St

ati
sti
cs
Handnot
e
 Chapt
erOne

Introduct i
on:While“
businessexperience,”some“ t
houghtf
ulguesswork,
”and
“intuiti
on”ar e key att
ri
butes ofsuccessf ulmanager s,today’
s busi
ness
pr oblemst endtobet oocomplexfort hi
st ypeofdeci si
onmakingalone.One
oft het ool
susedt omakedecisionsi sstati
stics.St
ati
sti
csisusednotonlyby
busi nesspeople;weallal
soapplystatist
icalconceptsinourli
ves.

Stat i
stics:Statist
icshast womeani ngs.Int hemor ecommonusage, statisti
cs
referst onumer i
cali nfor
mat i
on. A col l
ect i
onofnumer i
calinf
ormat i
oni s
calledst atist
ics.Thesubj ectofst ati
sti
cs,hasamuchbr oadermeaningt han
j
ust col lecti
ng and publ ishi
ng numer icali nformation.The sci ence of
collecting,or ganizing,presenting,analyzing,andi nter
pr et
ingdatatoassi st
i
nmaki ngmor eef fecti
vedeci sions.Ast hedef i
niti
onsuggest s,t
hefirststep
i
ni nv esti
gat i
ngapr oblem istocol l
ectrelev antdata.Theymustbeor ganized
i
nsomewayandper hapspr esentedinachar t
.Onlyafterthedatahav ebeen
organi zedar ewet henablet oanalyzeandi nt er
pretthem.

Types ofSt at
ist
ics:The st
udyofst at
ist
ics is usuall
y di
vi
ded i
ntot
wo
categor
ies:
descri
ptiv
estat
ist
icsandi
nfer
entialst
atist
ics.

Descri
pti
veStati
stics:Thedef initi
onofst ati
sti
csgivenearlierref
erredto
“or
ganizi
ng,pr
esenting,anal
yzi
ng...dat a.
”Thisfacetofstat
isti
csisusuall
y
ref
err
ed to as descr i
pti
ve statisti
cs.DESCRI PTIVE STATISTICS means
methodsoforganizing,summar izing,andpresenti
ngdatainani nformati
ve
way.

Infer
enti
al Statist
ics: The second t ype of st ati
sti
cs is infer
ent ial
stati
sti
cs—also cal
led stati
sti
calinference.i
nferent
ialstati
sti
csisf i
nding
somet hi
ngaboutapopul ati
onfrom asampl etakenf rom t
hatpopulation.
i
nf er
enti
alst
ati
sticscanal sobecalledasa“ bestguess”ofapopulat
ionv alue
basedonsampl einformation.I
NFERENTI ALSTATI STICS i
sThemet hods
usedt oest
imateapr opertyofapopul ati
ononthebasi sofasample.

Populat
ionandsample:apopul
ati
onint
hestat
ist
icalsensedoesnotalways
ref
ertopeople.POPULATI
ON isTheenti
resetofi ndi
vidual
sorobjectsof
i
nterestorthemeasurementsobtai
nedfr
om allindivi
dualsorobject
sof
i
nterest
.AndSAMPLEi sapor
ti
on,orpar
t,oft
hepopul
ati
onofi
nterest
.To
i
nfersomet hi
ng aboutapopul
ati
on,weusuall
ytakeasamplef r
om t he
populat
ion.

Ty
pesofVar
iabl
es:Ther
ear
etwobasi
cty
pesofv
ari
abl
es:

(
1)qual
it
ati
veand

(
2)quant
it
ati
ve.

Quali
tati
veVariabl
e:Whent hechar acteri
sti
cbei ngstudi
edisnonnumer ic,i
t
i
s called a quali
tat
ivev ariable oran at tri
bute.Examples ofqual i
tati
ve
vari
ablesaregender,reli
giousaf f
il
iat
ion,typeofautomobi l
eowned,st ateof
bir
th,andeyecolor.Whent hedat aarequal i
tat
ive,weareusuall
yint
erestedin
howmanyorwhatper centfalli
neachcat egory.Forexample,whatpercentof
thepopulat
ionhasbl ueey es?Whatper centofthetotalnumberofcar ssold
l
astmont hwereSUVs?Qual i
tati
vedat aareof t
ensummar i
zedinchar t
sand
bargraphs.

QuantitativeVari
able:Whenthev ari
ablestudi
edcanber epor
tednumeri
cal
ly,
the variableis called a quanti
tati
vev ari
able.Examples ofquant
it
ati
ve
vari
ablesar ethebalanceiny ourcheckingaccount,theagesofcompany
presi
dent s,thelif
eofanaut omobil
ebat t
ery(suchas42mont hs)
,andthe
numberofchi l
dreninafamily.

Quant
it
ati
vev
ari
abl
esar
eei
therdi
scr
eteorcont
inuous.

