CHAPTER 1

INTRODUCTION
• Generally, statistics can be defined from plural
and single point of view.
– In plural form Statistics are the collection of
information shown in numbers.
• They can be stated as aggregate of facts which are
numerically described. Plural definition of Statistics generally
expressed Statistics as statistical data.
– In singular form statistics is the science of collecting,
presenting, analyzing and interpretation of the results.
• It is the science of decision making under uncertainty.
• Singular definitions of statistics are expressing statistics as
statistical methods.

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Who Uses Statistics?

• Statistical techniques are used

extensively by marketing,
accounting, quality control,
consumers, professional sports
people, hospital administrators,
educators, politicians, physicians,
etc...
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Generally Statistics can be used:
• as a tool in scientific research. Statistical methods can
be applied on the data which are collected to make
conclusions, predictions or inferences.
• as a tool for quality control of a product. There
statistical methods which are designed to check
whether a product satisfies a given standard or not.
• as a science of decision making under the scenario of
uncertainty. Statistics helps to facilitate the power of
decision making particularly for managers by providing
sufficient information.
• statistics helps identification and determination of
functional relationship among variables.
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Types of Statistics

• Descriptive Statistics: Methods of

organizing, summarizing, and presenting
data in an informative way.
• EXAMPLE 1: A given poll found that 49% of the people in a
survey knew the name of the first book of the Bible. The
statistic 49 describes the number out of every 100 persons who
knew the answer.
• EXAMPLE 2: According to Consumer Reports, Samsung washing
machine owners reported 9 problems per 100 machines during
2020. The statistic 9 describes the number of problems out of
every 100 machines.

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Types of Statistics
• Inferential Statistics: A decision, estimate,
prediction, or generalization about a population,
based on a sample.
• A population is a collection of all possible
individuals, objects, or measurements of interest.
• For example, a researcher may be interested in
the relation between class size (variable 1) and
academic performance (variable 2) for the
population of third-grade children.
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• Usually populations are so large that a
researcher cannot examine the entire group.
Therefore, a sample is selected to represent
the population in a research study. The goal is
to use the results obtained from the sample to
help answer questions about the population.
• Hence, a sample is a portion, or part, of the
population of interest.

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 Sampling Error
• The discrepancy between a sample
statistic and its population
parameter is called sampling error.
• Defining and measuring sampling
error is a large part of inferential
statistics.

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Types of Statistics
• EXAMPLE 1: TV networks constantly monitor
the popularity of their programs by hiring
independent consulting organizations to
sample the preferences of TV viewers.
• EXAMPLE 2: The accounting department of a
large firm will select a sample of the invoices
to check for accuracy for all the invoices of
the company.
• EXAMPLE 3: Wine tasters sip a few drops of
wine to make a decision with respect to all
the wine waiting to be released for sale.
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Variables
• A variable is a characteristic or condition that
can change or take on different values.
• Most research begins with a general question
about the relationship between two variables
for a specific group of individuals.

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Types of Variables

• Qualitative or Attribute variable: the

characteristic or variable being studied is
non-numeric.
• EXAMPLES: Gender, religious affiliation,
type of automobile owned, place of birth,
eye color, blood type, etc.

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Types of Variables
• Quantitative variable: the variable can be
reported numerically.
• EXAMPLE: balance in your checking account,
minutes remaining in class, number of
children in a family, number of students in a
class.

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Types of Variables
• Quantitative variables can be classified as
either discrete or continuous.
• Discrete variables: can only assume certain
values and there are usually “gaps” between
values.
• EXAMPLE: the number of bedrooms in a
house. (1,2,3,..., etc...).

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• Continuous variables: can assume

any value within a specific range.
• EXAMPLE: The time it takes to fly
from Addis Ababa to New York.

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Summary of types of Variables

DATA

Qualitative or attribute Quantitative or numerical

(type of car owned)

discrete continuous
(number of children) (time taken for an exam)
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Levels of Measurement

• Nominal level (scaled): Data that can only

be classified into categories and cannot be
arranged in an ordering scheme.
• EXAMPLES: eye color, gender, religious
affiliation, blood type, etc.

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Levels of Measurement

• Mutually exclusive: An individual or item

that, by virtue of being included in one
category, must be excluded from any other
category.
– EXAMPLE: eye color.
• Exhaustive: each person, object, or item
must be classified in at least one category.
– EXAMPLE: religious affiliation.

