Statistical Analysis with Software

Application

Chapter 1

Introduction
 Learning Objectives

In this chapter you learn:

 How businesses use statistics

 The basic vocabulary of statistics
 The types of data used in business
 How to use Microsoft Excel and / or
Minitab with this book
 Why Learn Statistics

Make better sense of the world Make better business decisions

 Internet articles / reports  Business memos

 Magazine articles  Business research

 Newspaper articles  Technical journals

 Television & radio reports  Technical reports

 In Business, Statistics Has
Many Important Uses
 To summarize business data

 To draw conclusions from business data

 To make reliable forecasts about business

activities

 To improve business processes

 Two Different Branches Of
Statistics Are Used In Business
Statistics
The branch of mathematics that transforms data into
useful information for decision makers.

Descriptive Statistics Inferential Statistics

Collecting, summarizing, Using data collected from a

presenting and analyzing data small group to draw conclusions
about a larger group
 Descriptive and Inferential Statistics

Dataset- is the collection of the values of the characteristic being

studied.
Observation-is the value of the data set.

Element or unit-is the object or entity that is assigned a

value.
Example:
Suppose that the ages of the students in all the sections of a calculus course in a
given semester are recorded. A dataset is the whole set of numbers that represent the
ages of the student. An observation is the age of a certain student in those calculus
classes.
 Table 1.1 Frequency Table

Types of Buses No. of Passenegrs Percentage

(Frequency)
Bus Express(De Luxe) 67 18.77
Bue Express (Air- 75 21.01
conditioned)
Bus (King Long) 80 22.41
NZI (De Luxe) 63 17.65
NZI (Fully air-conditioned) 72 20.17
Total 357 100.00
 These Two Branches Are Used
In The Important Activities
 To summarize business data
 Descriptive methods used to create charts & tables
 To draw conclusions from business data
 Inferential methods used to reach conclusions about
a large group based on data from a smaller group
 To make reliable forecasts about business
activities
 Inferential methods used to develop, quantify, and
improve the accuracy of predictive models
 To improve business processes
 Involves managerial approaches like Six Sigma
 Descriptive Statistics

 Collect data
 e.g., Survey
 Present data
 e.g., Tables and graphs
 Characterize data
 e.g., The sample mean
 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 smaller group.
 Basic Vocabulary of Statistics

VARIABLES
Variables are characteristics of an item or individual and are what you
analyze when you use a statistical method.

DATA
Data are the different values associated with a variable.

OPERATIONAL DEFINITIONS
Data values are meaningless unless their variables have operational
definitions, universally accepted meanings that are clear to all associated
with an analysis.
 Basic Vocabulary of Statistics
POPULATION
A population consists of all the items or individuals about which
you want to draw a conclusion. The population is the “large
group.”

SAMPLE
A sample is the portion of a population selected for analysis. The
sample is the “small group.”

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

STATISTIC
A statistic is a numerical measure that describes a characteristic of
a sample.
 Population vs. Sample

Population Sample

Measures used to describe the Measures used to describe the

population are called parameters sample are called statistics
 Sampling

Sampling- is the act of studying only a subset of the population which is,
however, reprrsentative of the entire population.

Representative sample-are samples where the characteristics of the

elements of the sample should closely match the characteristics of

the population.

Random sample- is a sample drwn in such a way that each element of the
population has some chance of being added in the sample.
 3 Types of non-random samples:

1. Convenience sample-includes the most accessible elements of the

population.

2. Judgement or purposive sample- is selected based on the judgment and

prior knowledge of an expert. The chances of a selection based on
judgment of being a representative is small.

3. Snowball sample- is obtained when an element of a sample is suggested

or identified by another member of the sample. this samplingis
useful when gathering information about informal groups. such as
those dealing with child labor, prostitution, and the like.
 Types of random sample

1. Simple random sample- is drawn inuch a way that each element of the
population has an equal chance of being selected in the sample.
2. Systematic random sample- is a sample obtained by choosing every kth
element, with the initial element selected at random from the first k
elements. The first element may be considered as having followed the
last element in the population.
3. Strategfied random sample- is obtained by first dividing the population in
homogenous subpopulations (strata) and then taking a random
sample from each stratum.The stratified random sample is the
collection of all the random samples from all the strata.
4. Cluster sample- is obtained by first dividing the population into
subpopulations (based on geographical or other similar criteria),
whereby each subpopulation must closely match the population.
These are called clusters. Afterwards, k clusters are randomly
selected.
 This Book Is Organized To Show
The Four Uses Of Statistics

 To summarize business data (Chapters 2 & 3)

 To draw conclusions from business data

(Chapters 4 – 12)

 To make reliable forecasts about business

activities (Chapters 13 – 16)

 To improve business processes (Chapter 18)

 Types of Variables

 Categorical (qualitative) variables have values that

can only be placed into categories, such as “yes” and
“no.”

 Numerical (quantitative) variables have values that

represent quantities.
 Discrete variables arise from a counting process
 Continuous variables arise from a measuring process
 Types of Variables

Variables

Categorical Numerical

Examples:
 Marital Status
 Political Party Discrete Continuous
 Eye Color
(Defined categories)
Examples: Examples:
 Number of Children  Weight
 Defects per hour  Voltage
(Counted items) (Measured characteristics)
 Levels of Measurement

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

 Levels of Measurement (con’t.)

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
 Levels of Measurement (con’t.)

 An interval scale is an ordered scale in which the

difference between measurements is a meaningful
quantity but the measurements do not have a true
zero point.

 A ratio scale is an ordered scale in which the

difference between the measurements is a
meaningful quantity and the measurements have a
true zero point.
Interval and Ratio Scales
 Mathematical Notations

Useful mathematical symbols in statistics:

Summation Notation
1. is the greek capital letter sigma. It stands for a sum. The symbol:

(read “the summation of xi from 1 to n) represents the sum x1 + x2 + x3

+...+ x. The values i=1 and n are the lower and upper limits of the
summation, respectively. If the summation is done over all possible
values of xi the following symbol may also be used:

xi (read”the summation of xi “)
 Mathematical Notations

Factorial Notation

Let n be a non-negative integer. n! (read “n factorial”) is defined as:

0!+1, and
n!=n(n-1) (n-2) (n-3)...(2) (1), if n is a positive integer

Let n and k be integers, and let n k 0. The symbol

 Chapter Summary
In this chapter, we have
 Introduced the basic vocabulary and definitions of statistics, and
the role of statistics in turning data into information to facilitate
decision making
 Examined the use of statistics to:
 Summarize data
 Draw conclusions from data
 Make reliable forecasts
 Improve business processes
 Examined descriptive vs. inferential statistics
 Reviewed data types and measurement level