Chapter 1

An Introduction to Business Statistics

CHAPTER 1 MAP
1.1 Business Statistics and Their Uses

1.2 Data

1.3 Branches of Statistics

1.4 Ethics and Statistics − It’s a Dangerous World of Data Out There

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1.1 Business Statistics and Their Uses

Statistics
the mathematical science that deals with the
collection, analysis, and presentation of data,
which can then be used as a basis for inference
and induction

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 Business Statistics and Their Uses

Examples of how business use statistics:

Marketing Research
• Focus group data, customer surveys
Advertising
• Household surveys, TV viewing habits
Operations
• Quality control, reliability
Finance and Economics
• Data on income, credit risk, unemployment
Weather
• Forecasting, planning, risk minimization

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1.2 Data

Data
values assigned to observations or measurements

Information
data that are transformed into useful facts that
can be used for a specific purpose, such as making
a decision

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 Data

Data: Raw facts or measurements of interest

Table 1.1 | Temperatures in NYC in January 2018*
Actual Temp
Date High/Low (°F)
Mon 1/1 19° / 7°
Tue 1/2 26° / 3°
Wed 1/3 30° / 16°
Thu 1/4 29° / 19°
Each individual value is
Fri 1/5 19° / 9° considered a data point.
Sat 1/6 13° / 6°
Sun 1/7 18° / 5°
*www.accuweather.com

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 Data
Analyzing the data can provide information:

Table 1.1 | Temperatures in NYC in January 2018*

Actual Temp
Date High/Low (°F)
Mon 1/1 19° / 7°
Tue 1/2 26° / 3°
Wed 1/3 30° / 16° Weekly average low
Thu 1/4 29° / 19° temperature was ~9.3°.
Fri 1/5 19° / 9°
This is lowest historical low
Sat 1/6 13° / 6° temperature for NYC (based
Sun 1/7 18° / 5° on recorded data at this time).
*www.accuweather.com

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 Data Sets and Databases

Data set
a collection of data points

Database
a collection of data points that contains
multiple rows (records) and columns
(fields)

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 The Sources of Data

Primary data
data that you have collected for your own use

Secondary data
data collected by someone else

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 The Sources of Data

Primary data Secondary data

Advantages: Advantages:
• collected by the person or • Readily available
organization who uses the • Less expensive to collect
data

Disadvantages: Disadvantages:
• Can be expensive and time- • No control over how the data
consuming to gather was collected
• Less reliable unless collected
and recorded accurately

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 Primary Data

Primary data collection methods

Direct Observation or Experiments Surveys or

Focus Group Questionnaires

Observing subjects in Treatments are Subjects are asked to

their natural applied in controlled respond to questions
environment conditions. or discuss attitudes.

Example: Watching to Example: Crop Example: E-mail

see if drivers stop at growth from different surveys to customers
a stop sign plots using different to assess service
fertilizers quality
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Figure 1.2 | An Example of a Survey

To encourage
respondents to
participate, an
effective survey
will state its
purpose in the
beginning.

Personal
demographic
questions are
often last, when
respondents feel
more comfortable
with the process.

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 Bias

The manner in which survey questions are

asked can affect responses.
Bias can occur when a question is stated in a
way that encourages or leads a respondent to
a particular answer.
• Example: “Do you agree that the current overly
complex tax code should be simplified and made
more fair?”

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 The Two Main Types of Data

Qualitative Quantitative
Data Data
Classified by descriptive terms
Counted Measured
Examples:
• Marital Status Described by numerical values
• Political Party
Examples: Examples:
• Eye Color
(Defined categories) • Number of • Weight
Children • Voltage
• Defects per hour (Measured
(Counted items) characteristics)

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 Classifying Data
by Level of Measurement

Figure 1.4 | Two Main Types of Data and their

Corresponding Levels

Types of Data

Qualitative Quantitative

Nominal Ordinal Interval Ratio

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 Classifying Data
by Level of Measurement

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Time Series vs. Cross-Sectional Data

Time Series Data

• values that correspond to specific
measurements taken over a range of time
periods

Cross-Sectional Data
• values collected from a number of subjects
during a single time period

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 Time Series vs. Cross-Sectional Data
Table 1.4 | Unemployment Rate Data, 2013–2017

Unemployment Rate
Year USA % CA % MI % TX % FL %
Cross-
2013 7.4 8.3 8.4 6.0 6.2 Sectional
Data
2014 6.2 7.5 7.3 5.1 6.3
2015 5.3 6.2 5.4 4.5 5.4
2016 4.9 5.4 4.9 4.6 4.9
2017 4.4 4.3 4.7 3.9 3.7

Time Series Data

Based on: http://www.bls.gov.

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 Time Series vs. Cross-Sectional Data

Figure 1.5 - A Time Series Graph

of U.S. Unemployment Rates,
2013–2017

Figure 1.6 - A Cross-Sectional

Graph of 2017 Unemployment Rates

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1.3 Branches of Statistics

Descriptive statistics
• collecting, summarizing, and displaying data

Inferential statistics
• making claims or conclusions about the data
based on a sample
Predictive statistics
• analyzing past data to predict future values and
make decisions

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 Population vs. Sample

Population
• represents all possible subjects that are of
interest in a particular study
Sample
• refers to a portion of the
population that is
representative of the
population from which
it was selected

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 Parameter vs. Statistic
• Parameter – a described characteristic about a population
• Statistic – a described characteristic about a sample

Population Sample

Values calculated using Values computed from

population data are sample data are called
called parameters. statistics.

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 Inferential Statistics

Making claims about a population by examining sample

results

• Example:
Observed Estimated population
sample parameter (unknown, but
statistic Inference can be estimated from
(known) sample evidence)

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 Inferential Statistics

Figure 1.8 - Using Inferential

Statistics for Quality Control
Purposes: An Example

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1.4 Ethics and Statistics – It’s a
Dangerous World of Data Out There

Biased sample – a sample that does not

represent the intended population
• can lead to distorted findings
• biased sampling can occur intentionally or
unintentionally
• results can be manipulated by how we ask
questions and who is responding to them

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 Ways to Misuse Statistics
Changing the graph scale
• Should avoid distortion that might convey the wrong
message:

vs.

Choosing a sample that is not representative of the

population
• Avoid bias by randomly sampling from the population

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