Session 1

Statistics and Data

Which is Best—the Mean, Median, or Mode?
When you have a symmetrical distribution for continuous data, the mean, median, and mode are
equal. ...
However, if you have a skewed distribution, the median is often the best measure of central
tendency.
When you have ordinal data, the median or mode is usually the best choice.
Chapter 1 Learning Objectives (LOs)
LO 1.1 Describe the importance of statistics.

LO 1.2 Differentiate between descriptive statistics

and inferential statistics.

LO 1.3 Explain the various data types.

LO 1.4 Describe variables and types of

measurement scales.
 Tween Survey (An Introductory Case)
• Luke McCaffrey owns a ski resort two hours outside Boston,
Massachuetts and is in need of a new marketing manager. He is a fairly
tough interviewer and believes that the person in this position should
have a basic understanding of data fundamentals, including some
background with statistical methods. Luke is particularly interested in
serving the needs of “tween” population(children aged 8 to 12 years
old). He believes that tween spending power has grown over the past
few years, and he wants their skiing experience to be memorable so
that they want to return.
• At the end of last year’s ski season, Luke asked 20 tweens four specific
questions.
Survey questions asked to 20 tweens:
Q1. On your car drive to the resort, which radio station was playing?

Q2. On a scale 1 to 4, rate the quality of the food at the resort (where 1 is poor,
2 is fair, 3 is good, and 4 is excellent).

Q3. Presently, the main dining area closes at 3:00 pm. What time do you think
it should close?

Q4. How much of your own money did you spend at the lodge today?

The responses to these are shown in the next Table; these data are also found on
text website and are labeled Tween Survey.
Introductory Case: Tween Survey (2)
Here are the survey responses from the 20 tweens:
Introductory Case: Tween Survey (3)

1. Summarize the results of the survey.

2. Provide management with suggestions for
improvement.
Introductory Case: Tween Survey (3)

Luke asks each job applicant to use the information to:

1. Classify the tween responses into the appropriate measurement scale

2. Compare and constrast the type of information that can be extracted
from each measurement scale
3. Given the results of the survey, provide management with suggestion
for improvement
1.1 The Relevance of Statistics (1)

LO 1.1 Describe the importance of statistics.

• With knowledge of statistics:

- Avoid risk of making uninformed
decisions and costly mistakes.
- Differentiate between sound statistical
conclusions and questionable conclusions.
1.1 The Relevance of Statistics (2)

Example 1
• Headline of newspaper states “What global
warming?” after record amounts of snow in the
winter of 2010.

• Problem with Conclusion: Incorrect to draw conclusion based

on one year’s worth of data.
1.1 The Relevance of Statistics (3)

Example 2
• A gambler predicts that he will roll a 7 on his next roll of the
dice since he was unsuccessful in the last three rolls.

 Problem with Conclusion. The probability of rolling a 7 stays

constant with each roll of the dice.
1.1 The Relevance of Statistics (4)

Example 3
• A Boston Globe poll reported a 15-point lead for Martha
Coakley in the election for U.S. senator for Massachusetts,
implying an easy win for Coakley. Nine days later, Scott
Brown wins.

 Problem with Conclusion. The Globe’s prediction was based

on old information and included people that were unlikely to
vote.
 1.1 The Relevance of Statistics (5)

Example 4
• The CFO of Starbucks Corp. claims that business is picking up
since sales at stores open at least a year climbed 4% in the
quarter ended December 27, 2009.

 Problem with Conclusion. The CFO overstated the company’s

financial position by failing to mention that Starbucks closed
more than 800 stores over the past few years.
1.1 The Relevance of Statistics (6)

Example 5
• Researchers found that infants who sleep with a
nightlight are much more likely to develop myopia
later in life.

Problem with Conclusion. This is an example of the

correlation-to-causation fallacy. Even if two variables are
highly correlated, one does not necessarily cause the other.
 1.2 What Is Statistics? (1)

LO 1.2 Differentiate between descriptive statistics and inferential statistics.

• Statistics is the methodology of extracting useful

information from a data set.
• To do good statistical analysis, you must
• Find the right data.
• Use the appropriate statistical tools.
• Clearly communicate the numerical information
into written language.
 1.2 What Is Statistics? (2)
• Two branches of statistics
• Descriptive Statistics
• collecting, organizing, and presenting the data.
• Inferential Statistics
• drawing conclusions about a population based on
sample data from that population.
 1.2 What Is Statistics? (3)
• Population
• Consists of all items of interest.
• Sample
• A subset of the population.
• A sample statistic is calculated from the sample data
and is used to make inferences about the unknown
population parameter.
The Need for Sampling

LO 1.3 Explain the various data types.

