Chapter 1: Data and Statistics: The Where, Why, and How of Data Collection

Chapter 1: Data and Statistics
The Where, Why, and How of

Data Collection
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied
Slide
1
or duplicated, or posted to a publicly accessible website, in whole or in part.
Copyright ©2011 Pearson Education, Inc. publishing as Prentice Hall 1-1
Chapter Goals
After completing this chapter, you should be able to:
 Describe key data collection methods
 Know key definitions:
Population vs. Sample Primary vs. Secondary data
types
Qualitative vs. Quantitative data Time Series vs. Cross-
Sectional data
 Discrete vs continuous variables
 Explain the difference between descriptive and
inferential procedures
 Construct and interpret graphs
 Identify the four basic sampling methods.
 Organize data into a frequency distribution.
 Identify the different scales of measurement of data: nominal,
ordinal, interval, and ratio.
Copyright ©2011 Pearson1-2 Education, Slide
2
Inc. publishing as Prentice Hall
Statistics
 The term statistics can refer to numerical facts such as

averages, medians, percents, and index numbers that
help us understand a variety of business and economic
situations.
 Statistics can also refer to the art and science of
collecting, analyzing, presenting, and interpreting
data.
Slide
3
Applications in
Business and Economics
 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.
 Finance
Financial advisors use price-earnings ratios and
dividend yields to guide their investment advice.
Slide
4
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.
 Production
A variety of statistical quality control charts are used
to monitor the output of a production process.
 Information Systems
A variety of statistical information helps administrators
assess the performance of computer networks.
Slide
5
Data and Data Sets
 Data are the facts and figures collected, analyzed,

and summarized for presentation and interpretation.
 All the data collected in a particular study are referred

to as the data set for the study.
Slide
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Elements, Variables, and Observations
 Elements are the entities on which data are collected.

 A variable is a characteristic of interest for the elements.
 The set of measurements obtained for a particular
element is called an observation.
 A data set with n elements contains n observations.
 The total number of data values in a complete data
set is the number of elements multiplied by the
number of variables.
Slide
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Data, Data Sets,
Elements, Variables, and Observations
Observation Variables
Element
Names Stock Annual Earn/
Company Exchange Sales($M) Share($)
Dataram NQ 73.10 0.86

EnergySouth N 74.00 1.67
Keystone N 365.70 0.86
LandCare NQ 111.40 0.33
Psychemedics N 17.60 0.13
Data Set
Slide
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Procedures of Statistics
Goal: Convert data into meaningful information!

1. Descriptive procedures
• Collecting, presenting, and describing data.
2. Inferential procedures
• Drawing conclusions and/or making decisions
concerning a population based only on sample data
• Use probability to determine how confident can be
that the conclusions we make are correct
( confidence Intervals and margin errors)
Copyright ©2011 Pearson1-9 Education, Slide
9
10
hing as
all
Descriptive Procedures
 Collect data
• e.g., Survey, Observation,
Experiments
 Present data
• e.g., Charts and graphs
 Describe data
• e.g., Sample mean =  xi
n
Slide
10
Descriptive Statistics
 Most of the statistical information in newspapers,

magazines, company reports, and other publications
consists of data that are summarized and presented
in a form that is easy to understand.
 Such summaries of data, which may be tabular,
graphical, or numerical, are referred to as descriptive
statistics.
Slide
11
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 her shop. She examines
50 customer invoices for tune-ups. The costs of parts,
rounded to the nearest dollar, are listed on the next
slide.
Slide
12
Example: Hudson Auto Repair
 Sample of Parts Cost ($) for 50 Tune-ups

91 78 93 57 75 52 99 80 97 62
71 69 72 89 66 75 79 75 72 76
104 74 62 68 97 105 77 65 80 109
85 97 88 68 83 68 71 69 67 74
62 82 98 101 79 105 79 69 62 73
Slide
13
Tabular Summary:
Frequency and Percent Frequency
 Example: Hudson Auto
Parts Percent
Cost ($) Frequency Frequency
50-59 2 4
60-69 13 26 (2/50)100
70-79 16 32
80-89 7 14
90-99 7 14
100-109 5 10
50 100
Slide
14
Graphical Summary: Histogram
 Example: Hudson Auto