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Levels of Measurement
• Ordinal level: involves data that may be arranged
in some order, but differences between data
values cannot be determined or are meaningless.
• EXAMPLE: During a taste test of 4 colas, cola C
was ranked number 1, cola B was ranked number
2, cola A was ranked number 3, and cola D was
ranked number 4. Level of satisfaction, Rank in a
class, degree of happiness, etc.

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Levels of Measurement

• Interval level: similar to the ordinal level,

with the additional property that
meaningful amounts of differences
between data values can be determined.
There is no natural zero point.
– EXAMPLE: Temperature on the Fahrenheit
scale.

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Levels of Measurement

• Ratio level: the interval level with an

inherent zero starting point. Differences
and ratios are meaningful for this level of
measurement.
– EXAMPLES: money, heights

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Measurement levels summarized

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 Application of statistics
• Statistics is the mathematical science involving
the collection, analysis and interpretation of data.
• A number of specialties have evolved to apply
statistical and methods to various disciplines.
– Certain topics have "statistical" in their name
but relate to manipulations of probability
distributions rather than to statistical analysis.
• Actuarial science is the discipline that applies
mathematical and statistical methods to assess
risk in the insurance and finance industries.
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• Astrostatistics is the discipline that applies
statistical analysis to the understanding of
astronomical data.
• Biostatistics is a branch of biology that studies
biological phenomena and observations by
means of statistical analysis, and includes medical
statistics.
• Business analytics is a rapidly developing
business process that applies statistical methods
to data sets (often very large) to develop new
insights and understanding of business
performance & opportunities

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• Chemometrics is the science of relating measurements
made on a chemical system or process to the state of
the system via application of mathematical or
statistical methods.
• Demography is the statistical study of all populations.
It can be a very general science that can be applied to
any kind of dynamic population, that is, one that
changes over time or space.
• Econometrics is a branch of economics that applies
statistical methods to the empirical study of economic
theories and relationships.
• Environmental statistics is the application of statistical
methods to environmental science. Weather, climate,
air and water quality are included, as are studies of
plant and animal populations.

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• Epidemiology is the study of factors affecting the health
and illness of populations, and serves as the foundation
and logic of interventions made in the interest of public
health and preventive medicine.
• Forensic statistics is the application of probability models
and statistical techniques to scientific evidence, such as
DNA evidence, and the law. In contrast to "everyday"
statistics, to not engender bias or unduly draw conclusions,
forensic statisticians report likelihoods as likelihood ratios
(LR).
• Geostatistics is a branch of geography that deals with the
analysis of data from disciplines such as petroleum
geology, hydrogeology, hydrology, meteorology, oceanogra
phy, geochemistry, geography.
• Jurimetrics is the application of probability and statistics
to law.

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• Machine learning is the subfield of computer science that
formulates algorithms in order to make predictions from
data.
• Operations research (or operational research) is an
interdisciplinary branch of applied mathematics and formal
science that uses methods such as mathematical modeling,
statistics, and algorithms to arrive at optimal or near
optimal solutions to complex problems; Management
science focuses on problems in the business world.
• Population ecology is a sub-field of ecology that deals with
the dynamics of species populations and how these
populations interact with the environment.
• Psychometrics is the theory and technique of educational
and psychological measurement of knowledge, abilities,
attitudes, and personality traits.

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• Quality control reviews the factors involved in
manufacturing and production; it can make use
of statistical sampling of product items to aid decisions
in process control or in accepting deliveries.
• Quantitative psychology is the science of statistically
explaining and changing mental processes and
behaviors in humans.
• Reliability engineering is the study of the ability of a
system or component to perform its required functions
under stated conditions for a specified period of time
• Statistical finance, an area of econophysics, is an
empirical attempt to shift finance from
its normative roots to a positivist framework using
exemplars from statistical physics with an emphasis on
emergent or collective properties of financial markets.

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 Limitations of Statistics
• Statistics laws are true on average. Statistics are aggregates of
facts, so a single observation is not a statistic. Statistics deal
with groups and aggregates only.
• Statistical methods are best applicable to quantitative data.
• Statistics cannot be applied to heterogeneous data.
• If sufficient care is not exercised in collecting, analyzing and
interpreting the data, statistical results might be misleading.
• Only a person who has an expert knowledge of statistics can
handle statistical data efficiently.
• Some errors are possible in statistical decisions. In particular,
inferential statistics involves certain errors. We do not know
whether an error has been committed or not.

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