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viii COnTEnTS
6.2 Estimating with Confidence 302 CHAPTER 7 Inference for Means 357
Statistical confidence 302
Confidence intervals 304 Introduction 357
Confidence interval for a
population mean 306 7.1 Inference for the Mean
How confidence intervals behave 309 of a Population 358
Some cautions 311 t distributions 358
Section 6.2 Summary 313 The one-sample t confidence interval 360
Section 6.2 Exercises 314 Case 7.1 Time Spent Using
a Smartphone 361
6.3 Tests of Significance 316 The one-sample t test 362
The reasoning of significance tests 316 Using software 365
Case 6.1 Fill the Bottles 317 Matched pairs t procedures 368
Stating hypotheses 319 Robustness of the one-sample
Test statistics 321 t procedures 371
P-values 322 BEyOnD THE BASICS:
The Bootstrap 372
Statistical significance 324
Section 7.1 Summary 373
Tests of one population mean 326
Section 7.1 Exercises 374
Two-sided significance tests
and confidence intervals 329
7.2 Comparing Two Means 378
P-values versus reject-or-not
The two-sample t statistic 379
reporting 331
The two-sample t confidence interval 381
Section 6.3 Summary 332
The two-sample t significance test 383
Section 6.3 Exercises 333
Robustness of the two-sample
procedures 384
6.4 Using Significance Tests 336
Inference for small samples 385
Choosing a level of significance 337
The pooled two-sample t procedures 386
What statistical significance does
Case 7.2 Active versus Failed
not mean 337
Retail Companies 389
Statistical inference is not valid
Section 7.2 Summary 392
for all sets of data 339
Section 7.2 Exercises 393
Beware of searching for
significance 339
7.3 Additional Topics on Inference 398
Section 6.4 Summary 341
Choosing the sample size 398
Section 6.4 Exercises 341
Inference for non-Normal
populations 406
6.5 Power and Inference
Section 7.3 Summary 408
as a Decision 343
Section 7.3 Exercises 409
Power 343
Increasing the power 345 Chapter 7 Review Exercises 411
Inference as decision 346
Two types of error 346
Error probabilities 347 CHAPTER 8 Inference for
The common practice of Proportions 417
testing hypotheses 349
Section 6.5 Summary 350 Introduction 417
Section 6.5 Exercises 350 8.1 Inference for a Single
Chapter 6 Review Exercises 351 Proportion 418
COnTEnTS xi
Case 8.1 Robotics and Jobs 418 Models for two-way tables 466
Large-sample confidence BEyOnD THE BASICS: Meta-Analysis 468
interval for a single proportion 420 Section 9.1 Summary 470
Plus four confidence interval for a
single proportion 421 9.2 Goodness of Fit 470
Significance test for a single Section 9.2 Summary 475
proportion 423 Chapter 9 Review Exercises 475
Choosing a sample size for
a confidence interval 426
Case 8.2 Marketing Christmas CHAPTER 10 Inference
Trees 428 for Regression 483
Choosing a sample size for a
significance test 429 Introduction 483
Section 8.1 Summary 431
Section 8.1 Exercises 432 10.1 Inference about the
Regression Model 484
8.2 Comparing Two Proportions 436 Statistical model for simple
Large-sample confidence intervals linear regression 484
for a difference in proportions 437 From data analysis to inference 485
Case 10.1 The Relationship
Case 8.3 Social Media in the
between Income and Education
Supply Chain 438
for Entrepreneurs 485
Plus four confidence intervals for
a difference in proportions 440 Estimating the regression
Significance tests 440 parameters 490
Choosing a sample size for Conditions for regression
two sample proportions 444 inference 494
BEyOnD THE BASICS: Relative Risk 447
Confidence intervals and
Section 8.2 Summary 448 significance tests 495
Section 8.2 Exercises 449 The word “regression” 500
Inference about correlation 500
Chapter 8 Review Exercises 451
Section 10.1 Summary 502
Section 10.1 Exercises 503
CHAPTER 9 Inference for
Categorical Data 455 10.2 Using the Regression Line 510
BEyOnD THE BASICS:
9.1 Inference for Two-Way Nonlinear Regression 515
