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PowerPoint Presentation Package* to Accompany:

(5th Edition)

by Paul Newbold, William L. Carlson, and Betty M. Thorne

*by Mark P. Karscig; Department of Economics and Finance, Central Missouri State University

Chapter 1

Dealing with Uncertainty

Everyday decisions are based on incomplete information

Dealing with Uncertainty

The price of IBM stock will be higher in six months than it is now.
versus

The price of IBM stock is likely to be higher in six months than it is now.

Dealing with Uncertainty

If the federal budget deficit is as high as predicted, interest rates will remain high for the rest of the year.
versus

If the federal budget deficit is as high as predicted, it is probable that interest rates will remain high for the rest of the year.

Sampling
Population and Sample
A population is the complete set of all items in which an investigator is interested. A population is the set of all of the outcomes from a system or process that is to be studied. N represents population size.

Examples of Populations
Names of all registered voters in the United States. Incomes of all families living in Daytona Beach. Annual returns of all stocks traded on the New York Stock Exchange. Grade point averages of all the students in your university.

Sampling
Population and Sample
A sample is an observed subset of population values with sample size given by n.

Sampling
Random Samples
Simple random sampling is a procedure in which every possible sample of n objects is equally likely to be chosen.

Sampling
Random Samples
Simple random sampling is a procedure in which every possible sample of n objects is equally likely to be chosen. The resulting sample is usually called a random sample.

Statistical Thinking
Statistical thinking is a philosophy of learning and action based on the following fundamental principles: All work occurs in a system of interconnected processes; Variation exists in all processes, and Understanding and reducing variation are the keys to success.

Statistical Thinking
Systems and Processes
A system is a number of components that are logically and sometimes physically linked together for some purpose.

Statistical Thinking
Systems and Processes
A process is a set of activities operating on a system that transforms inputs to outputs. A business process is groups of logically related tasks and activities, that when performed utilizes the resources of the business to provide definitive results required to achieve the business objectives.

Making Decisions
Data, Information, Knowledge
1. Data: specific observations of measured numbers. 2. Information: processed and summarized data yielding facts and ideas. 3. Knowledge: selected and organized information that provides understanding, recommendations, and the basis for decisions.

Making Decisions
Descriptive and Inferential Statistics Descriptive Statistics include graphical and numerical procedures that summarize and process data and are used to transform data into information.

Making Decisions
Descriptive and Inferential Statistics Inferential Statistics provide the bases for predictions, forecasts, and estimates that are used to transform information to knowledge.

The Journey to Making Decisions

Decision

Knowledge
Experience, Theory, Literature, Inferential Statistics, Computers

Information
Descriptive Statistics, Probability, Computers Begin Here: Identify the Problem

Data

Key Words
Data Descriptive Statistics Inferential Statistics Information Knowledge Population Process Sample Simple Random Sampling Statistical Thinking System