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statistics

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- Maestro
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MBA612;

On campus

Those topics are found in Business Statistics: A Decision-Making Approach

I will only review those that have the double star.

Please be familiar with all the topics.

Topic

Chapter(s)

Instructor

Data Collection

1

Describing Your Data, Graphs, Tables, Charts

2

Numerical Measures

3

Measures of Central Tendency, **

3

Variation and Shape

3

Population Measures

Mean **

3

Variance, Standard Deviation **

3

Sample measurements (statistics)

Sample Mean **

3

Sample variance, and sample standard deviation**

3

Basic Probability

4

Discrete Probability Distributions

5

Mean, Standard deviation & Variance of a

Discrete Random Variable **

5

Binomial Distribution**

5

The Continuous Distributions **

Normal Distribution **

Normal Approximation to the Binomial **

Sampling Distributions for the mean and proportion **

instructor, 6

6

instructor

7

Lecture 1

Four Rules of Summation

1)

2)

3)

4)

5)

Xi

5Xi

20

18

22

25

15

100

90

110

125

75

500

X

i=1

= 100

5Xi = 500, The above approach uses case by case method. That is, for each value

of I, the value of 5xi is found and then these values are summed.

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On campus

Rule #1

n

K

i=1

Xi= K X

i=1

out of the expression.

Rule #2

(Xi + Yi)

(Xi + Yi) = Xi + Yi

Xi

20

18

22

25

15

100

1)

2)

3)

4)

5)

Yi

2

1

0

2

1

6

Xi + Y i

22

19

22

27

16

106

Here, again, we have found the value of the expression case by case then summed.

Also, (Xi + Yi) = Xi + Yi = 100 + 6 = 106 Here we have simplified the expression

and found the same answer.

Rule #3

n

K =nk

i=1

Rule #4

n

X

i=1

1)

2)

Yi

Xi

20

18

Yi

2

1

XiYi

40

18

2

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MBA612;

On campus

3)

4)

5)

0

2

1

6

22

25

15

100

0

50

15

123

n

X

i=1

Yi (Xi) (Yi)

123 100 x 6

That is, one cannot find the value of the quantity on the left hand side of the

expression by using the expression on the right hand side and visa versa.

The following is a formula for sample variance. As one moves from the first formula

to the second formula, one uses all the rules of summation.

S2 = (Xi

X )2

(n-1)

S2 = n Xi2 ( Xi)2

n (n 1)

Statistics

X

= Xi

n

E ( X ) = , This means, the expected value of the sample mean is the population

mean.

Parameter

Definition of Parameter is the average value of all X

This formula is used when you have all the data and not a sample of data.

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MBA612;

On campus

xi

i=1

N

= E (X) is again defined as the population average value of x.

= /

population mean. The standard deviation of sample means is called the standard

error. More about this later. Note the picture above.

r

An example, Calculate

i/j

1)

2)

3)

4)

5)

20

22

18

25

15

100

30

32

28

35

25

150

X ij

j=1 i=1

X ij

X

i=1

j=1 i=1

i1

X

i=1

i2

(X11 + X21 + X31 + X41 + X51) + (X12 + X22 + X32 + X42 + X52)

20 + 22 + 18+ 25 + 15 + 30 + 32 + 28 + 35 + 25

100 + 150 =250

Lamb

MBA612;

On campus

Mean

Mode

Median

= X/n

value that is in the middle once you arrange them in order

5

8

12

average of these two

16

30

3,000,000

Position of the median

2

n+1

The median is not affected by extreme values; however the mean is affected by

extreme values

Mode

Median

Mean

The mean is affected by extreme values. Assume that in this example the data is

nonsymmetrical and skewed to the right.

Variance

A statistic is always from a sample.

Lamb

MBA612;

On campus

n

Statistic

s2 =

( X i X )2

/(n-1)

i=1

xi

i=1

2 =

Parameter

i=1

/N

2 = E (X - )2

Definition of Parameter

Standard Deviation

( X i)2

This is the picture of a variable that is normally distributed with mean , and

standard deviation .

Note, picture should be symmetrical about

the curve at which the

shape of the curve changes from concave to convex.

Student heights with

= 57 and

= 4 inches

53 61

If heights are normally distributed, then about two-thirds of the students will fall

within this range. Recall that 2/3 of the observations fall within one standard

deviation of the mean, if the variable is normally distributed.