• Reasons for sampling from the population

• Too expensive to gather information on the entire
population.
• Often impossible to gather information on the
entire population.
Types of Data (1)

• Cross-sectional data
• Data collected by recording a characteristic of many subjects
at the same point in time, or without regard to differences in
time.
• Subjects might include individuals, households, firms,
industries, regions, and countries.
• The survey data from the Introductory Case is an example of
cross-sectional data.
Types of Data (2)

• Time series data

• Data collected by recording a characteristic of a subject
over several time periods.
• Data can include hourly, daily, weekly, monthly, quarterly,
or annual observations.
• This graph plots the
national homeownership
rate (%) from 2001 through
2015.
 Types of Data (3)
• Structured data
• Data that has a well-defined length and format.
• Numbers, dates, strings of words, and so on.
• Unstructured data
• Data that does not conform to a predefined row-column
format.
• Reports, emails, multimedia, and so on.
• Big data
• Massive volume of data that is difficult to manage, process,
and analyze using traditional tools.
Getting Started on the Web
• There is an abundance of data on the Internet. Here
are a few websites for data.
1.3 Variables and Scales of Measurement
(1)
LO 1.4 Describe variables and types of measurement scales.

• A variable is the general characteristic being

observed on objects of interest.
• Types of Variables
• Qualitative – gender, race, political affiliation
• Quantitative – test scores, age, weight
• Discrete
• Continuous
1.3 Variables and Scales of
Measurement (2)
• Types of Quantitative Variables
• Discrete
• A discrete variable assumes a countable
number of distinct values.
• Examples: Number of children in a family,
number of points scored in a basketball
game.
1.3 Variables and Scales of
Measurement (3)
• Types of Quantitative Variables
• Continuous
• A continuous variable can assume an
uncountable number of values within an
interval.
• Examples: Weight, height, time, investment
return.
Nominal Scale. Nominal variables (also called as categorical variables) can be placed into categories.
 They don’t have a numeric value and so cannot be added, subtracted, divided or multiplied.
They also have no order; if they appear to have an order then you probably have ordinal variables instead.

Ordinal Scale. The ordinal scale contains things that you can place in order.
For example, hottest to coldest, lightest to heaviest, richest to poorest.
Basically, if you can rank data by 1st, 2nd, 3rd place (and so on), then you have data that’s on an ordinal scale.

 Interval Scale. An interval scale has ordered numbers with meaningful divisions.
Temperature is on the interval scale: a difference of 10 degrees between 90 and 100 means the same as 10 degrees
between 150 and 160.
Compare that to high school ranking (which is ordinal), where the difference between 1st and 2nd might be .01 and
between 10th and 11th .5.
If you have meaningful divisions, you have something on the interval scale

Ratio Scale. The ratio scale is exactly the same as the interval scale with one major difference: zero is meaningful.
For example, a height of zero is meaningful (it means you don’t exist).
Compare that to a temperature of zero, which while it exists, it doesn’t mean anything in particular (although
admittedly, in the Celsius scale it’s the freezing point for water).
1.3 Variables and Scales of Measurement
(4)
Scales of Measure

- Nominal
Qualitative Variables
- Ordinal

- Interval
Quantitative Variables
- Ratio
1.3 Variables and Scales of Measurement
(6)
• The Ordinal Scale
• Ordinal data may be categorized and ranked with respect to
some characteristic or trait.
• For example, instructors are often evaluated on an ordinal scale
(excellent, good, fair, poor).

• Differences between categories are meaningless because the

actual numbers used may be arbitrary.
• There is no objective way to interpret the difference between
instructor quality.
1.3 Variables and Scales of Measurement
(9)
• The Interval Scale
• Data may be categorized and ranked with respect to some
characteristic or trait.
• Differences between interval values are meaningful. Thus
the arithmetic operations of addition and subtraction are
meaningful.
• No “absolute 0” or starting point defined.
• Meaningful ratios may not be obtained.
 1.3 Variables and Scales of Measurement
(10)
• The Interval Scale
• For example, consider the Fahrenheit
scale of temperature.
• This scale is interval because the data
are ranked and differences (+ or −)
may be obtained.
• But there is no “absolute 0” (What
does 0°F mean?)
1.3 Variables and Scales of Measurement
(11)
• The Ratio Scale
• The strongest level of measurement.
• Ratio data may be categorized and ranked with respect to
some characteristic or trait.
• Differences between interval values are meaningful.
• There is an “absolute 0” or defined starting point. “0” does
mean “the absence of …” Thus, meaningful ratios may be
obtained.
 1.3 Variables and Scales of Measurement
(12)
• The Ratio Scale

• The following variables are measured on a ratio scale:

• General Examples: Weight, Time, and Distance

• Business Examples: Sales, Profits, and Inventory Levels

Synopsis of Tween Survey

• 60% of the tweens listened to KISS108. The resort may want to direct its
advertising dollars to this station.
• 55% of the tweens felt that the food was, at best, fair. (11 out of 20)
• 95% of the tweens would like the dining area to remain open later. (19 out of
20)
• 85% of the tweens spent their own money at the lodge. (17 of the 20 tween)