Statistics for Business

and Economics, Slides by

11 E JOHN
LOUCKS
Anderson/Sweeney/Williams St. Edward’s
University
Chapter 1
I need
Data and Statistics
Applications in Business and Economics help!
 Data
 Data Sources
 Descriptive Statistics
 Statistical Inference
 Computers and
Statistical Analysis
Applications in
Business
Accounting and Economics
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
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.
 Applications in
Business and Economics
 Finance
Financial advisors use price-earnings ratios and
dividend yields to guide their investment
recommendations.
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 elements.
 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.
 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
Scales of Measurement
Scales
Scales of
of measurement
measurement include:
include:
Nominal Interval
Ordinal Ratio

The
The scale
scale determines
determines thethe 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.
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.
 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 soso 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. 11 denotes
denotes Business,
Business,
22 denotes
denotes Humanities,
Humanities, 33 denotes
denotes Education,
Education, and
and
so
so on).
on).
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.
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 asas
Freshman,
Freshman, Sophomore,
Sophomore, Junior,
Junior, or
or Senior.
Senior.
Alternatively,
Alternatively, aa numeric
numeric code
code could
could bebe used
used for
for
the
the class
class standing
standing variable
variable (e.g.
(e.g. 11 denotes
denotes
Freshman,
Freshman, 22 denotes
denotes Sophomore,
Sophomore, and and so
so on).
on).
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.
Scales of Measurement
 Interval

Example:
Example:
Melissa
Melissa has
has an
an SAT
SAT score
score of
of 1205,
1205, while
while Kevin
Kevin
has
has an
an SAT
SAT score
score of
of 1090.
1090. Melissa
Melissa scored
scored 115
115
points
points more
more than
than Kevin.
Kevin.
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.
Scales of Measurement
 Ratio

Example:
Example:
Melissa’s
Melissa’s college
college record
record shows
shows 36
36 credit
credit hours
hours
earned,
earned, while
while Kevin’s
Kevin’s record
record shows
shows 7272 credit
credit
hours
hours earned.
earned. Kevin
Kevin has
has twice
twice as
as many
many credit
credit
hours
hours earned
earned asas Melissa.
Melissa.
 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 statistical
statistical
analysis
analysis when
when the
the data
data are
are quantitative.
quantitative.
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
 Quantitative Data

Quantitative
Quantitative data
data indicate
indicate how
how many
many or
or how
how much:
much:

discrete,
discrete, ifif measuring
measuring how
how many
many

continuous,
continuous, ifif 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.
 Scales of Measurement

Data

Qualitative Quantitative

Numerical Non-numerical Numerical

Nominal
Nominal Ordinal Nominal Ordinal Interval Ratio
 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 ofof building
building
permits
permits issued
issued in
in June
June 2007
2007 in
in each
each of
of the
the counties
counties
of
of Ohio
Ohio
 Time Series Data

Time
Time series
series data
data are
are collected
collected over
over several
several time
time
periods.
periods.

Example:
Example: datadata detailing
detailing the
the number
number of
of building
building
permits
permits issued
issued in
in Lucas
Lucas County,
County, Ohio
Ohio in
in each
each of
of
the
the last
last 36
36 months
months
Data Sources
 Existing Sources

Within a firm – 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
Data Sources
 Statistical Studies
In
In experimental
experimental studies
studies the
the variable
variable of
of interest
interest is
is
first
first identified.
identified. Then
Then one
one or
or more
more other
other variables
variables
are
are identified
identified and
and controlled
controlled so
so that
that data
data can
can be
be
obtained
obtained about
about how
how they
they influence
influence the
the variable
variable of
of
interest.
interest.

In
In observational
observational (nonexperimental)
(nonexperimental) studies
studies no
no
attempt
attempt is
is made
made toto control
control or
or influence
influence the
the
variables
variables of
of interest.
interest. a survey is a good example
Data Acquisition Considerations
Time Requirement
• Searching for information can be time consuming.
• Information may no longer be useful by the time it
is available.
Cost of Acquisition
• Organizations often charge for information even
when it is not their primary business activity.
Data Errors
• Using any data that happen to be available or were
acquired with little care can lead to misleading
information.
Descriptive Statistics
 Descriptive statistics are the tabular, graphical, and numerical methods
used to summarize and present data.
 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.
 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
Tabular Summary:
Frequency and Percent Frequency
Parts 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
Graphical Summary:
Tune-up Parts Cost
Histogram
18
16
14
Frequency

12
10
8
6
4
2
Parts
50-59 60-69 70-79 80-89 90-99 100-110 Cost ($)
Numerical Descriptive
 The most common numerical descriptive statistic
Statistics
is the average (or mean).
 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).
 Statistical Inference

Population - the set of all elements of interest in a

particular study
Sample - a subset of the population

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

Process of Statistical Inference
1. Population
consists of all tune- 2. A sample of 50
ups. Average cost of engine tune-ups
parts is unknown. is examined.

3. The sample data

4. The sample average provide a sample
is used to estimate the average parts cost
population average. of $79 per tune-up.
Computers and Statistical
 Statistical analysis typically involves working with
Analysis
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.
End of Chapter 1