Tables 455 Section 10.2 Summary 515
Two-way tables 456 Section 10.2 Exercises 516
Case 9.1 Are Flexible Companies
More Competitive? 457 10.3 Some Details of Regression
Describing relations in two-way Inference 517
tables 458 Standard errors 518
The hypothesis: No association 462 Analysis of variance for regression 520
Expected cell counts 462 Section 10.3 Summary 524
The chi-square test 463 Section 10.3 Exercises 524
The chi-square test and the z test 465 Chapter 10 Review Exercises 526
xii COnTEnTS
13.3 Modeling Trend and Seasonality 14.2 Comparing Group Means 733
Using Regression 664 Contrasts 733
Identifying trends 665 Case 14.2 Evaluation of a
Seasonal patterns 671 new Educational Product 733
Using indicator variables 672 Multiple comparisons 740
Residual checking 677 Simultaneous confidence intervals 744
Section 13.3 Summary 679 Section 14.2 Summary 744
Section 13.3 Exercises 679
14.3 The Power of the AnOVA Test 745
13.4 Lag Regression Models 681 Section 14.3 Summary 749
Autoregressive-based models 681 Chapter 14 Review Exercises 749
Section 13.4 Summary 690
Section 13.4 Exercises 691 Notes and Data Sources N-1
Tables T-1
13.5 Moving-Average and Answers to Odd-Numbered Exercises S-1
Smoothing Models 691 Index I-1
Moving-average models 691
Moving average and The following optional Companion
seasonal ratios 694 Chapters can be found online at
Exponential smoothing models 699 www.macmillanhighered.com/psbe4e.
Section 13.5 Summary 706
Section 13.5 Exercises 706
Chapter 13 Review Exercises 708 CHAPTER 15 Two-Way Analysis
of Variance 15-1
Notes and Data Sources 15-28 Notes and Data Sources 16-31
Answers to Odd-Numbered Exercises 15-29 Answers to Odd-Numbered Exercises 16-32
S tatistics is the science of data. The Practice of Statistics for Business and Eco-
nomics (PSBE) is an introduction to statistics for students of business and eco-
nomics based on this principle. We present methods of basic statistics in a way that
emphasizes working with data and mastering statistical reasoning. PSBE is elemen-
tary in mathematical level but conceptually rich in statistical ideas. After complet-
ing a course based on our text, we would like students to be able to think objectively
about conclusions drawn from data and use statistical methods in their own work.
In PSBE we combine attention to basic statistical concepts with a comprehen-
sive presentation of the elementary statistical methods that students will find useful
in their work. We believe that you will enjoy using PSBE for several reasons:
1. PSBE examines the nature of modern statistical practice at a level suitable for
beginners. We focus on the production and analysis of data as well as the tradi-
tional topics of probability and inference.
2. PSBE has a logical overall progression, so data production and data analysis are
a major focus, while inference is treated as a tool that helps us to draw conclu-
sions from data in an appropriate way.
3. PSBE presents data analysis as more than a collection of techniques for explor-
ing data. We emphasize systematic ways of thinking about data. Simple prin-
ciples guide the analysis: always plot your data; look for overall patterns and
deviations from them; when looking at the overall pattern of a distribution for
one variable, consider shape, center, and spread; for relations between two vari-
ables, consider form, direction, and strength; always ask whether a relationship
between variables is influenced by other variables lurking in the background.
We warn students about pitfalls in clear cautionary discussions.
4. PSBE uses real examples and exercises from business and economics to
illustrate and enforce key ideas. Students learn the technique of least-squares
regression and how to interpret the regression slope. But they also learn the con-
ceptual ties between regression and correlation and the importance of looking
for influential observations.
