Quantitative Business Methods

QBM
 Chapter 1

Introduction to
Course and
Basic Statistics
Introduction to your Course and to Basic
Statistics

• This course is intended to be student

friendly with a minimum of statistical
jargon or mathematics and a maximum
of explanation
 Textbook
• Business Statistics for non-mathematicians
• Author: Sonia Taylor

• Contains more on each topic with explanations,

worked examples, practice exercises etc.

• Includes links to extra helpful material on its

Companion Website with supplementary
exercises and revision for tests and examinations

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 Having completed the course you should be
able to
1. understand the use of most simple statistical
techniques used in the world of business
2. understand graphical presentation of data
3. present data to others in graphical form
4. summarise and analyse numerical data

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5. To interpret your analysis for others
6. To identify relationships between pairs of
variables
7. make inferences about a population from a
sample
8. use some basic forecasting techniques
9. use a statistical software package (optional at
the discretion of the lecturer)

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 The main themes of this course are

• Descriptive statistics: graphical and numerical.

• Inferential statistics: confidence intervals and
hypothesis tests.
• Pairwise relationships between variables:
correlation, regression and chi-squared tests.
• Forecasting: modelling and use of time series.

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 Statistics
(ref. Concise Oxford Dictionary)

• Numerical facts systematically collected

• The science of collecting, classifying and
using statistics

(The emphasis in this course is on data

classification, summarisation, display and
analysis in order to aid understanding.)

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 Business Statistics
Any decision making process needs the support
of quantitative data which may be on:
• Your firm's products, costs, sales or services
• Your competitors' products, costs, sales or
services
• Measurement of industrial processes,
• Your firm's workforce, etc.

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 Variables, Types of Data and Scales of
Measurement
Variable - something whose 'value' can 'vary'.
• A car could be red, blue green, etc
• It could be classed as small, medium or large.
• Its year of manufacture could be 2004, 2006 It
would have a particular registration number.
• It has a measurable length.

All these variables describe the car, but are

measured on different scales.
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 Categorical data
• Generally non-numerical data
• Data placed in exclusive categories
• Cases counted rather than measured
• E.g. People by occupation/sex.
Cars by make/colour.

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 Nominal data
• Lowest level of measurement
• Variable can be named but not ordered
• Numbers on athletes' vests only label the
runners.
• Car registration numbers only identify cars.
• Any analysis is carried out on the frequencies.
• No other arithmetic is meaningful.

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 Ordinal Data
• This is one level up from nominal.
• This data or its categories can be ordered but
not measured.
• The differences between successive values or
categories is not the same.
Cars can be ordered as: 'small', 'medium', 'large'
without the differences being measurable.
Degree classifications are only ordinal.

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 Ordinal Data
• Athletes results depend only on their order of
finishing in a race, not their times.
• Questionnaires often use the categories: 'Strongly
agree', 'Agree', 'No opinion', 'Disagree' or
'Strongly disagree'.
The responses may be coded as 1, 2, 3, 4 and 5
for the computer but the differences are not
equal so the data is only ordinal.

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 Interval Data
• Numbers defined by standard units of
measurement

• Equal difference between numbers genuinely

means equal distance between measurements

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 Interval Data
• Has no meaningful zero

E.g. Temperature: 50°C - 30°C equals 60°C - 40°C

but 60°C is not twice as hot as 30°C as 0 oC  zero
heat. It is therefore interval data.

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 Ratio data
(In analysis this is treated the same as interval data)

• Numbers defined by standard units of

measurement

• Equal difference between numbers genuinely

means equal distance between measurements

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 Ratio data
• Needs a meaningful zero as its lowest value

• This is so that one number being twice as big as

another means that the measurements are also
in that ratio.
E.g., The time taken for athletes to complete a race would be measured on
this scale.

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 Summary

• So three measurement scales:

nominal
ordinal
interval

• Measuring:
nominal, ordinal and interval data.

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• Data may be analysed using methods appropriate
to lower levels, for example interval analysed as
ordinal, but useful information may be lost.
If we know that Bill earns £40 000 and Ben earns £30 000 we
are throwing information away by only recording that Bill
earns 'more than' Ben.

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• Data cannot be analysed using methods which
are only appropriate for higher level data as the
results will be either invalid or meaningless.
If the sex of students is coded 0 = 'male', 1 = 'female', we cannot say that
'the mean value is 0.7'. We can however say that '70% of the students are
female'.

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 Qualitative and Quantitative data
• The distinction between these is not clearly
defined.
• Non-numerical data is often described as being
qualitative, or non-metric.
• Quantitative, metric, data which describes some
measurement or quantity is always numerical and
measured on the interval or ratio scales.

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 Discrete and Continuous data
• Quantitative data may be discrete or
continuous.
• If the values which can be taken by a variable
change in steps the data is discrete.
• If the data can take any value within a range it
is continuous.
e.g.The number of people shopping in a supermarket is discrete but
the amount they spend is continuous.

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 Populations and Samples
• The population is the entire group of interest,
whether people or things.
• It is not usually possible, or not practical, to
examine every member of a population.
• A sample, a smaller selection taken from that
population, is used to estimate some value for
the whole population.
• The sample must be representative of the whole
population of interest.

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 Census v Survey
• A census, gathers data from the whole
population, e.g. the ten year census.

• A survey gathers data from only a sample taken

from the population of interest.
The Gallup polls produced from a sample of the electorate for forecasting
the result of a general election.

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 Why do we need to sample?
• Analysing a sample saves time and money.
• Often necessary if the data collection destroys
the article of interest, e.g. the quality control of
films.
• The ideal method of sampling is random sampling
- every member of the population has an equal
chance of being selected.
• In practice other non-ideal methods of sampling
are often substituted.
• (See textbook) 26
 Descriptive Statistics
• Used when we are only interested in the specific
group from which the measurements are taken.

• The facts and figures, whether graphical or

numerical, are usually referred to as 'the
statistics' in the media.

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 Descriptive Statistics
• Much business data will be descriptive in
nature.

• In the next two weeks you will learn how to

display data graphically and summarise it
numerically.

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 Inferential Statistics
• Used to infer something about the population when we
only have the data from a sample.

• The sample is analysed to produce the sample summary

statistics from which we can infer values for the parent
population.

• The summary statistics from the sample are usually

referred to as the sample statistics and the corresponding
measure estimated for the population as a population
parameters.
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Summary

You have been introduced to

• Different types of data

• To importance of being able to distinguish between
the different types of data as this determines which
method of display and analysis is best suitable.
• Descriptive Statistics
• Inferential Statistics
Questions