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Business Statistics (BUSA 3101) Dr. Lari H. Arjomand lariarjomand@clayton.

edu
Text Book Statistical Techniques in Business & Economics Lind, Marchal, and Wathen Marchal, 15th Ed. 2012

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Business Statistics


For Lecture Notes, Slides, Quizzes, Projects, Syllabus, Office Hours, Exams & Due Dates, Statistical Links, Tutorials, Bulletin Board & Much More referee to my website at the following URL: http://business.clayton.edu/arjomand

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Chapter 1
What is Statistics
     

Applications in Business and Economics Data Data Sources Descriptive Statistics Statistical Inference Computers and Statistical Analysis

I need help!

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Application Areas of Statistics

Accounting Auditing Costing

Management Describe employees Quality improvement

Finance Financial trends Forecasting

Marketing Consumer preferences Marketing mix effects

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Applications in Business and Economics




Accounting 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.

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Applications in Business and Economics




Marketing Electronic point-of-sale scanners at point-ofretail 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.

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Applications in Business and Economics


 Finance Financial advisors use price-earnings ratios and pricedividend yields to guide their investment recommendations.

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Why Collect Data?


Obtain input to a research study Measure performance Assist in formulating decision alternatives Satisfy curiosity Knowledge for the sake of knowledge

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Data and Data Sets




Data are the facts and figures collected, summarized, analyzed, and interpreted.

 The data collected in a particular study are referred set. to as the data set.

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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. observation.  The total number of data values in a data set is the number of elements multiplied by the number of variables.

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Data, Data Sets, Elements, Variables, and Observations


Variables Element Names

Company Dataram EnergySouth Keystone LandCare Psychemedics

Stock Annual Earn/ Exchange Sales($M) Share($) AMEX OTC NYSE NYSE AMEX 73.10 74.00 365.70 111.40 17.60
Data Set
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0.86 1.67 0.86 0.33 0.13

Scales of Measurement
Scales of measurement include:
Nominal Ordinal Interval Ratio

The scale determines the amount of information contained in the data. The scale indicates the data summarization and statistical analyses that are most appropriate.

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Scales of Measurement


Nominal
Data are labels or names used to identify an attribute of the element. A nonnumeric label or numeric code may be used.

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Scales of Measurement


Nominal
Example: Students of a university are classified by the school in which they are enrolled using a nonnumeric label such as Business, Humanities, Education, and so on. Alternatively, a numeric code could be used for the school variable (e.g. 1 denotes Business, 2 denotes Humanities, 3 denotes Education, and so on).

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Scales of Measurement


Ordinal
The data have the properties of nominal data and meaningful. the order or rank of the data is meaningful. A nonnumeric label or numeric code may be used.

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Scales of Measurement


Ordinal
Example: Students of a university are classified by their class standing using a nonnumeric label such as Freshman, Sophomore, Junior, or Senior. Alternatively, a numeric code could be used for the class standing variable (e.g. 1 denotes Freshman, 2 denotes Sophomore, and so on).

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Scales of Measurement


Interval
The data have the properties of ordinal data, and the interval between observations is expressed in terms of a fixed unit of measure. Interval data are always numeric. numeric.

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Scales of Measurement


Interval
Example: Melissa has an SAT score of 1205, while Kevin 1205, has an SAT score of 1090. Melissa scored 115 1090. points more than Kevin.

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Scales of Measurement


Ratio
The data have all the properties of interval data meaningful. and the ratio of two values is meaningful. Variables such as distance, height, weight, and time use the ratio scale. This scale must contain a zero value that indicates that nothing exists for the variable at the zero point.

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Scales of Measurement


Ratio
Example: Melissas college record shows 36 credit hours earned, while Kevins record shows 72 credit hours earned. Kevin has twice as many credit hours earned as Melissa.

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Types of Data
Data

Numerical
(Quantitative)

Categorical
(Qualitative)

Discrete

Continuous

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Qualitative and Quantitative Data


Data can be further classified as being qualitative or quantitative. quantitative. The statistical analysis that is appropriate depends on whether the data for the variable are qualitative or quantitative. In general, there are more alternatives for statistical analysis when the data are quantitative.

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Qualitative Data
Labels or names used to identify an attribute of each element Often referred to as categorical data Use either the nominal or ordinal scale of measurement Can be either numeric or nonnumeric Appropriate statistical analyses are rather limited

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Quantitative Data
Quantitative data indicate how many or how much: discrete, discrete, if measuring how many continuous, continuous, if measuring how much Quantitative data are always numeric. numeric. Ordinary arithmetic operations are meaningful for quantitative data.