This is the picture of the distribution of sample means, they are normally distributed

about , with standard deviation /

Sample Means are normally distributed. Again, the curve should be symmetrical

(sorry, I flunked art)

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MBA612;

On campus

X = /

mean

A larger size sample used to obtain the sample mean will tend to get the sample

means closer to

Area under the curve equals 1

number of values.

Balanced Die

Roll

you get

X

P (x)

1, 2

$10 2/6

3, 4, 5

$20 3/6

6

$100 1/6

Average winnings per roll

= E(x)

To find the mean of a discrete random variable use the following formula

= E(X) = Xi P(Xi)

Play the game 6 times. What game? Rolling a balanced die.

= E(x) = Xi P(xi)

X

p(X)

X#

X P(x)

1, 2

$10 2/6

20

20/6

3, 4, 5

$20 3/6

60

60/6

6

$100 1/6

100 100/6

180

180/6

180/6 = $30 average winnings (Mean)

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MBA612;

On campus

To find the variance of a discrete random variable, use the following formula.

2 = E(X - )2 = (X - )2 P(Xi)

X

P(X) (Xi - )2

(Xi - )2 P(Xi)

1, 2

$10 2/6

400

800/6

3, 4, 5

$20 3/6

100

300/6

6

$100 1/6

4,900

4900/6

6,000/6

2 = 1000

= $31.62

If we were to play the game 16 times the average winnings per roll would be $30,

and the standard deviation of that mean would be

X = /

= 31.62/4 = 7

= /

30

Binomial Distribution

1) Successive independent trials with only 2 outcomes per trial

Yes

or

No

Heads or

Tails

Buy

or

Not Buy

Probability of success remains constant throughout experiment

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MBA612;

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Random variable

If distribution follows a binomial then this is the formula

n!

(n x)! x!

pxqn- x

n = # of trials

P = probability of success on any single trail

q = (1 P)

X = specific # of successes

For Example

n = 5, this is the number of trials

P = 2/6 =1/3

X=2

5! (1/3)2 (2/3)2

3! 2!

10 x 1/9 x 8/27

80/243

= Xi P(Xi)

Shortcut for mean

= np

(number of trials x probability of success)

Variance shortcut for a binomial

2 = npq

5 2/6 4/6 =

In order for us to recognize that a problem can be modeled by the binomial

theorem, we must have n independent trials with only 2 relevant outcomes per

trial. It is also the case that the binomial distribution becomes normally distributed

if certain conditions are met np> 5 and nq>5. In the following example the

conditions for the normal distribution would be met.

170

200 230

n= 400

P=

And therefore np=200 (the mean)

The variance is equal to npq or

400 = 100, and the standard

Deviation would equal , = 10, = 100

10

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MBA612;

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170

Rarely will you be outside the range 170 230

200

230

Discrete Distribution

X

0

1

2

3

4

P(X)

1/16

4/16

6/16

4/16

1/16

For a formula to be a discrete probability distribution, the probabilities calculated

have to be between 0 and 1 and the sum of the values has to be 1.

P(Xi) = 1

Minimum sum of two dice = 2

Maximum sum of two dice = 12

P(x) = 6 7 x

36

P(2) = 1/36

Where 2, 3, 4, 12

1

2

3

4

5

6

X

2

3

p(x)

1/36

2/36

10

Lamb

MBA612;

4

5

6

7

8

9

10

11

12

On campus

3/36

4/36

5/36

6/36

5/36

4/36

3/36

2/36

1/36

Green/Red

1

1

2

2

3

3

4

4

5

5

6

6

7

2

3

4

5

3

4

5

6

4

5

6

7

5

6

7

8

6

7

8

9

7

8

9

10

8

9

10

11

6

7

8

9

10

11

12

Normal Distribution

(X - )2

103

F(x) =

12

90

e- 2

(x-)2/2

(x - ) is squared whether or not the deviation is positive or negative doesnt matter.

determines the central location.

Area subscribed = 1

= 100

= 10

Find the area between 90 and 103

X

N (, ) change into a z statistic

Z

N (0,1)

Z transformation (Z scores)

11

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On campus

Z is the number of standard deviation that an observation is away from its mean.

Z=

.3413

.1179

.0228

90

100 103

-1

.3

Prove that the z = 0

Z is defined as = X - x

x

z = E (x-x) = E (x) - x = x - x = 0

x

x

x

Variance of Z

22 = E(z-z)2

= E(z2)

=E

=

X i 2

(

)

E ( X i )2 / 2

x2

= E(x - x)2

x2

= x2

x2

=1

Central Limit Theorem Sample means are normally distributed. A small sample used to

obtain means will generate sample means that are normally distributed, then if the distribution of

the original variable is non symmetric, a larger size sample to gather the means will be necessary

before the distribution of sample means become normal.