Discret
eVar i
able:Discr
etev ari
ablescanassumeonl ycert
ainvalues,and
thereare“gaps”betweent hev al
ues.Examplesofdiscret
evari
ablesarethe
numberofbedr oomsi nahouse( 1,2,3,4,
etc.
)Thus,t
hereisa“gap”between
possibl
evalues.Typi
call
y,discr
etev ar
iabl
esresul
tfr
om counti
ng.

ContinuousVariable:Observati
onsofaconti
nuousv ar
iablecanassumeany
valuewi t
hinaspeci fi
cr ange.Examplesofcont
inuousv ari
ablesar
et heair
pressureinat i
reand t heweightofa shipmentoft omat oes.Typical
l
y,
continuousvar
iablesresultf
rom measuri
ng.

Levels ofMeasur ement :Data can be classif

ied accor di
ng tol evels of
measurement . The l evelof measur ement of t he data dictates t he
calcul
ationsthatcanbedonet osummar i
zeandpr esentthedata.Itwillalso
determi
net hest at
ist
icalteststhatshouldbeper f
ormed.Ther eareact uall
y
fourlevelsofmeasur ement :nominal
,ordinal
,interval,andrati
o.Thel owest ,
orthemostpri
mit
ive,measur
ementisthenominall
evel
.Thehighest,orthe
l
evelthatgi
vesusthemosti nf
ormat
ionabouttheobserv
ati
on,isther ati
o
l
evelofmeasur
ement.

Nomi nal
-LevelDat a:Fort
henomi
nall
evelofmeasur
ement,obser
vat
ionsofa
quali
tati
vevariablecanonlybecl
assi
fi
edandcounted.Ther
eisnopar t
icul
ar
ordertothelabels.

Or
dinal-
LevelData:Thenexthigherl
evelofdatai
st heordi
nall
evel
.the
or
dinalscaledet
erminestheorderortheranksofdata.I
nsummar y
,the
pr
operti
esoftheordi
nall
evel
ofdataar
e:

1.Dat
aclassi
fi
cat
ionsarerepr
esentedbyset
sofl
abel
sornames(
high,
medi
um,l
ow)thathaver
elat
ivev
alues.

2.Becauseoft
her
elat
ivev
alues,
thedat
acl
assi
fi
edcanber
ankedoror
der
ed.

I
nterval-
LevelDat
a:Theint
erval
level
ofmeasurementisthenexthi
ghestl
evel
.
I
tincludesal lt
hecharacter
ist
icsoftheordinall
evel,butinaddit
ion,t
he
di
fferencebetweenval
uesi saconstantsi
ze.Thepropert
iesoftheint
erv
al-
l
eveldataare:

1.Data classif
icat
ions ar
e or
der
ed accor
ding t
othe amount of t
he
char
act
eri
stictheypossess.

2.Equaldi
ff
erencesinthechar
act
eri
sti
car
erepr
esent
edbyequaldi
ff
erences
i
nthemeasur ements.

Ratio-LevelDat a:Pr acticall

yal lquantit
ativ
edat aisr ecordedont herati
olev el
ofmeasur ement .Ther atiolev eli
st he“highest ”levelofmeasur ement .I
thas
allthechar acter i
sticsoft hei nter
v allevel,buti naddi t
ion,the0poi nti s
meani ngfulandt her ati
obet weent wonumber si smeani ngf
ul.Examplesof
ther ati
oscal eofmeasur ementi ncludewages,uni tsofpr oducti
on,wei ght,
changesi nst ockpr i
ces,di stancebet weenbr anchof f
ices,andheight.Money
i
sagoodi l
l
ust ration.Ify ouhav ezer odollars,theny ouhav enomoney .the
propertiesoft her ati
o- l
eveldat aare:

1.Data classi
fi
cat
ions are or
der
ed accor
ding t
othe amount of t
he
char
act
eri
sticst
heypossess.

2.Equaldi
ff
erencesi
nthechar
acteri
sticarerepr
esent
edbyequaldi
ff
erences
i
nthenumber sassi
gnedt
otheclassi
ficat
ions.

3.Thezer
opointi
stheabsenceoft
hechar
act
eri
sti
candt
her
ati
obet
ween
twonumbersi
smeani
ngf
ul.
 Chapt
er2

FREQUENCYTABLEA groupi
ngofqualit
ati
vedat
aintomut
ual
l
yexcl
usi
ve
cl
assesshowi
ngt
henumberofobser
vat
ionsi
neachcl
ass.

BARCHARTAgr aphthatshowsquali
tati
vecl
assesont
hehor
izont
alaxi
sand
the cl
ass f
requenci
es on the ver
ticalaxi
s.The cl
ass f
requenci
es ar
e
propor
ti
onal
totheheightsofthebar
s.

