | 150 | 0.191489362 |
| | | |
| 61 | 2350 | 34.4893617 |
+-----+--------------+-------------+
What does 31.91 mean or represent, even though 34.4 is correct?
The term itself is a bit confusing. Rather, we can think of the correct average as
$\frac{n_1a_1+n_2a_2+n_3a_3}{n_1+n_2+n_3}$.
Now, we can ask ourselves what is the term $n_1a_1$? This can be thought of as the entire 'amount' in group 1. So, if we were trying to determine the average wealth and had the wealth from 3 income brackets, with the first being the highest, we could think of $n_1a_1$ as being the total wealth of the people with the highest incomes.