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Principles of Statistics and

Statistics for Business and
Economics

Lecturer: MSc. Le Thu Hang

Faculty of Business and Administration
Foreign Trade University

Chapter 1

Introduction to Statistics

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Points to highlight
1/ Define the nature of Statistics / Answer the key
question: “What is statistics?”

2/ Key concepts in statistics

Descriptive statistics vs Inferential Statistics
Population vs Sample
Qualitative vs Quantitative Data
Scale of measurements

3/ Data analysis process

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I. What is statistics?
1. Why study statistics?
 Being informed

Example: According to a survey on shopping online while

at work conducted in early November, 2005 – 42% of
the men and 32% of the women in the sample were
shopping online at work.

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I. What is statistics?
1. Why study statistics?
 Being informed
Your ability to be informed thoroughly
 Extract information from tables, charts, and graphs

 Follow numerical arguments

 Understand the basics of how data should be gathered,

summarized and analyzed to draw statistical conclusions

I. What is statistics?
1. Why study statistics?
 Making informed judgments

Example:
 How should you select an online seller in Ebay based on
their feedback scores and detailed ratings?

 If you know the rate of being unemployed of new

graduate students of a particular major, will you choose
that major?

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I. What is statistics?
1. Why study statistics?
 Making informed Judgments
Your ability to make informed judgments
 Decide whether existing information is adequate or whether
additional information is required

 If necessary, collect more information in a reasonable and

thoughtful way

 Summarize the available data in a useful and informative

manner

 Analyze the available data

 Draw conclusion, make decision, and assess the risk of an

incorrect information 7

I. What is statistics?
1. Why study statistics?
 Evaluating Decisions that Affect your Life
Example:
University financial aid offices survey students on the cost
of going to school and collect data on family income,
savings, and expenses. These data are used to set
criteria for deciding who receives financial aids.

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I. What is statistics?
1. Why study statistics?
 Evaluating Decisions that Affect your life
Your ability to Evaluate decisions that Affect your life
 Understand statistical methods used to make decisions that
affect your life

 Be able to evaluate whether such important decisions are being

made in a reasonable way

I. What is statistics?

2. Understand the nature of statistics

interest rates, population, stock market

prices, unemployment rate…

- In a very general way:

Statistics numerical information

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I. What is statistics?

- Furthermore:

Statistics Statistical methods

- Collect
- describe
- summarize
- present
- analyze

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Statistical Analysis Process

Pose a question/ Decide what to
problem measure and Collecting data
how to measure?

Summarizing
data

Interpreting Analyzing
results data
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Examples
 Customers’ satisfaction toward a
product/service provided by a company
 Customers’ online shopping behavior
 Emotional intelligence and Job
performance

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Applications in
Business and Economics

Economics
Economists use statistical
information in making forecasts about
the future of the economy or some
aspects of it.

Economists use statistical models to

help explain and predict variables such
as inflation rate, unemployment rate,
and changes in the gross domestic
product.

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Applications in
Business and Economics

Marketing
 Electronic point-of-sale scanners at retail
checkout counters are used to collect
data for a variety of marketing research
applications.

 A market researcher who surveys

consumers and converts the responses
into useful information for research
purpose.

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Applications in
Business and Economics

 Example: one Midwest grocery chain

analyze local buying patterns. They
discovered that when men bought diapers
on Thursdays and Saturdays, they also
tended to buy beer. The grocery chain
could use this information in various ways
to increase revenue. For example, they
could move the beer display closer to the
diaper display

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Applications in
Business and Economics
 Finance
 Financial advisors use price-earnings ratios and dividend
yields to guide their investment recommendations.

 A financial analyst develops stock portfolios based on

historical rate of return

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Jobs of Statistics

 Making sense of numerical information

 Dealing with uncertainty
 Sampling
 Analyzing relationships
 Forecasting
 Decision making in an uncertain environment

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Making sense of numerical information

 Decision-makers require as much information as

possible to make decision
 However, after being collected numerical
information is under the raw form.

Hence, these information need to be summarized,

organized and analyzed so that important features emerges

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Dealing with uncertainty

 In statistics we have to deal with the question

what might be, what could be… not what is
 One task of statistics is to estimate the level of
uncertainty
 Examples:
- Estimate the number of students might
attend a conference tomorrow.
- What might the weather like tomorrow

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Sampling
 E.g: Before bringing a new product to market,
market research survey about the likely level of
demand of this product maybe undertaken?

should the survey cover all potential buyers

(population)?

Absolutely impossible due

to the huge costs of time,
money, people…

Sampling
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Analyzing relationships

 Let’s consider some examples below:

(i) Does the growth rate of money supply influence
the inflation rate?
(ii) If the price of a product rise by 5%, what is
the effect on the sales of this product?
- The relationships between variables will be
analyzed in a quantitative way not qualitative
way based on the past behaviors of these
variables

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Forecasting

 Reliable predictions play a key role in

management and making decision
 For example: investment decisions must be
made well ahead of the time at which a new
product can be brought to market;
 Forecasts of future values are obtained through
the information of past behaviors
 The analysis of this information suggests future
trend

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Decision making in an uncertain

environment
 A particular problem for management: making
decisions in the condition of incomplete
information
 Risks of making decisions?

