Business Statistics:

Chapter 1

Introduction

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-1

 Learning Objectives

In this chapter you learn:

 Definition of statistics, Statistics Vocabulary

 How Statistics is used in business
 The sources of data used in business
 The types of data used in business
 Types of Sampling methods

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-2

 Introduction
It is not precisely known how the word “Statistics” was
originated. However, most people believe that the term
statistics has been derived from the Latin word “Status”
meaning political state.
Some believed that the word statistics has been originated
from the Italian word ”Statista”, the French word
“Statistique” and the German word “Statistik”.
This background tends to suggests that the term statistics
has its origin from the ancient time.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-3

 What is statistics?

 A branch of mathematics taking and transforming

numbers into useful information for decision makers
 Methods for processing & analyzing numbers

 Methods for helping reduce the uncertainty inherent

in decision making
According to Coxton and Cowden, Statistics is the
science which deals with the collection, analysis
and interpretation of numerical data.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-4

 Continue….

Statistics is used in three distinct senses:

First, by statistics we often mean numerical data relating
to any field of enquiry. For example, statistics of prices,
statistics of exports, statistics of births and deaths and
so on.
Second, by statistics we refer to the scientific method by
which we collect, analyze, and interpret numerical data.
Third, the term statistics is frequently used to refer to any
numerical features of a set of data based on sample
rather than the population.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-5

 Objectives of statistics
The main purpose of statistics is the collection of data
regarding different aspects of life, presentation, analysis and
coming to the conclusion with a reasonable interpretation. In
this respect, the objectives of statistics are as bellow-
1. Statistics collects the numerical and analytical data regarding

various aspects of life.

2. It presents the collected data attractively and simplifies
them.
3. Analyzing the mathematical data.

4. It presents them to us in a compact form.

5. It deals with various methods of experiments.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-6

 Why Study Statistics?

Decision Makers Use Statistics To:

 Present and describe business data and information properly

 Draw conclusions about large groups of individuals or items,
using information collected from subsets of the individuals or
items.
 Make reliable forecasts about a business activity
 Improve business processes

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-7

 Types of Statistics

 Statistics
 The branch of mathematics that transforms data into
useful information for decision makers.

Descriptive Statistics Inferential Statistics

Collecting, summarizing, and Drawing conclusions and/or

describing data making decisions concerning a
population based only on sample
data

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-8

 Descriptive Statistics

 Collect data
 e.g., Survey
 Present data
 e.g., Tables and graphs
 Characterize data
X i
 e.g., Sample mean = n

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-9

 Inferential Statistics
 Estimation
 e.g., Estimate the population
mean weight using the sample
mean weight
 Hypothesis testing
 e.g., Test the claim that the
population mean weight is 120
pounds

Drawing conclusions about a large group of

individuals based on a subset of the large group.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-10

 Properties of Statistics
Statistics are aggregate of interrelated information:
Individual or segregated information cannot be statistics.
Example: 10,20,30 do not belong to statistics. But if we say
that the spans of service here of the three persons are
10,20,30 years respectively, then it will be statistics.
Statistics are numerically expressed: if an information tends
to be a statistics, it must be expressed in number. Example:
Life span, height, weight etc.
Statistics should have the property of being varied by
multiplicity of causes:
Example: the weight of an individual depends primarily on
his/her age and height. Production of paddy dependent on
rainfall, fertilizer used, soil fertility.
Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-11
 Continue…..

Statistics are comparable and homogeneous: It is necessary

for the data of statistics to be homogeneous and comparable.
Statistics should be obtained for pre-determined purposes:
There should be a clear, well defined and unambiguous
statement regarding the purpose of data collection.
Statistics are enumerated or estimated according to
reasonable standard of accuracy: The data should be
proper and correct as far as possible so that they can be
employed and applied confidently for a special purpose.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-12

 Basic Vocabulary of Statistics

VARIABLE
A variable is a characteristic of an item or individual.
Classification of Variable: We can classify the variable according to the
Characteristics into two Groups:
1.Qualitative Variables: Color, Occupation etc.
2.Quantitative Variables: Income of a people.
Quantitative variables can be further classifies into two sub-groups:
I.Discrete variable
II.Continuous variables
DATA
Data are the different values associated with a variable.
CONSTANT
A numerical characteristics which does never change or vary it’s value is
termed as constant.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-13

 Basic Vocabulary of Statistics
POPULATION
Population refers to the totality of all the items or individuals having same
specific characteristics.
A population can be classified in different types. Such as
A.Finite population
B.Infinite population

SAMPLE
A sample is the portion of a population selected for analysis.