An Exercise to demonstrate the Central Limit Theorem:

X

P(X)

(X - x) 2P(Xi)

P(

)

12

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1

3

5

On campus

1/3

1/3

1/3

4/3

0

4/3

3/9

2/9

= (XiP(Xi)) = 3

2= E(X-x)2 = (X - x)2P(Xi) = 8/3

1/9

Sample Size 2

X

1 2

3 4 5

Notice that with a sample size of only two, the distribution of sample means can be

approximated by the normal distribution. That is to say, sample means quickly take on the shape

of the normal even when the sample size is very small. Notice, however, that the original

distribution of the variable was symmetrical. If the underlying distribution is highly skewed, then

it would take a much larger sample size for the distribution of sample means to become normal.

X

1, 1

1, 3

1, 5

3, 1

3, 3

1

2

3

2

3

1

2

3

4

5

3, 5

5, 1

5, 3

5, 5

4

3

4

5

X

X

E(

E(

- )2 P(

=(

= (8/3)/2 = 4/3

X

(P )

1/9

4/9

9/9

8/9

5/9

- )2

4

1

0

1

4

=3

X

P( )

1/9

2/9

3/9

2/9

1/9

- )2P(

4/9

2/9

0

2/9

4/9

X

= 4/3

) = (XiP(Xi)) =

( X i P ( X i ) )

X

may take on will increase.

=

X

P(

)=

13

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MBA612;

On campus

2 / n or

x

X

=

x/n

Problem #1

X

+ 6Yi)

i=1

Work

a.) case by case

b.) simplify

Xi

Yi

1) 20

2

2) 18

1

3) 22

0

4) 25

2

5) 15

1

100 6

Problem #2

(Xi 20)

Work

a.) case by case

b.) simplify

14

Lamb

MBA612;

1)

2)

3)

4)

5)

On campus

Xi

20

18

22

25

15

100

Yi

2

1

0

2

1

6

Problem #3

(3XiYi 4Xi)

Work

a.) case by case

b.) simplify

1)

2)

3)

4)

5)

Xi

20

18

22

25

15

100

Yi

2

1

0

2

1

6

Problem #4

Prove. Using the rules of summation that :

n

(x ix )2

i=1

(n1)

={n

x

i=1

2

i

xi

i=1

)2}/n(n-1)

Problem #5

Find s2 using both formulas and the data below. You should get the same answer for

each.

Formula #1

15

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MBA612;

On campus

S2 = (Xi -

X )2

n-1

Formula #2

S2 = nXi2 (Xi)2

n(n 1)

30

30

10

15

25

Problem #6

Flip a coin 4 times. Xi = the number of heads

H

T

Xi

0

1

2

3

H

T

H

T

P(Xi)

1/16

4/16

6/16

4/16

16

Lamb

MBA612;

4

On campus

1/16

Find

= Xi P(Xi)

Find Variance

2 = (Xi

)2 P(Xi)

Problem #7

Binomial Distribution,

a) Determine the following probabilities for all possible values of x, given n=5, p

=1/3, q=2/3.

b) Then find the mean using = Xi P(Xi)

c) Then find the variance using 2 = (Xi

)2 P(Xi)

d) Use the shortcut formula for the mean of a binomial = np, and compare

your answer to the answer found in b.

e) Use the shortcut formula for the variance of a binomial 2 = npq, and

compare your answer to the answer found in c.

X

0

1

2

3

4

5

P(X)

80/243

Problem #8

Redo the exercise that I did in class to demonstrate Central Limit

Theorem, using a sample size of 3 instead of 2.

B) Find the population mean, and the variance, and standard

deviation of the variable.

C) Find and list all possible samples of size three, and calculate

each mean for that sample as was done above for a sample of

size two.

17

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E) Also find the Variance of those means, sample of size 3, Using

2

( X )2P( X )

2X

2x

n

Part A

1) Page 110-111. These problems emphasize the concept of

variance (population as well as sample). Problem #s are.

27,28 and 30

2) Page 187. Discrete random variables. Do problems 2,6 and 7

3) Page 200-201. Binomial distribution. Do problems 22, 23, 33

and 34.

4) Page 237. Normal distribution. Do problems 11, 13, 14 and 15.

5) Page 277. The Standard Error of the mean. Do problems 26, 29,

and 30.

6) Page 285. The standard error of the Proportion. This may be

new material for you. Do problems 48 and 50.

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