STATISTICS FOR BUSINESS

AND ECONOMICS
Chapter 1
Statistics, Data, &
Statistical Thinking
 CONTENTS

1. The Science of Statistics

2. Types of Statistical Applications in Business
3. Fundamental Elements of Statistics
4. Processes
5. Types of Data
6. Collecting Data
7. The Role of Statistics in Managerial Decision
Making
 LEARNING OBJECTIVES
1. Introduce the field of statistics
2. Demonstrate how statistics applies to business
3. Establish the link between statistics and data
4. Identify the different types of data and data-
collection methods
5. Differentiate between population and sample data
6. Differentiate between descriptive and inferential
statistics
 1.1

The Science of Statistics

 WHAT IS STATISTICS?
1. Collecting Data Data Why?
e.g., Survey Analysis
2. Presenting Data
e.g., Charts & Tables © 1984-1994 T/Maker Co.

3. Characterizing Data Decision-

e.g., Average Making

© 1984-1994 T/Maker Co.

 WHAT IS STATISTICS?
Statistics

is the science of data. It involves collecting,

classifying, summarizing, organizing,
analyzing, and interpreting numerical
information.
 1.2

Types of Statistical Applications in

Business
 APPLICATION AREAS

• Economics • Engineering
• Forecasting • Construction
• Demographics • Materials

• Sports • Business
• Individual & Team • Consumer Preferences
Performance • Financial Trends
 STATISTICS: TWO
PROCESSES
Describing sets of data
and
Drawing conclusions
(making estimates, decisions,
predictions, etc. about sets of data
based on sampling)
STATISTICAL METHODS

Statistical
Methods

Descriptive Inferential
Statistics Statistics
 DESCRIPTIVE STATISTICS
1. Involves
• Collecting Data
• Presenting Data $
• Characterizing Data 50
2. Purpose
• Describe Data
25

0
Q1 Q2 Q3 Q4

X = 30.5 S2 = 113
 INFERENTIAL STATISTICS
1. Involves
• Estimation Population?
• Hypothesis
Testing
2. Purpose
• Make
decisions
about
population
characteristics
 1.3

Fundamental Elements
of Statistics
 FUNDAMENTAL
ELEMENTS
1. Experimental unit • P in Population
• Object upon which we collect data & Parameter
2. Population • S in Sample
• All items of interest & Statistic
3. Variable
• Characteristic of an individual
experimental unit
4. Sample
• Subset of the units of a population
 FUNDAMENTAL
ELEMENTS
1. Statistical Inference
• Estimate or prediction or generalization about a
population based on information contained in a
sample
2. Measure of Reliability
• Statement (usually qualified) about the degree
of uncertainty associated with a statistical
inference
 FOUR ELEMENTS OF
DESCRIPTIVE STATISTICAL
PROBLEMS
1. The population or sample of interest
2. One or more variables (characteristics of the
population or sample units) that are to be
investigated
3. Tables, graphs, or numerical summary tools
4. Identification of patterns in the data
 FIVE ELEMENTS OF
INFERENTIAL STATISTICAL
PROBLEMS
1. The population of interest
2. One or more variables (characteristics of the
population units) that are to be investigated
3. The sample of population units
4. The inference about the population based on
information contained in the sample
5. A measure of reliability for the inference
 1.4

Processes
 PROCESS
A process is a series of actions or operations that
transforms inputs to outputs. A process produces or
generates output over time.

© 2011 Pearson Education, Inc

 PROCESS

A process whose operations or actions are unknown or

unspecified is called a black box.

Any set of output (object or numbers) produced by a

process is called a sample.
 1.5

Types of Data
 TYPES OF DATA

Quantitative data are measurements that are recorded

on a naturally occurring numerical scale.

Qualitative data are measurements that cannot be

measured on a natural numerical scale; they can only be
classified into one of a group of categories.
 TYPES OF DATA

Types of
Data

Quantitative Qualitative
Data Data
 QUANTITATIVE DATA
Measured on a numeric scale.
• Number of defective
4
items in a lot. 943
• Salaries of CEOs of
oil companies. 21 52
• Ages of employees at
a company. 120 12
8
71 3
 QUALITATIVE DATA
Classified into categories.
• College major of each
student in a class.
• Gender of each employee
at a company.
• Method of payment
(cash, check, credit card).

$ Credit
 1.6

Collecting Data
 OBTAINING DATA

1. Data from a published source

2. Data from a designed experiment
3. Data from a survey
4. Data collected observationally
 OBTAINING DATA
Published source:
book, journal, newspaper, Web site
Designed experiment:
researcher exerts strict control over units
Survey:
a group of people are surveyed and their responses are
recorded
Observation study:
units are observed in natural setting and variables of
interest are recorded
 SAMPLES
A representative sample exhibits characteristics
typical of those possessed by the population of
interest.

A random sample of n experimental units is a

sample selected from the population in such a
way that every different sample of size n has an
equal chance of selection.
 RANDOM SAMPLE
Every sample of size n has an equal chance of selection.
 1.7

The Role of Statistics in

Managerial Decision Making
 STATISTICAL THINKING

Statistical thinking involves applying rational thought

and the science of statistics to critically assess data and
inferences. Fundamental to the thought process is that
variation exists in populations and process data.

A random sample of n experimental units is a sample

selected from the population in such a way that every
different sample of size n has an equal chance of
selection.
NONRANDOM SAMPLE ERRORS
Selection bias results when a subset of the experimental
units in the population is excluded so that these units
have no chance of being selected for the sample.

Nonresponse bias results when the researchers

conducting a survey or study are unable to obtain data on
all experimental units selected for the sample.

Measurement error refers to inaccuracies in the values

of the data recorded. In surveys, the error may be due to
ambiguous or leading questions and the interviewer’s
effect on the respondent.
REAL-WORLD PROBLEM
 STATISTICAL
COMPUTER PACKAGES
1. Typical Software
• SPSS
• MINITAB
• Excel

2. Need Statistical
Understanding
• Assumptions
• Limitations
 KEY IDEAS
Types of Statistical Applications

Descriptive
1. Identify population and sample (collection
of experimental units)
2. Identify variable(s)
3. Collect data
4. Describe data
 KEY IDEAS
Types of Statistical Applications

Inferential
1. Identify population (collection of all
experimental units)
2. Identify variable(s)
3. Collect sample data (subset of population)
4. Inference about population based on sample
5. Measure of reliability for inference
 KEY IDEAS

Types of Data

1. Quantitative (numerical in nature)

2. Qualitative (categorical in nature)
 KEY IDEAS

Data-Collection Methods

1. Observational
2. Published source
3. Survey
4. Designed experiment
 KEY IDEAS

Problems with Nonrandom Samples

1. Selection bias
2. Nonresponse bias
3. Measurement error