5. PSBE is aware of current developments both in statistical science and in teach-
ing statistics. Brief, optional “Beyond the Basics” sections give quick overviews
of topics such as density estimation, the bootstrap, scatterplot smoothers, data
mining, nonlinear regression, and meta-analysis.
xv
xvi TO InSTRUCTORS: AbouT ThiS book
students understand the truth of the mantra that “association does not imply causa-
tion.” Moreover, managers need to understand the use of sample surveys for market
research and customer satisfaction and the use of statistically designed experiments
for product and process development and improvement.
Another strand that runs through PSBE is that data lead to decisions in a spe-
cific setting. A calculation or graph or “reject H0” is not the conclusion of an exer-
cise in statistics. We encourage students to state a conclusion in the specific problem
context, and we hope that you will require them to do so.
Finally, we think that a first course in any discipline should focus on the
essentials. We have not tried to write an encyclopedia, but to equip students to use
statistics (and learn more statistics as needed) by presenting the major concepts
and most-used tools of the discipline. Longer lists of procedures “covered” tend
to reduce student understanding and ability to use any procedures to deal with real
problems.
REMInDER • Reminders At key points in the text, Reminder margin notes direct the reader
to the first explanation of a topic, providing page numbers for easy reference.
• Data file names Data file names now include a short description of the content
DATA
as well as the exercise or example number. Marginal icons show data set names
for examples and in-text icons show the data set names for exercises.
• Software basics These have been expanded to include more software options
and moved from the appendices at the end of each chapter to our online re-
sources. These can now be found at www.macmillanhighered.com/psbe4e.
Accessible Technology
Any mention of the current state of statistical practice reminds us that quick, cheap,
and easy computation has changed the field. Procedures such as our recommended
two-sample t and logistic regression depend on software. Even the mantra “look at
your data” depends—in practice—on software because making multiple plots by
hand is too tedious when quick decisions are required. What is more, automating
calculations and graphs increases students’ ability to complete problems, reduces
their frustration, and helps them concentrate on ideas and problem recognition
rather than mechanics.
We therefore strongly recommend that a course based on PSBE be accompa-
nied by software of your choice. Instructors will find using software easier because
all data sets for PSBE can be found in several common formats on the website
www.macmillanhighered.com/psbe4e.
The Microsoft Excel spreadsheet is by far the most common program used for
statistical analysis in business. Our displays of output, therefore, emphasize Excel,
though output from several other programs also appears. PSBE is not tied to spe-
cific software. Even so, one of our emphases is that a student who has mastered the
basics of, say, regression can interpret and use regression output from almost any
software.
We are well aware that Excel lacks many advanced statistical procedures. More
seriously, Excel’s statistical procedures have been found to be inaccurate, and they
lack adequate warnings for users when they encounter data for which they may
give incorrect answers. There is good reason for people whose profession requires
continual use of statistical analysis to avoid Excel. But there are also good, practi-
cal reasons why managers whose life is not statistical prefer a program that they
regularly use for other purposes. Excel appears to be adequate for simpler analyses
of the kind that occur most often in business applications.
Some statistical work, both in practice and in PSBE, can be done with a calcula-
tor rather than software. Students should have at least a “two-variable statistics” cal-
culator with functions for correlation and the least-squares regression line as well as
for the mean and standard deviation. Graphing calculators offer considerably more
capability. Because students have calculators, the text doesn’t discuss “computing
formulas” for the sample standard deviation or the least-squares regression line.
Technology can be used to assist learning statistics as well as doing statistics.
The design of good software for learning is often quite different from that of soft-
ware for doing. We want to call particular attention to the set of statistical applets
available on the PSBE website: www.macmillanhighered.com/psbe4e. These in-
teractive graphical programs are by far the most effective way to help students grasp
the sensitivity of correlation and regression to outliers, the idea of a confidence
interval, the way ANOVA responds to both within-group and among-group varia-
tion, and many other statistical fundamentals. Exercises using these applets appear
throughout the text, marked by a distinctive icon. We urge you to assign some of
these, and we suggest that if your classroom is suitably equipped, the applets are
very helpful tools for classroom presentation as well.
adopted several structural devices to aid students. Major settings that drive the expo-
sition are presented as cases with more background information than other examples.