18 Tune-up Parts Cost
16
14
Frequency
12
10
8
6
4
2
Parts
5059 6069 7079 8089 9099 100-110 Cost ($)
Slide
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Numerical Descriptive Statistics
 The most common numerical descriptive statistic

is the average (or mean).
 The average demonstrates a measure of the central
tendency, or central location, of the data for a variable.
 Hudson’s 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).
Slide
16
Inferential Procedures
 Making statements about a population by

examining sample results
Sample statistics Population parameters
(known) Inference
unknown, but can
be estimated from
sample evidence
Sample Population
Copyright ©2011 Pearson 1-17
Education, Slide
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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
Education, Slide
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Why Sample?
 Less time consuming than a census

 Less costly to administer than a census
 It is possible to obtain statistical results of a
sufficiently high precision based on samples
Strive for representative samples to reflect the population

of interest accurately!
Education, Slide
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Populations and Samples
 A population is the entire collection of things under

consideration and referred to as the frame
• The sampling unit is each object or individual in the frame
• A parameter is a summary measure computed to describe a
characteristic of the population
 A sample is a subset of the population selected for

analysis
• A statistic is a summary measure computed to describe a
characteristic of the sample drawn from the population
Education, Slide
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Parameters and Statistics
It is essential that we draw distinctions between

parameters and statistics
Parameters Statistics
Source Population Sample
Calculated? No Yes
Constants? Yes No
Examples μ, σ, p x , s, pˆ
21 Slide
21
30/09/20or Statistics
Business duplicated,IIor posted to a publicly accessible website, in whole or in part.
Techniques for Inferential Procedures
Estimation and Hypothesis Testing
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
Education, Slide
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Sampling Techniques
Sampling Techniques
Nonstatistical Sampling Statistical Sampling
Convenience Simple Systematic

Random
Judgment Cluster
Stratified
Education, Slide
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Nonstatistical Sampling
 Convenience
• Collected in the most convenient manner for the
researcher
 Judgment
• Based on judgments about who in the population
would be most likely to provide the needed
information
Education, Slide
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Statistical Sampling
 Items of the sample are chosen based on known or

calculable probabilities
Statistical Sampling
(Probability Sampling)
Simple Random Stratified Systematic Cluster
Education, Slide
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Simple Random Sampling
 Every possible sample of a given size has an equal
chance of being selected
 Selection may be with replacement or without
replacement
 The sample can be obtained using a table of random
numbers or computer random number generator
 A random number generator (provided in Excel for
example) can be used to select a random sample (Figure
1.2)
Education, Slide
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Sampling Methods
Figure 1.2 Random Number Generation
Slide
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27 or duplicated,
© Pearson or posted to a publicly accessible website, in whole or in part.
Education 2011
Stratified Random Sampling
 Divide population into subgroups (called strata)

according to some common characteristic
• e.g., gender, income level
 Select a simple random sample from each subgroup
 Combine samples from subgroups into one
Population
Divided
into 4
strata
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied Sample
Slide
28
Systematic Random Sampling
 Decide on sample size: n

 Divide ordered (e.g., alphabetical) frame of N
individuals into groups of k individuals: k=N/n
 Randomly select one individual from the 1st group
 Select every kth individual thereafter
N = 64
n=8 First Group
k=8
Slide
Education, 29
orPrentice
Inc. publishing as duplicated,
Hall or posted to a publicly accessible website, in whole or in part.
Cluster Sampling
 Divide population into several “clusters,” each

representative of the population (e.g., county)
 Select a simple random sample of clusters
• All items in the selected clusters can be used, or items can be
chosen from a cluster using another probability sampling
technique
Population
divided into
16 clusters. Randomly selected
clusters for sample
Slide
30
Random Variables
 A random variable represents a possible numerical

value from an uncertain event.
 Discrete random variables produce outcomes that
come from a counting process (e.g. number of classes
you are taking (1,2,3,4).
 Continuous random variables produce outcomes that
come from a measurement (e.g. your annual salary, or
your weight) (50,5; 60,345,…).
31 Slide
31
Random Variables
Random
Variables
Discrete Continuous
Random Variable Random Variable
32 Slide
32
Sampling distribution
 These procedures share a fundamental concept

