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Basic Concepts of Statistics
Basic Concepts of Statistics
Introduction
Decision makers make better decisions when they use all available information in an effective and meaningful way. The primary role of statistics is to to provide decision makers with methods for obtaining and analyzing information to help make these decisions. Statistics is used to answer long-range planning questions, such as when and where to locate facilities to handle future sales.
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Definition
Statistics
is defined as the science of collecting, organizing, presenting, analyzing and interpreting numerical data for the purpose of assisting in making a more effective decision.
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Applications in Management
Accounting Public accounting firms use statistical sampling procedures when conducting audits for their clients.
Economics Economists use statistical information in making forecasts about the future of the economy or some aspect of it.
Applications in Management
Marketing Electronic point-of-sale scanners at retail checkout counters are used to collect data for a variety of marketing research applications.
Production A variety of statistical quality control charts are used to monitor the output of a production process.
Types of Statistics
There are two types of statistics 1. Descriptive Statistics is concerned with summary calculations, graphs, charts and tables.
2. Inferential Statistics is a method used to generalize from a sample to a population. For example, the average income of all families (the population) in India can be estimated from figures obtained from a few hundred (the sample) families.
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Statistical Population
A
Population is a collection of all distinct individuals or objects or items under study. The number of entities in a population, Called the Population Size, is denoted by N A descriptive measure of a population is called a Parameter
Sample
A
Sample is a part of a population and the sample size is denoted by n. A sample should be a representative of the population.
descriptive measure of a population is called a Statistic
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Data are the facts and figures collected, summarized, analyzed, and interpreted.
The data collected in a particular study are referred to as the data set.
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Stock Exchange NQ N N NQ N
Scales of Measurement
Scales of measurement include:
Nominal Ordinal Interval Ratio
The scale indicates the data summarization and statistical analyses that are most appropriate.
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Scales of Measurement
Nominal
Data are labels or names used to identify an attribute of the element. A nonnumeric label or numeric code may be used.
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Scales of Measurement
Nominal
Example: Students of a university are classified by the school in which they are enrolled using a nonnumeric label such as Business, Humanities, Education, and so on.
Alternatively, a numeric code could be used for the school variable (e.g. 1 denotes Business, 2 denotes Humanities, 3 denotes Education, and so on).
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Scales of Measurement
Ordinal
The data have the properties of nominal data and the order or rank of the data is meaningful. A nonnumeric label or numeric code may be used.
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Scales of Measurement
Ordinal
Example: Students of a university are classified by their class standing using a nonnumeric label such as Freshman, Junior, or Senior. Alternatively, a numeric code could be used for the class standing variable (e.g. 1 denotes Freshman, 2 denotes Juniors and so on).
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Scales of Measurement
Interval
The data have the properties of ordinal data, and the interval between observations is expressed in terms of a fixed unit of measure.
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Scales of Measurement
Interval
Example: Shruti has an MAT score of 605, while Raj has an MAT score of 655. Raj scored 50 points more than Shruti.
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Scales of Measurement
Ratio
The data have all the properties of interval data and the ratio of two values is meaningful. Variables such as distance, height, weight, and time use the ratio scale. This scale must contain a zero value that indicates that nothing exists for the variable at the zero point.
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Scales of Measurement
Ratio
Example: Rajs college record shows 36 credit hours earned, while Kevins record shows 72 credit hours earned. Kevin has twice as many credit hours earned as Rajs.
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In general, there are more alternatives for statistical analysis when the data are quantitative.
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Qualitative Data
Labels or names used to identify an attribute of each element Often referred to as categorical data Use either the nominal or ordinal scale of measurement
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Quantitative Data
Quantitative data indicate how many or how much:
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Scales of Measurement
Data
Qualitative Quantitative
Numerical
Non-numerical
Numerical
Nominal
Ordinal
Nominal
Ordinal
Interval
Ratio
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Cross-Sectional Data
Cross-sectional data are collected at the same or approximately the same point in time. Example: data detailing the number of building permits issued in June 2007 in each of the Districts of UP
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Data Sources
Existing Sources
Within a firm almost any department Business database services Dow Jones & Co. Government agencies - Department of Labor
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Descriptive Statistics
Descriptive statistics are the tabular, graphical, and numerical methods used to summarize and present data.
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Frequency
12 10 8 6 4 2
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Statistical Inference
Population
- the set of all elements of interest in a particular study
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1. Population
2. A sample of 50
engine tune-ups is examined.
3. The sample data provide a sample average parts cost of $79 per tune-up.
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Statistical analysis typically involves working with large amounts of data. Computer software is typically used to conduct the analysis. Instructions are provided in chapter appendices for carrying out many of the statistical procedures using Minitab and Excel.
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