(But we avoid the temptation to give so much information that the case obscures the
CASE statistics.) A distinctive icon ties together examples and exercises based on a case.
The exercises are structured with particular care. Short “Apply Your Knowl-
edge” sections pose straightforward problems immediately after each major new
idea. These give students stopping points (in itself a great help to beginners) and
also tell them that “you should be able to do these things right now.” Most num-
bered sections in the text end with a substantial set of exercises, and more appear as
review exercises at the end of each chapter.
Acknowledgments
We are grateful to the many colleagues and students who have provided helpful com-
ments about PSBE, as well as those who have provided feedback about Introduction
to the Practice of Statistics. They have contributed to improving PSBE as well. In
particular, we would like to thank the following colleagues who, as reviewers and
authors of supplements, offered specific comments on PSBE, Fourth Edition:
Ala Abdelbaki, University of Virginia Hilde E. Patron Boenheim, University of
Diane Bean, Kirkwood Community College West Georgia
Tadd Colver, Purdue University Cathy D. Poliak, University of Houston
Bryan Crissinger, University of Delaware Michael Racer, University of Memphis
Douglas Antola Crowe, Bradley University Terri Rizzo, Lakehead University
John Daniel Draper, The Ohio State Stephen Robertson, Southern Methodist
University University
Anne Drougas, Dominican University Deborah Rumsey, The Ohio State University
Gary Evans, Purdue University John Samons, Florida State College at
Homi Fatemi, Santa Clara University Jacksonville
Mark A. Gebert, University of Kentucky Bonnie Schroeder, The Ohio State
Kim Gilbert, University of Georgia University
Matt Gnagey, Weber State University Caroline Schruth, University of
Deborah J. Gougeon, University of Scranton Washington
Betsy Greenberg, University of Texas at Carl Schwarz, Simon Fraser University
Austin Sarah Sellke, Purdue University
Susan Herring, Sonoma State University Jenny Shook, Pennsylvania State
Paul Holmes, University of Georgia University
Patricia Humphrey, Georgia Southern Jeffrey Sklar, California Polytechnic State
University University
Ronald Jorgensen, Milwaukee School of Rafael Solis, California State University,
Engineering Fresno
Leigh Lawton, University of St. Thomas Weixing Song, Kansas State University
James Manley, Towson University Christa Sorola, Purdue University
Lee McClain, Western Washington Lynne Stokes, Southern Methodist
University University
Glenn Miller, Pace University Tim Swartz, Simon Fraser University
Carolyn H. Monroe, Baylor University Elizabeth J. Wark, Worchester State
Hayley Nathan, University of University
Wisconsin–Milwaukee Allen L. Webster, Bradley University
Joseph Nolan, Northern Kentucky University Mark Werner, University of Georgia
Karah Osterberg, Northern Illinois Blake Whitten, University of Iowa
University Yuehua Wu, York University
Charles J. Parker, Wayne State College Yan Yu, University of Cincinnati
MEDIA AnD SUPPLEMEnTS
T he following electronic and print supplements are available with The Practice
of Statistics for Business and Economics, Fourth Edition:
Useful analytics. The gradebook quickly and easily allows instructors to look up
performance metrics for classes, individual students, and individual assignments.
NEW Video Technology Manuals available for TI-83/84 calculators, Minitab, Excel,
JMP, SPSS (an IBM Company),* R (with and without Rcmdr), and CrunchIt!®
provide 50 to 60 brief videos for using each specific statistical software in conjunc-
tion with a variety of topics from the textbook.
NEW StatBoards videos are brief whiteboard videos that illustrate difficult topics
through additional examples, written and explained by a select group of statistics
educators.
