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Learning Objectives
Define statistics
Classify numbers by level of data and
understand why doing so is important
Differentiate between

Introduction to Statistics for

Business Decisions

Population and sample

Descriptive and inferential statistics
Parameter and statistic

Lecture 1: Warm-up and Introduction

What is Statistics?
Science of gathering, analyzing,
interpreting, and presenting data
Branch of mathematics
Measurement taken on a sample

Why we need Statistics

To know how to properly present information

To know how to draw conclusions about

populations based on sample information

To know how to improve processes

To know how to obtain reliable forecasts

Statistics is the art and science

of:
Designing studies
Analyzing data
Translating data into knowledge and
understanding of the world

Levels of Data Measurement

Nominal

Lowest level of data measurement

Ordinal
Interval
Ratio

Highest level of data measurement

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Levels of Data Measurement

Levels of Data Measurement

Properties of nominal data + the
order or rank of the data is
meaningful.
A nonnumeric label or a numeric
code may be used.

Nominal

Used to classify or categorize

Nominal

Ordinal

Interval

Ratio

Data are labels or names used to

identify an attribute of the element.
A nonnumeric label or a numeric
code may be used.
Example:
Students of a university are classified by
the school in which they are enrolled in.
Alternatively, a numeric code could be
used for the school variable (e.g. 1
denotes Business, 2 denotes
Humanities, 3 denotes Education)

Nominal

Ordinal

Properties of ordinal data + the interval

between observations is expressed in
terms of a fixed unit of measure.
Relative magnitude of numbers is
meaningful
Differences between numbers are
comparable
Interval data are always numeric.

Distances between consecutive

integers are equal (known)

Interval

Ratio

Example:
Calendar Time
Melissa has an SAT score of 1205, while
Kevin has an SAT score of 1090.
Melissa scored 115 points more than
Kevin.

Interval

Qualitative

Meaningful Operations

Statistical
Methods

Nominal

Classifying and Counting

Nonparametric

Ordinal

All of the above plus Ranking

Nonparametric

Interval

All of the above plus Addition,

Subtraction, Multiplication,
and Division

Parametric

Ratio

All of the above

Parametric

Quantitative

Example:
Taste test ranking of three brands of soft drink
Students of a university are classified by their
class standing using a nonnumeric label such
as Freshman, Sophomore, Junior, or Senior.
Alternatively, a numeric code could be used for
the class standing variable (e.g. 1 denotes
Freshman, 2 denotes Sophomore, and so on).

Ratio

Levels of Data Measurement

Nominal

Ordinal
Interval
Ratio

The data have all the properties of

interval data and the ratio of two
values is meaningful.
This scale must contain a zero
value that indicates that nothing
exists for the variable at the zero
point.
Example:
Height, Weight, and Volume; Monetary
Variables, such as Profit and Loss, Revenues,
and Expenses; Financial ratios, such as P/E
Ratio, Inventory Turnover, and Quick Ratio.

Used to create ratios

Data Measurement Levels

Data Level, Operations,

and Statistical Methods
Data
Level

Numbers are used to indicate

rank or order

Ordinal

Levels of Data Measurement

Ratio/Interval
Measurements
Data
Ordinal
Data

Ranking/
Ordering

Nominal
Data

Categories

Highest Level
Complete Analysis

Higher Level
Mid-level Analysis
Lowest Level
Basic Analysis

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Populations and Samples

Population- the whole
A Population is the set of all items or individuals of interest

Population and Sample

Examples: All likely voters in the next election

All parts produced today
All sales receipts for November
Sample- a portion of the whole
A Sample is a subset of the population
Examples: 1000 voters selected at random for interview
A few parts selected for destructive testing
Every 100th receipt selected for audit

Population & sample (2)

Population & sample

Population

No Pets
Have pets

p = 10/50 = .2 = 20%
Suppose this picture represents the population of people in the entire country.
In this population, a certain percentage (p) of people who have pets. In this
example, 10 people have pets. P is the parameter that measures this view of the
population. It is the value that you would get if you could survey the entire
population. 20% of the people in this population have pets.

Why Sample?

Less time consuming than a census

Less costly to administer than a census

It is possible to obtain statistical results of

a sufficiently high precision based on
samples.

Have pets
No pets

Population

p = 10/50 = .2 = 20%

Sample

P* = 3/10 = .3 = 30%

In real life it is difficult to survey the entire population so we take a sample.

We can then count the number of people in the sample who have pets,
and calculate a statistic (P*) that is an estimate of the value of p.
In this case, P* overestimates the value of the parameter p.

Population and Sample

Sample

Sample

Population
Collect data
Find Parameters

Collect data
Find Statistics

Descriptive Statistics:

Inferential Statistics:

Inference on the
population from census

Inference on the
population from sample

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Parameter vs. Statistic

Descriptive vs. Inferential Statistics

Descriptive Statistics using data

gathered on a group to describe or reach
conclusions about that same group only
Inferential Statistics using sample data
to reach conclusions about the population
from which the sample was taken

Parameter descriptive measure of the

population
Usually represented by Greek letters
: mean

2 : population variance
: population standard deviation
Statistic descriptive measure of a sample
Usually represented by Roman letters

x : sample mean
s 2 : sample variance
s : sample standard deviation

Homework

Process of Inferential Statistics

Population

Calculate X
to estimate

Sample
x
(statistic)

(parameter)

Select a
random sample

1.6 & 1.7