Chapter 1 Formatted: Font: 12 pt, Font color: Text 1

Data and Statistics

Learning Objectives Formatted: Font: 12 pt, Font color: Text 1

1. Obtain an appreciation for the breadth of statistical applications in business and

economics.

2. Understand the meaning of the terms elements, variables, and observations as they
are used in statistics.

3. Obtain an understanding of the difference between categorical, quantitative, cross-

sectional and time series data.

4. Learn about the sources of data for statistical analysis both internal and external to
the firm.

5. Be aware of how errors can arise in data.

6. Know the meaning of descriptive statistics and statistical inference.

7. Be able to distinguish between a population and a sample.

8. Understand the role a sample plays in making statistical inferences about the
population.

9. Know the meaning of the terms analytics, big data and data mining.

10. Be aware of ethical guidelines for statistical practice.

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1. Discuss the differences between statistics as numerical facts and statistics as a Highlight
discipline or field of study. Formatted: Font: 12 pt, Bold, Font color: Text 1
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Chapter 1

Statistics can be referred to as numerical facts. In a broader sense, statistics is

the field of study dealing with the collection, analysis, presentation and
interpretation of data.

2. Tablet PC Comparison provides a wide variety of information about tablet

computers. Their website enables consumers to easily compare different tablets using
factors such as cost, type of operating system, display size, battery life, and CPU
manufacturer. A sample of 10 tablet computers is shown in Table 1.6 (Tablet PC Formatted: Font: 12 pt, Bold, Font color: Text 1, Not
Comparison website, February 28, 2013). Highlight
Formatted: Font: 12 pt, Bold, Font color: Text 1, Not
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Formatted: Font: 12 pt, Font color: Text 1

a. How many elements are in this data set?

The ten elements are the ten tablet computers

b. How many variables are in this data set?

5 variables: Cost ($), Operating System, Display Size (inches), Battery Life (hours), CPU
Manufacturer

c. Which variables are categorical and which variables are quantitative?

Categorical variables: Operating System and CPU Manufacturer

Quantitative variables: Cost ($), Display Size (inches), and Battery Life (hours)

d. What type of measurement scale is used for each of the variables?

Variable Measurement Formatted: Font: 12 pt, Font color: Text 1
Scale
Cost ($) Ratio Formatted: Font: 12 pt, Font color: Text 1
Operating System Nominal Formatted: Font: 12 pt, Font color: Text 1
Display Size Ratio Formatted: Font: 12 pt, Font color: Text 1
(inches)
Battery Life (hours) Ratio Formatted: Font: 12 pt, Font color: Text 1
CPU Manufacturer Nominal Formatted: Font: 12 pt, Font color: Text 1
3. Refer to Table 1.6. Formatted: Font: 12 pt, Bold, Font color: Text 1
a. What is the average cost for the tablets? Formatted: Font: Bold, Underline, Font color: Text 1

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 Data and Statistics

Average cost = 5829/10 = $582.90

b. Compare the average cost of tablets with a Windows operating system to the
average cost of tablets with an Android operating system.
Average cost with a Windows operating system = 3616/5 = $723.20
Average cost with an Android operating system = 1714/4 = $428.5
The average cost with a Windows operating system is much higher.

c. What percentage of tablets use a CPU manufactured by TI OMAP?

2 of 10 or 20% use a CPU manufactured by TI OMAP

d. What percentage of tablets use an Android operating system?

4 of 10 or 40% use an Android operating system

4. Table 1.7 shows data for eight cordless telephones (Consumer Reports, November
2012). The Overall Score, a measure of the overall quality for the cordless
telephone, ranges from 0 to 100. Voice Quality has possible ratings of poor, fair,
good, very good, and excellent. Talk Time is the manufacturer’s claim of how long
the handset can be used when it is fully charged.
Data for Eight Cordless Telephones
Brand Model Price Overall Voice Quality Handset on Talk Time (Hours)
($) Score Base

AT&T CL84100 60 73 Excellent Yes 7

AT&T TL92271 80 70 Very Good No 7

Panasonic 4773B 100 78 Very Good Yes 13

Panasonic 6592T 70 72 Very Good No 13

Uniden D2997 45 70 Very Good No 10

Uniden D1788 80 73 Very Good Yes 7

Vtech DS6521 60 72 Excellent No 7

Vtech CS6649 50 72 Very Good Yes 7

a. How many elements are in this data set?