JMP Student Edition (developed by SAS) is easy to learn and contains all the
capabilities required for introductory business statistics. JMP is the leading com-
mercial data analysis software of choice for scientists, engineers, and analysts at
companies throughout the world (for Windows and Mac).
Data files are available in JMP, ASCII, Excel, TI, Minitab, SPSS, R, and CSV
formats.
Instructor’s Guide with Full Solutions includes worked out solutions to all exer-
cises, teaching suggestions, and chapter comments.
Confectionary.
Citron.
TO CLARIFY SUGAR.
Best sugar, 3 lbs.; water, 1-1/4 pint; white of egg, 1/4 of 1; lemon-
juice, 1 dessertspoonful.
NOUGAT.
(Another Receipt.)
The French, who are very fond of the delicious flavour of the
orange-blossom, leave the petals in the candy; but a more delicate
confection, to English taste, is made as follows:—Throw the orange-
flowers into the syrup when it has boiled about ten minutes, and after
they have simmered in it for five more, pour the whole out, and leave
them to infuse until the following day, or even longer, if more
convenient; then bring the syrup to the point of boiling, strain it from
the blossoms through a muslin, and finish it by the foregoing receipt.
COCOA-NUT CANDY.
Take some fine fresh candied orange-rind, or citron, clear off the
sugar which adheres to it, cut it into inch-squares, stick these singly
on the prong of a silver fork or on osier-twigs, dip them into liquid
barley-sugar, and place them on a dish rubbed with the smallest
possible quantity of very pure salad oil. When cold, put them into tin
boxes or canisters well dried, with paper, which should also be very
dry, between each layer.
EVERTON TOFFIE.
Throw into a well heated metal mortar from two to four ounces of
the best quality of cake-chocolate broken small, and pound it with a
warm pestle until it resembles a smooth paste or very thick batter;
then add an equal weight of sugar in the finest powder, and beat
them until they are thoroughly blended. Roll the mixture into small
balls, lay them upon sheets of writing paper or upon clean dishes,
and take them off when they are nearly cold. The tops may be
covered with white nonpareil comfits, or the drops may be shaken in
a paper containing some of these, and entirely encrusted with them;
but it must be recollected that they will not adhere to them after they
become hard. More or less sugar can be worked into the chocolate
according to the taste; and a Wedgwood mortar may be used for it
when no other is at hand, but one of bell-metal will answer the
purpose better.
CHOCOLATE ALMONDS.
When the chocolate has been softened, and mixed with an equal
proportion of sugar, as directed in the foregoing receipt, enclose
singly in small portions of it some almonds previously well dried, or
even slightly coloured in the oven, after having been blanched. Roll
them very smooth in the hand, and cover them with the comfits, or
form them like the almond shamrocks of page 574. Filberts and
pistachio-nuts may be substituted for the almonds with good effect;
but they also must be perfectly dry.
SEVILLE ORANGE PASTE.
Dessert Dishes.
DESSERT DISHES.
Select for this dish very fine bunches of red and white currants,
large ripe cherries, and gooseberries of different colours, and
strawberries or raspberries very freshly gathered. Beat up the white
of an egg with about half as much cold water, dip the fruit into this
mixture, drain it on a sieve for an instant, and then roll it in fine sifted
sugar until it is covered in every part; give it a gentle shake, and lay it
on sheets of white paper to dry. In England, thin gum-water is
sometimes used, we believe, for this dish, instead of the white of
egg; we give, however, the French method of preparing it. It will dry
gradually in a warm room, or a sunny window, in the course of three
or four hours.
Obs.—This is an inexpensive dish, which if well prepared has the
appearance of fine confectionary. The incrustation of sugar much
increases too the apparent size of the fruit. That which is used for it
should be of the best quality, and fine and dry. When it becomes
moist from the fruit being rolled in it, it will no longer adhere to it as it
ought.