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II/ Key concepts in statistics

1/ Elementary units vs The Frame
 Elementary units
 The persons or objects that have characteristics of
interest to statisticians

 The frame
 A complete listing of all elementary units relevant to a
statistical investigation

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II/ Key concepts in statistics

2/ Variables and Data
 Variables
 Characteristics of interest of elementary units

 Data
 A single observation about a specified characteristic of
interest is called a datum.
 Any collection of observations about one or more
characteristics of interest, for one or more elementary
units, is called a data set.
 A data set may be univariate, bivariate, multivariate
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Example: ASEAN countries (2016 data)

Country Population GDP (billion GDP per Total Area
(million USD) capital (km2)
persons) (USD)
Vietnam 92.701 202.62 2371 332.698
Laos 6.758 15.90 1921 237.955
Malaysia 31.187 296.36 12127 330.803
Thailand 68.864 406.84 5938 513.120
Singapore 5.607 296.97 53053 719,1
Phillipines 103.320 304.90 3280 300.000
Indonesia 261.115 932.26 3635 1.904.569

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II/ Key concepts in statistics

3/ Population vs Sample
 Population
 is the WHOLE group of all elementary units of interest

 Sample
 is a subset of data drawn from the population.

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Population vs. Sample

Population Sample

a b cd b c
ef gh i jk l m n gi n
o p q rs t u v w o r u
x y z y

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4/ Descriptive statistics and Inferential

statistics

Statistics

Descriptive Statistics Inferential Statistics

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Descriptive statistics
 Methods used to organize, summarize, describe
and present data in a convenient and
informative way.
 Tabular, graphical, and numerical methods
(mean, median, variance, standard deviation…)

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Descriptive Statistics
- Collect data
e.g., Survey, Observation,
Experiments

- Present data
e.g., Charts and graphs

- Characterize data
e.g., Calculate mean =

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Inferential Statistics
 Procedures used to draw conclusions or
inferences about the characteristics of a
population from information obtained from the
sample.
 Making estimates, testing hypothesis…
 Used when we can not enumerate the whole
population

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Inferential Statistics

Population parameters
Sample statistics (unknown, but can be
(known) estimated from sample
Inference
evidence

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Inferential Statistics
Drawing conclusions and/or making decisions
concerning a population based on sample results.

 Estimation
– e.g., Estimate the population
mean weight using the sample
mean weight
 Hypothesis Testing
– e.g., Use sample evidence to test
the claim that the population
mean weight is 120 pounds
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5/ Quantitative and qualitative data

Data can be classified as being qualitative

or quantitative.

Depends on whether the data are qualitative or

quantitative, we choose the most
appropriate statistical methods

In general, there are more statistical analysis for

quantitative data
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Qualitative or Quantitative data?

Marital Status
Qualitative
Gender

Height

Ages Quantitative

Student Evaluation
Grades 37

Qualitative Data

 Data that is normally described in words, labels

or names rather than numerically
 Often be referred to as categorical data
 Nominal or ordinal scale of measurement will be
applied to summarize this kind of data
 Qualitative variables can, in turn, be binomial
or multinomial

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Examples
 Gender:
1. Male 2. Female
 Eye colors:
1.Brown 2.Black 3.Blue 4.Green
 Marital status:
1. Single
2. Married
3. Divorced
4. Widowed
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Quantitative Data
 Quantitative data is data that is normally expressed
numerically. It indicates how many or how much:

There are two types of quantitative data:

Discrete quantitative data: Continuous quantitative
- integer numbers data:
- can be measured - decimal numbers,
precisely. - can not be measured
- Only a finite number of precisely
values is possible. - An infinite number of
- Obtained when values is possible.
measuring how many. - Obtained when
measuring how much 40

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Quantitative Data

E.g.
(i)The number of students in a class
(ii)The number of correct answers in a test
(iii)People’s height, weight; students’ GPA

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4/ Scales of Measurement

 Scales of measurement include:

Nominal Interval

Ordinal Ratio

The scale determines the amount of information

contained in the data.

The scale indicates the data summarization and

statistical methods that are most appropriate.
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4/ Scales of Measurement
 In statistics, for convenient summarization, we
typically assign numbers to various
characteristics of elementary units (people,
objects, or concepts).
 These types of measure are called scale of
measurement.
 These scales of measurement gradually develop,
from the simplest form (nominal scale) to the
most sophisticated one (interval/ratio scale).

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Level of measurements

Highest Level
Measurements
Ratio/Interval Scale Complete Analysis

Rankings Higher Level

Ordered Categories Ordinal Scale Mid-level Analysis

Categorical Codes Lowest Level

ID Numbers Nominal Scale Basic Analysis
Category Names

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Scales of Measurement
 Nominal

Data are labels or names used to identify a

characteristic of the elementary units.