PARAMETER
A parameter is a numerical measure that describes a characteristic of a
population.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-14

 Population vs. Sample

Population Sample

Measures used to describe the Measures computed from

population are called parameters sample data are called statistics

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-15

 Types of Measurement scale

Measurement: Measurement is a process of assigning numbers to some

variables or events according to scientific rules.
Types of Measurement Scale: To measure a variable there are various
way. We classify then ways into four scales of measurement.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-16

 Nominal Scale
The measurement scale in which numbers are assigned to the
categories or variable values for identification only is called a
nominal scale. Here, we can set numerical values for the
names but can not order them meaningfully. By setting values
we can only categorize them. The variable which is measured
in nominal scale is known as Nominal variable.
Example: Religion, color etc.
The nominal scale has the following properties:
 Data classification are mutually exclusive

 Data classification have no logical order

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-17

 Ordinal Scale
The measurement scale in which numbers are assigned to the
categories or variable values for identification as well as
ranking is called an ordinal scale. Here the magnitude is used
only for comparison and not for any mathematical operation.
The variable which is measured in ordinal scale is known as
ordinal variable.
Example: Economic status.
Low=1,Middle class=2, upper class=3
The ordinal scale has the following properties:
 Data classification are mutually exclusive

 Data classification are ranked or ordered according to

particular trait they possess.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-18
 Interval Scale
The measurement scale in which numbers are arranged to the
variable values in such a way that the level of measurement is
broken down on a scale of equal units and the zero value on the
scale is not absolute zero is called an interval scale. The
variable which is measured in interval scale is known as interval
variable.
Example: Temperature, I.Q score.
Here the thermometer records temperature in terms of degrees
and 1 degree change (increase or decrease) in temperature
implies the same amount of heat.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-19

 Ratio Scale

The measurement scale in which numbers are assigned to

the variable values in such a way that the level of
measurement is broken down on a scale of equal units and
the zero value on the scale is absolutely zero is called a
ratio scale. The variable that is measured in ratio scale is
known as ratio variable.
Example: height, weight.
The interval scale has following property:
The zero point is the absence of the characteristic.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-20

 Comparison of the levels of measurement

Levels Arithmetic Features Examples

Nominal Counting Categories Religion
Ordinal Counting Categories Economic status
Ranking Ranks
Interval Counting Categories I.Q. score
Ranking Ranks Temperature
Addition Has equal units
Subtraction
Ratio Counting Categories Family size
Ranking Ranks
Addition Has equal units
Subtraction Has absolute zero
Multiplication
Division

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-21

 Limitations of Statistics

The following are the important limitations of the science

of statistics:
1. Statistics does not deal with isolated measurement

2. Statistics deals only with quantitative characteristics

3. Statistical results are true only on an average

4. Statistics is only a mean.

5. Statistics can be misused.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-22

 Distrust of Statistics
By distrust of statistics we mean a lack of confidence in statistical
statements and statistical methods. It is often believed that
“Statistics can prove anything” The following three reasons
account for such notions being held by people about statistics:
1. Figures are convincing and therefore, people are easily led to

believe them.
2. They can be manipulated in such a manner as to establish

foregone conclusions.
3. Even if correct figures are used, these may be presented in

such a manner that the reader is mislead.

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-23

 Thank You

Business Statistics: A First Course, 5e © 2009 Prentice-Hall, Inc. Chap 1-24

 http://182.160.97.198:8080/xmlui/handle/1234567
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