 Sampling distribution
• A theoretical distribution of the possible values of
samples statistics if an infinite number of same-
sized samples were taken from a population.
30/09/20Statistics
Business II 33 Slide
33
Discrete vs. continuous
distributions
 Discrete distributions – constructed from discrete

(individually distinct) random variables
 Continuous distributions – based on continuous random
variables
 Random Variable - a variable which contains the
outcomes of a chance experiment
34 Slide
34
Discrete vs. continuous
distributions
 Categories of Random Variables

• Discrete Random Variable - the set of all possible values is at most a
finite or a countable infinite number of possible values (they are
generated from experiments in which things are counted)
• Continuous Random Variable - takes on values at every point over a
given interval (they are usually generated from experiments in which
things are measured)
35 Slide
35
Examples of discrete and
continuous random variables
 Measure the arrivals of automobiles at a turnpike
tollbooth during a 30-second period. CR
 Measure the time between the completion of two tasks
in a production line. CR
 Measuring the time between customer arrivals at a retail
outlet CR
 Counting the number of people who arrive at a store
during a five-minute period DR
 Determine the number of defects in a batch of 50 items
DR
 Measuring the weight of newly designed automobiles
CR
36 Slide
36
Data Types
Data
Qualitative Quantitative
(Categorical) (Numerical)
Examples:
 Marital Status
 Political Party Discrete Continuous
 Eye Color
Examples: Examples:
(Defined categories)
 Number of Children
Weight 
 Defects per hour

 Voltage
(Counted items)
(Measured
characteristics)
1-37
Copyright ©2011 Pearson Education, Slide
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Data Types
 Time Series Data

• Ordered data values observed over time
 Cross Sectional Data

• Data values observed at a single point in time
Education, Slide
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Data Types
Sales (in $1000’s)

2003 2004 2005 2006 Time
Atlanta 435 460 475 490 Series
Boston 320 345 375 395 Data
Cleveland 405 390 410 395

Denver 260 270 285 280
Cross Sectional
Data
Education, Slide
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Time Series Data
 Graph of Time Series Data
Slide
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Data Measurement Levels
(Scales of Measurement)
Highest Level
Measurements
e.g., temperature e.g.,
Ratio/Interval Data Complete Analysis
age range 25-34
Rankings Higher Level

Ordered Categories Ordinal Data Mid-level Analysis
Categorical Codes Lowest Level

e.g., ID Numbers, gender Nominal Data Basic Analysis
Education, Slide
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Scales of Measurement
 Nominal
Example:
Students of a university are classified by the
school in which they are enrolled using a
nonnumeric label such as Business, Healthcare,
Humanities, Education, and so on.
Alternatively, a numeric code could be used for
the school variable (e.g. 1 denotes Business,
2 denotes Healthcare, 3 denotes Humanities, 4 denotes
Education, and so on).
Slide
42
Scales of Measurement ( other examples)
A nominal scale classifies data into distinct categories in

which no ranking is implied.
Categorical Variables Categories
Personal Computer Yes / No

Ownership
Type of Stocks Owned Growth / Value/ Other
Internet Provider Microsoft Network / AOL/ Other
Slide
43
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-43
 Ordinal
Example:
Students of a university are classified by their
class standing using a nonnumeric label such as
Freshman, Sophomore, Junior, or Senior.
Alternatively, a numeric code could be used for
the class standing variable (e.g. 1 denotes
Freshman, 2 denotes Sophomore, and so on).
Slide
44
Scales of Measurement (other examples)
An ordinal scale classifies data into distinct categories in

which ranking is implied
Categorical Variable Ordered Categories

Freshman, Sophomore, Junior,
Student class designation
Senior
Product satisfaction Satisfied, Neutral, Unsatisfied
Professor, Associate Professor,
Faculty rank
Assistant Professor, Instructor
AAA, AA, A, BBB, BB, B, CCC, CC,
Standard & Poor’s bond ratings
C, DDD, DD, D
Student Grades A, B, C, D, F
Slide
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 Interval
Example:
Melissa has an SAT score of 1985, while Kevin
has an SAT score of 1880. Melissa scored 105
points more than Kevin.
Slide
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 Ratio
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.
Slide
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Interval and Ratio Scales ( other examples)
Slide
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Steps to Categorizing Data
1. Identify each factor in the data set

2. Determine if the data are time-series or cross-
sectional
3. Determine which factors are quantitative and which
are qualitative
4. Determine the level of data measurement
• e.g., nominal, ordinal, ratio, interval…
Education, Slide
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Procedures for Collecting Data
Data Collection Procedures
Experiments Written
questionnaires
Telephone Direct observation and

surveys personal interview
Education, Slide
50
Data Sources
 Existing Sources
Internal company records – almost any department

Business database services – Dow Jones & Co.
Government agencies - U.S. Department of Labor
Industry associations – Travel Industry Association
of America
Special-interest organizations – Graduate Management
Admission Council
Internet – more and more firms
Slide
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Data Sources
 Data Available From Internal Company Records
Employee records name, address, social security number

Production records part number, quantity produced,
direct labor cost, material cost
Inventory records part number, quantity in stock,
reorder level, economic order quantity
Sales records product number, sales volume, sales
volume by region
Credit records customer name, credit limit, accounts
receivable balance
Customer profile age, gender, income, household size
Slide
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Data Sources
 Data Available From Selected Government Agencies
Census Bureau Population data, number of

www.census.gov households, household income
Federal Reserve Board Data on money supply, exchange

www.federalreserve.gov rates, discount rates
Office of Mgmt. & Budget Data on revenue, expenditures, debt

www.whitehouse.gov/omb of federal government
Department of Commerce Data on business activity, value of
www.doc.gov shipments, profit by industry
Bureau of Labor Statistics Customer spending, unemployment

www.bls.gov rate, hourly earnings, safety record
Slide
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Chapter Summary
 Reviewed key data collection methods

 Introduced key definitions:
Population vs. Sample Primary vs. Secondary data types
Qualitative vs. Quantitative data Time Series vs. Cross-Sectional data
 Examined descriptive vs. inferential procedures

 Described different sampling techniques
 Reviewed data types and measurement levels
Education, Slide
54

Chapter 1: Data and Statistics: The Where, Why, and How of Data Collection

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Chapter 1: Data and Statistics: The Where, Why, and How of Data Collection

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Chapter 1: Data and Statistics

The Where, Why, and How of

 The term statistics can refer to numerical facts such as

 Data are the facts and figures collected, analyzed,

 All the data collected in a particular study are referred

 Elements are the entities on which data are collected.

Dataram NQ 73.10 0.86

Goal: Convert data into meaningful information!

 Most of the statistical information in newspapers,

The manager of Hudson Auto would like to have a

 Sample of Parts Cost ($) for 50 Tune-ups

 Example: Hudson Auto

 The most common numerical descriptive statistic

 Making statements about a population by

 Less time consuming than a census

Strive for representative samples to reflect the population

 A population is the entire collection of things under

 A sample is a subset of the population selected for

It is essential that we draw distinctions between

Nonstatistical Sampling Statistical Sampling

Convenience Simple Systematic

 Items of the sample are chosen based on known or

Simple Random Stratified Systematic Cluster

Figure 1.2 Random Number Generation

 Divide population into subgroups (called strata)

 Decide on sample size: n

 Divide population into several “clusters,” each

 A random variable represents a possible numerical

 These procedures share a fundamental concept

 Discrete distributions – constructed from discrete

 Categories of Random Variables

 Defects per hour

 Time Series Data

 Cross Sectional Data

Sales (in $1000’s)

Cleveland 405 390 410 395

 Graph of Time Series Data

Rankings Higher Level

Categorical Codes Lowest Level

A nominal scale classifies data into distinct categories in

Categorical Variables Categories

Personal Computer Yes / No

Type of Stocks Owned Growth / Value/ Other

Internet Provider Microsoft Network / AOL/ Other

An ordinal scale classifies data into distinct categories in

Categorical Variable Ordered Categories

1. Identify each factor in the data set

Data Collection Procedures

Telephone Direct observation and

Internal company records – almost any department

 Data Available From Internal Company Records

Employee records name, address, social security number

 Data Available From Selected Government Agencies

Census Bureau Population data, number of

Federal Reserve Board Data on money supply, exchange

Office of Mgmt. & Budget Data on revenue, expenditures, debt

Bureau of Labor Statistics Customer spending, unemployment

 Reviewed key data collection methods

 Examined descriptive vs. inferential procedures

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