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Scales of Measurement
Data Qualitative Quantitative

Numerical

NonNon-numerical

Numerical

Nominal

Ordinal

Nominal

Ordinal

Interval

Ratio

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CrossCross-Sectional Data
CrossCross-sectional data are collected at the same or approximately the same point in time. Example: Example: data detailing the number of building permits issued in June 2003 in each of the counties of Ohio

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Time Series Data


Time series data are collected over several time periods. Example: Example: data detailing the number of building permits issued in Lucas County, Ohio in each of the last 36 months

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Data Sources
Data Sources

Primary

Secondary Published (& On-Line)

Experiment

Survey

Observation

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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 SpecialSpecial-interest organizations Graduate Management Admission Council Internet more and more firms

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Data Sources (Continued) (Continued)




Statistical Studies In experimental studies the variables of interest are first identified. Then one or more factors are controlled so that data can be obtained about how the factors influence the variables. In observational (non-experimental) studies no non-experimental) attempt is made to control or influence the variables of interest. a survey is a good example

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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 happens to be available or


that were acquired with little care can lead to poor and misleading information.
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What Is Statistics?


Collecting data e.g., Survey Presenting data e.g., Charts & tables Characterizing data e.g., Average

Data Analysis

Why?

DecisionDecisionMaking

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Statistical Methods
Statistical Methods

Descriptive Statistics

Inferential Statistics

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Descriptive Statistics


Descriptive statistics are the tabular, graphical, and numerical methods used to summarize data.

Descriptive Statistics: These are statistical methods used to describe data that have been collected.

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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 tunetune-ups performed in the shop. She examines 50 customer invoices for tune-ups. The costs of parts, tunerounded to the nearest dollar, are listed on the next slide.

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Example: Hudson Auto Repair




Sample of Parts Cost for 50 Tune-ups Tune-

91 71 104 85 62

78 69 74 97 82

93 72 62 88 98

57 89 68 68 101

75 66 97 83 79

52 75 105 68 105

99 79 77 71 79

80 75 65 69 69

97 72 80 67 62

62 76 109 74 73

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Tabular Summary: Frequency and Percent Frequency


Parts Cost ($) 5050-59 6060-69 7070-79 8080-89 9090-99 100100-109 Parts Frequency 2 13 16 7 7 5 50 Percent Frequency 4 26 (2/50)100 32 14 14 10 100

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Graphical Summary: Histogram


TuneTune-up Parts Cost
18 16 14

Frequency

12 10 8 6 4 2

Parts 5059 6069 7079 8089 9099 100-110 Cost ($)


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Numerical Descriptive Statistics


 The most common numerical descriptive statistic is the average (or mean). mean).  Hudsons average cost of parts, based on the 50 tunetune-ups studied, is $79 (found by summing the 50 cost values and then dividing by 50). 50).

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Inferential Statistics


Involves Estimation Hypothesis testing Purpose Make decisions about population characteristics

Population?

Inferential Statistics: These are statistical methods used to find out something about population based on a sample.
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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

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Process of Statistical Inference

1. Population
consists of all tunetune-ups. Average cost of parts is unknown. unknown

2. A sample of 50
engine tune-ups tuneis examined.

4. The sample average


is used to estimate the population average.

3. The sample data


provide a sample average parts cost of $79 per tune-up. tune-

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Statistical Analysis Using Microsoft Excel


 Statistical analysis typically involves working with large amounts of data. data.  Computer software is typically used to conduct the analysis.  Frequently the data that is to be analyzed resides in a spreadsheet. spreadsheet.  Modern spreadsheet packages are capable of data management, analysis, and presentation.  MS Excel is the most widely available spreadsheet software in business organizations.

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Statistical Analysis Using Microsoft Excel




3 tasks might be needed: Enter Data Enter Functions and Formulas Apply Tools

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A Parts Cost 91 71 104 85 62 78 69

D Mean Median Mode Range

E =AVERAGE(A2:A71) =MEDIAN(A2:A71) =MODE(A2:A71) =MAX(A2:A71)-MIN(A2:A71)

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Statistical Analysis Using Microsoft Excel




Excel Worksheet (showing data) data)


A B Invoice # 20994 21003 21010 21094 21116 21155 21172 21198 C Parts Cost ($) 91 71 104 85 62 78 69 74 D Labor Cost ($) 185 205 192 178 242 148 165 190

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Customer Sam Abrams Mary Gagnon Ted Dunn ABC Appliances Harry Morgan Sara Morehead Vista Travel, Inc. John Williams

Note: Rows 10-51 are not shown. 10-

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Statistical Analysis Using Microsoft Excel




Excel Formula Worksheet


C D E Parts Labor Cost ($) Cost ($) 91 185 71 205 104 192 85 178 62 242 78 148 69 165 74 190 F G

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Average Parts Cost =AVERAGE(C2:C51)

Note: Columns A-B and rows 10-51 are not shown. A10-

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Statistical Analysis Using Microsoft Excel




Excel Value Worksheet


C D E Parts Labor Cost ($) Cost ($) 91 185 71 205 104 192 85 178 62 242 78 148 69 165 74 190 F G

1 2 3 4 5 6 7 8 9

Average Parts Cost

79

Note: Columns A-B and rows 10-51 are not shown. A10-

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End of Chapter 1

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