PIECHARTAchartthatshowsthepropor
ti
onorper
cent
aget
hateachcl
ass
repr
esent
soft
het
otalnumberoffr
equenci
es.

FREQUENCY DISTRI
BUTION A groupi
ng ofdatainto mut
ual
l
y excl
usi
ve
cl
assesshowi
ngthenumberofobser
vat
ionsi
neachclass.

Classes(K)
:Ausefulr
eci
petodeterminet
henumberofclasses(
k)isthe“2to
thekr ul
e.”Thi
sguidesuggestsyouselectthesmal
lestnumber(k)forthe
numberofcl assessuchthat2k( i
nwor ds,2rai
sedtot hepowerofk)i s
greatert
hanthenumberofobserv
ations(
n).

2K>/
=tot
alnumberofobser
vat
ion

Determinet heclassint
ervalorclasswi dt
h:General
lytheclassintervalor
classwi dthisthesamef oral
lcl
asses.Thecl assesal
ltakentogethermust
cov eratleastt
hedist
ancefrom t
hel owestval
ueinthedataupt othehighest
value.Expressi
ngthesewordsinaf ormul
a:

whereii
stheclassi
nter
val
,Histhehighestobser
vedv
alue,Li
sthel
owest
obser
vedval
ue,
andkisthenumberofclasses.
 Chapt
er-3

Popul
ati
onMean:thepopulat
ionmeanisthesum ofallt
hev
aluesi
nthe
popul
ati
ondi
vi
dedbythenumberofv
aluesi
nthepopul
ati
on.

Al
sopr
esent
edby
:

wher
e:

r
epr
esent
sthepopul
ati
onmean.I
tist
heGr
eekl
ower
casel
ett
er“
mu.
”

Ni
sthenumberofv
aluesi
nthepopul
ati
on.

Xr
epr
esent
sanypar
ti
cul
arv
alue.

∑i
stheGr
eekcapi
tal
let
ter“
sigma”andi
ndi
cat
est
heoper
ati
onofaddi
ng.

∑Xi
sthesum oft
heXv
aluesi
nthepopul
ati
on.

Par
amet
er:Any measurabl
e char
acter
ist
ic ofa popul
ati
on i
s cal
l
ed a
par
amet
er.Themeanofapopul
ati
onisanexampleofapar
ameter
.

SampleMean:weof t
enselectasamplefrom thepopulat
iontoest
imatea
specif
icchar
act
erist
icofthepopulat
ion.Forraw data—thati
s,ungrouped
data—themeani sthesum ofallthesampledv al
uesdi vi
dedbythet otal
numberofsampledvalues.
Al
sopr
esent
edas:

wher
e:

r
epr
esent
sthesampl
emean.I
tisr
ead“
Xbar
.”

Ni
sthenumberofv
aluesi
nthesampl
e.

Xr
epr
esent
sanypar
ti
cul
arv
alue.

∑i
stheGr
eekcapi
tal
let
ter“
sigma”andi
ndi
cat
est
heoper
ati
onofaddi
ng.

∑Xi
sthesum oft
heXv
aluesi
nthesampl
e.

MEDIAN:Medi
anisthemidpoi
ntoftheval
uesaft
ert
heyhavebeenor
der
ed
f
rom t
hesmall
estt
othel
argest
,ort
helar
gestt
othesmal
lest
.

MODE:Modei
sthev
alueoft
heobser
vat
iont
hatappear
smostf
requent
ly.

TheGeomet r
icMean:Thegeomet ri
cmeani susefuli
nf i
ndingtheav er
age
change ofper cent
ages,rat
ios,i
ndexes,orgrowthr at
es overt i
me.The
geometricmeanofasetofNposi t
ivenumbersisdefi
nedast henthrootof
theproductofnv al
ues.Thef
ormul
aforthegeometr
icmeani swrit
ten:

Asecondappl
i
cat
ionofthegeomet
ri
cmeanistofindanaver
agepercent
age
changeov
eraper
iodoft
ime.For
mulaofAv
eragepercent
agei
ncr
ease:
Range:Thesimplestmeasur
eofdisper
sionist
herange.I
tist
hedi
ff
erence
bet
weent hel
argestandt
hesmal
lestval
uesinadat
aset.

MEAN DEVIATI
ON:MeanDev i
ati
onisthear
it
hmeti
cmeanoft
heabsol
ute
val
uesoft
hedeviat
ionsf
rom t
hearit
hmeti
cmean.

VARIANCE:Var
iancei
shear
it
hmet
icmeanoft
hesquar
eddev
iat
ionsf
rom
themean.
STANDARDDEVI
ATI
ON:
Standar
dDev
iat
ioni
sthesquar
erootoft
hev
ari
ance

Sampl
eVar
ianceFor
mul
a:

Sampl
eSt
andar
dDev
iat
ionFor
mul
a: