Basic Concepts

of
Statistical
Studies
1

Introduction

Decision makers make better decisions

when they use all available information in
an effective and meaningful way. The
primary role of statistics is to to provide
decision makers with methods for
obtaining and analyzing information to
help make these decisions. Statistics is
used to answer long-range planning
questions, such as when and where to
locate facilities to handle future sales.

Definition
Statistics

is defined as the
science of collecting,
organizing, presenting,
analyzing and interpreting
numerical data for the
purpose of assisting in making
a more effective decision.

Applications in Management

Accounting
Public accounting firms use statistical
sampling procedures when conducting
audits for their clients.

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

Applications in Management

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

Production
A variety of statistical quality
control charts are used to monitor
the output of a production process.

Types of Statistics

There are two types of statistics

1. Descriptive Statistics is concerned with
summary calculations, graphs, charts and
tables.
2. Inferential Statistics is a method used to
generalize from a sample to a population. For
example, the average income of all families
(the population) in India can be estimated
from figures obtained from a few hundred
(the sample) families.

Statistical Population
A

Population is a collection of all

distinct individuals or objects or
items under study. The number of
entities in a population, Called
the Population Size, is
denoted by N
A descriptive measure of a
population is called a Parameter

Sample
A

Sample is a part of a
population and the sample
size is denoted by n. A sample
should be a representative of
the population.

descriptive measure of a
population is called a Statistic

Data and Data Sets

Data are the facts and figures collected, summarized,

analyzed, and interpreted.

The data collected in a particular study are referred

to as the data set.

Elements, Variables, and Observations

The elements are the entities on which data are

collected.
A variable is a characteristic of interest for the eleme
elem
The set of measurements collected for a particular
element is called an observation.
The total number of data values in a complete data
set is the number of elements multiplied by the
number of variables.

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Data, Data Sets,

Elements, Variables, and Observations
Variable
Observatio
s
n
Elemen
Stock
Annual
Earn/
t
Names
Company
Exchange Sales($M) Share($)

Dataram
EnergySouth
Keystone
LandCare
Psychemedics

NQ
N
N
NQ
N

73.10
74.00
365.70
111.40
17.60

0
1.67
0.86

0
0.13

Data Set
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Scales of Measurement
Scales
Scales of
of measurement
measurement include:
include:
Nominal

Interval

Ordinal

Ratio

The
The scale
scale determines
determines the
the amount
amount of
of information
information
contained
contained in
in the
the data.
data.
The
The scale
scale indicates
indicates the
the data
data summarization
summarization and
and
statistical
statistical analyses
analyses that
that are
are most
most appropriate.
appropriate.

12

Scales of Measurement

Nominal
Data
Data are
are labels
labels or
or names
names used
used to
to identify
identify an
an
attribute
attribute of
of the
the element.
element.
A
A nonnumeric
nonnumeric label
label or
or numeric
numeric code
code may
may be
be used.
used.

13

Scales of Measurement

Nominal
Example:
Example:
Students
Students of
of aa university
university are
are classified
classified by
by the
the
school
school in
in which
which they
they are
are enrolled
enrolled using
using aa
nonnumeric
nonnumeric label
label such
such as
as Business,
Business, Humanities,
Humanities,
Education,
Education, and
and so
so on.
on.

Alternatively,
Alternatively, aa numeric
numeric code
code could
could be
be used
used for
for
the
the school
school variable
variable (e.g.
(e.g. 1
1 denotes
denotes Business,
Business,
2
2 denotes
denotes Humanities,
Humanities, 3
3 denotes
denotes Education,
Education, and
and
so
so on).
on).

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Scales of Measurement

Ordinal
The
The data
data have
have the
the properties
properties of
of nominal
nominal data
data and
and
the
the order
order or
or rank
rank of
of the
the data
data is
is meaningful
meaningful..
A
A nonnumeric
nonnumeric label
label or
or numeric
numeric code
code may
may be
be used.
used.

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Scales of Measurement

Ordinal
Example:
Example:
Students
Students of
of aa university
university are
are classified
classified by
by their
their
class
class standing
standing using
using aa nonnumeric
nonnumeric label
label such
such as
as
Freshman,
Freshman, Junior,
Junior, or
or Senior.
Senior.
Alternatively,
Alternatively, aa numeric
numeric code
code could
could be
be used
used for
for
the
the class
class standing
standing variable
variable (e.g.
(e.g. 1
1 denotes
denotes
Freshman,
Freshman, 2
2 denotes
denotes Juniors
Juniors and
and so
so on).
on).

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Scales of Measurement

Interval
The
The data
data have
have the
the properties
properties of
of ordinal
ordinal data,
data, and
and
the
the interval
interval between
between observations
observations is
is expressed
expressed in
in
terms
terms of
of aa fixed
fixed unit
unit of
of measure.
measure.
Interval
Interval data
data are
are always
always numeric
numeric..

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Scales of Measurement

Interval
Example:
Example:
Shruti
Shruti has
has an
an MAT
MAT score
score of
of 605,
605, while
while Raj
Raj
has
has an
an MAT
MAT score
score of
of 655.
655. Raj
Raj scored
scored 50
50
points
points more
more than
than Shruti.
Shruti.

18

Scales of Measurement

Ratio
The
The data
data have
have all
all the
the properties
properties of
of interval
interval data
data
and
and the
the ratio
ratio of
of two
two values
values is
is meaningful
meaningful..

Variables
Variables such
such as
as distance,
distance, height,
height, weight,
weight, and
and time
time
use
use the
the ratio
ratio scale.
scale.

This
This scale
scale must
must contain
contain aa zero
zero value
value that
that indicates
indicates
that
that nothing
nothing exists
exists for
for the
the variable
variable at
at the
the zero
zero point
point
poin

19

Scales of Measurement

Ratio
Example:
Example:
Rajs
Rajs college
college record
record shows
shows 36
36 credit
credit hours
hours
earned,
earned, while
while Kevins
Kevins record
record shows
shows 72
72 credit
credit
hours
hours earned.
earned. Kevin
Kevin has
has twice
twice as
as many
many credit
credit
hours
hours earned
earned as
as Rajs
Rajs..

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Qualitative and Quantitative Data

Data
Data can
can be
be further
further classified
classified as
as being
being qualitative
qualitative
or
or quantitative.
quantitative.

The
The statistical
statistical analysis
analysis that
that is
is appropriate
appropriate depends
depends
on
on whether
whether the
the data
data for
for the
the variable
variable are
are qualitative
qualitative
or
or quantitative.
quantitative.

In
In general,
general, there
there are
are more
more alternatives
alternatives for
for statistica
statistica
analysis
analysis when
when the
the data
data are
are quantitative.
quantitative.

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Qualitative Data
Labels
Labels or
or names
names used
used to
to identify
identify an
an attribute
attribute of
of each
each
element
element
Often
Often referred
referred to
to as
as categorical
categorical data
data
Use
Use either
either the
the nominal
nominal or
or ordinal
ordinal scale
scale of
of
measurement
measurement
Can
Can be
be either
either numeric
numeric or
or nonnumeric
nonnumeric
Appropriate
Appropriate statistical
statistical analyses
analyses are
are rather
rather limited
limited

22

Quantitative Data
Quantitative
Quantitative data
data indicate
indicate how
how many
many or
or how
how much:
much:
discrete
discrete,, if
if measuring
measuring how
how many
many
continuous
continuous,, if
if measuring
measuring how
how much
much
Quantitative
Quantitative data
data are
are always
always numeric
numeric..
Ordinary
Ordinary arithmetic
arithmetic operations
operations are
are meaningful
meaningful for
for
quantitative
quantitative data.
data.

23

Scales of Measurement
Data
Qualitative

Quantitativ
e

Numerical

Nonnumerical

Numerical

Nomina
Nomina Ordina
ll
l

Nominal Ordinal

Interval Ratio

24

Cross-Sectional Data
Cross-sectional
Cross-sectional data
data are
are collected
collected at
at the
the same
same or
or
approximately
approximately the
the same
same point
point in
in time.
time.
Example
Example:: data
data detailing
detailing the
the number
number of
of building
building
permits
permits issued
issued in
in June
June 2007
2007 in
in each
each of
of the
the Districts
Districts
of
of UP
UP

25

Time Series Data

Time
Time series
series data
data are
are collected
collected over
over several
several time
time
periods.
periods.
Example
Example:: data
data detailing
detailing the
the number
number of
of building
building
permits
permits issued
issued in
in Districts
Districts of
of UP
UP in
in each
each of
of
the
the last
last 36
36 months
months

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Data Sources

Existing Sources
Within a firm almost any department
Business database services Dow Jones & Co.
Government agencies - Department of Labor
Industry associations Travel Industry Association

Special-interest organizations Graduate Managemen

Admission Counci
Internet more and more firms

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Descriptive Statistics

Descriptive statistics are the tabular,

graphical, and numerical methods used to
summarize and present data.

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Example: Hudson Auto Repair

The manager of Hudson Auto
would like to have a better
understanding of the cost
of parts used in the engine
tune-ups performed in the
shop. She examines 50
customer invoices for tune-ups. The costs of
parts,
rounded to the nearest dollar, are listed on the
next
slide.
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Example: Hudson Auto Repair

Sample of Parts Cost ($) for 50 Tuneups

91
71
104
85
62

78
69
74
97
82

93
72
62
88
98

57
89
68
68
101

75
66
97
83
79

52
75
105
68
105

99
79
77
71
79

80
75
65
69
69

97
72
80
67
62

62
76
109
74
73

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Tabular Summary:
Frequency and Percent
Frequency
Parts
Percent
Parts
Cost ($) Frequency Frequency
4
2
50-59
26 (2/50)10
13
60-69
32
16
70-79
0
14
7
80-89
14
7
90-99
10
5
100-109
100
50

31

Graphical Summary:
Histogram
Tune-up Parts Cost

18

Frequency

16
14
12
10
8
6
4
2

Parts
Cost ($)
5059 6069 7079 8089 9099 100-110
32

Numerical Descriptive
Statistics
The most common numerical descriptive statistic
is the average (or mean).
Hudsons average cost of parts, based on the 50
tune-ups studied, is $79 (found by summing the
50 cost values and then dividing by 50).

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Statistical Inference
Population the set of all elements of interest in a
particular study
Sample a subset of the population

obtaine
Statistical inference the process of using data obtained
from a sample to make estimates
and test hypotheses about the
characteristics of a population
Census collecting data for a population
Sample survey collecting data for a sample

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Process of Statistical
Inference
1. Population

consists of all tuneups. Average cost of

parts is unknown.
unknown

2. A sample of 50

4. The sample average

3. The sample data

provide a sample
average parts cost
of $79 per tune-up.

is used to estimate the

population average.

engine tune-ups
is examined.

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Computers and Statistical

Analysis

Statistical analysis typically involves working with

large amounts of data.
Computer software is typically used to conduct the
analysis.
Instructions are provided in chapter appendices for
carrying out many of the statistical procedures
using Minitab and Excel.

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