There is no relative order or rank between these

data categories

Numeric codes are assigned for each data category.

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Scales of Measurement
 Nominal
It never makes sense to add, subtract, multiply,
divide, rank, average or manipulate

Used to count frequency of variables outcomes

E.g: Numbers assigned for a person’s gender

Or numbers assigned for a person’s marital status
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Example
Students of a university are classified by the
school in which they are enrolled such as
Business, Humanities, Education, and so on.

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.

Numeric codes may be used which do indicate the

rank / order of data categories.

The gap between numbers or units on this scale

doesn’t mean equal magnitude between variable
outcomes
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Scales of Measurement
 Ordinal

Just like nominal data, it never makes sense to

add, subtract, multiply, divide, rank, average
or manipulate

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Example
In a running or swimming competition or race,
finishers are ranked from the first place to the
last place. Let’s assume that there were six
people attending this contest.

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Example
Let 1 denotes the first place finishers, 2 denotes
the second place finisher, 3 denotes the third
place finisher and so on
The gap between these numbers does not
indicate equal absolute magnitude (especially
number 1 and number 2, number 3 and number
4)

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Scales of Measurement

 Interval

Have the properties of ordinal data, and

the intervals between numbers or units on the scale
are equal over all level of the scale

Interval scales provide more quantitative

information

There is no zero value that indicates

that nothing exists for the variable at the zero point.
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Scales of Measurement

 Interval

Addition and subtraction are permissible but

multiplication and division continue to make no
sense

Example: Melissa has an SAT score of 1205,

while Kevin has an SAT score of 1090. Melissa
scored 115 points more than Kevin.

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Example
 Consider the centigrade scale for measuring
temperature. This scale has properties of
interval scale due to the following reasons:
- Each value on the scale can be ranked as
larger or smaller than any other value.
- It has the equal intervals property because
the scale is made up of equal units.
- It has no zero point (water freezes at zero
degrees centigrade, but temperatures can
get colder than that).
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Scales of Measurement

 Ratio

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.

Variables such as distance, height, weight, and time

use the ratio scale.
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Scales of Measurement

 Ratio

All types of arithmetic operations, even

multiplication and division can be performed with
such data

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Example
Melissa’s college record shows 36 credit
hours earned, while Kevin’s record shows
72 credit hours earned. Kevin has twice
as many credit hours earned as Melissa.

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Example
Survey “Students’ opinion on having two canteens inside
university campus”
1/ Gender
☐ Male ☐ Female
2/ Your major
☐ Business administration ☐ Banking and Finance
☐ International Commerce ☐ Commercial Law
3/ Your monthly expenditure:
☐ < 1000K VND ☐ 1000K – 2000K VND
☐ 2000K – 5000K VND ☐ >= 5000K VND
4/ With the scores from 1-10, can you rate the services
provided by FTU corner
Your score: …. 58

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5/ Do you agree that having two canteens is not necessary

in FTU

☐ ☐ ☐ ☐ ☐
Strongly Agree Neutral Disagree Strongly
agree Disagree

6/ Your average expenses each time you visit a canteen in

FTU: ……………

Requirements:
1/ Answer the questions on your own
2/ Identify the scale of measurement used for each
question?

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III/ Data Analysis Process

Step 1: Understand the Understand the goal of the research

nature of the problem Identify the questions to answer

 Decide what information needed to

answer questions
Step 2: Decide what to
 Define the variables to study
measure and how to
 Develop appropriate methods for
measure
determining variables’ values

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III/ Data Analysis Process

Decide whether using existing data
or collect new data
If existing data be used, understand
how they were collected and for
what purpose
If new data are required, a careful
plan of collecting data must be
designed
Step 3: Data collection

Statistical Methods:
 Finding existing data: from print to
Internet
 Generating new data: observation,
experiment, survey
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III/ Data Analysis Process

After being collected, data should be

preliminarily analyzed
Summarizing data graphically and
numerically

Step 4: Data summarization

Statistical Methods:
 Presenting data: Tables, Charts
and Graphs
 Presenting data: descriptive statistics

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III/ Data Analysis Process

Select and apply appropriate
inferential statistical methods to
analyze data

Step 5: Formal data analysis

Statistical Methods:
Estimation, Hypothesis testing,
Variance analysis, Regression and
Correlation, Time series and Forecasting,
Index numbers…

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III/ Data Analysis Process

Several questions should be addressed
What conclusion can be drawn from the
Step 6: Interpretation of analysis?

results How do the results inform us about the

research problem or question?
How the results guide future research?

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Learn to View Statistics with a

Critical Eye
 There are three kinds of lies…..
– Lies
– Damn Lies
– Statistics
 You need to make statistics work
for you, not lie for you!

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Learn to View Statistics with a

Critical Eye

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Learn to View Statistics with a

Critical Eye

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Learn to View Statistics with a

Critical Eye

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End of chapter 1

THANK YOU!

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