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Chapter 1

There are eight elements in this data set; each element corresponds to one of the
eight models of cordless telephones

b. How many elements are in this data set?

Categorical variables: Voice Quality and Handset on Base
Quantitative variables: Price, Overall Score, and Talk Time

c. What scale of measurement is used for each variable?

Price – ratio measurement
Overall Score – interval measurement
Voice Quality – ordinal measurement
Handset on Base – nominal measurement
Talk Time – ratio measurement

5.Refer to the data set in Table 1.7.

a.What is the average price for the cordless telephones?

Average Price = 545/8 = $68.13

b. What is the average price for the cordless telephones?

Average Talk Time = 71/8 = 8.875 hours

c. What percentage of the cordless telephones have a voice quality of

excellent?
Percentage rated Excellent: 2 of 8 2/8 = .25, or 25%

d. What percentage of the cordless telephones have a voice quality of

excellent?
Percentage with Handset on Base: 4 of 8 4/8 = .50, or 50%

6.J.D. Power and Associates surveys new automobile owners to learn about the quality
of recently purchased vehicles. The following questions were asked in the J.D. Power
Initial Quality Survey, May 2012.

a. Did you purchase or lease the vehicle?

Categorical

b. What price did you pay?

Quantitative

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 Data and Statistics

c. What is the overall attractiveness of your vehicle’s exterior? (Unacceptable,

Average, Outstanding, or Truly Exceptional)
Categorical

d. What is your average number of miles per gallon?

Quantitative

e. What is your overall rating of your new vehicle? (1- to 10-point scale with 1
Unacceptable and 10 Truly Exceptional)
Quantitative

7. The Kroger Company is one of the largest grocery retailers in the United States, with over
2000 grocery stores across the country. Kroger uses an online customer opinion questionnaire to
obtain performance data about its products and services and learn about what motivates its
customers (Kroger website, April 2012). In the survey, Kroger customers were asked if they
would be willing to pay more for products that had each of the following four characteristics.
The four questions were as follows:

a. Would you pay more for

products that have a brand name?
products that are environmentally friendly?
products that are organic?
products that have been recommended by others?

● Each question has a yes or no categorical response.

b. For each question, the customers had the option of responding Yes if they would
pay more or No if they would not pay more.
Are the data collected by Kroger in this example categorical or quantitative?
What measurement scale is used?

● Yes and no are the labels for the customer responses. A nominal scale is
being used.

8. The Tennessean, an online newspaper located in Nashville, Tennessee, conducts a daily

poll to obtain reader opinions on a variety of current issues. In a recent poll, 762
readersresponded to the following question: “If a constitutional amendment to ban a state
income tax is placed on the ballot in Tennessee, would you want it to pass?” Possible
responses were Yes, No, or Not Sure (The Tennessean website, February 15, 2013).

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Chapter 1

a. What was the sample size for this poll?

● 762

b. What was the sample size for this poll?

● Categorical

c. Would it make more sense to use averages or percentages as a summary of the data
for this question?
● Percentages

d. .Of the respondents, 67% said Yes, they would want it to pass. How many
individuals provided this response?
● 67(762) = 510.54

510 or 511 respondents said they want the amendment to pass.

9. The Commerce Department reported receiving the following applications for the
Malcolm Baldrige National Quality Award: 23 from large manufacturing firms, 18
from large service firms, and 30 from small businesses.

a. Is type of business a categorical or quantitative variable?

● Categorical

b.What percentage of the applications came from small businesses?

● 30 of 71; 42.3%

10. The Bureau of Transportation Statistics Omnibus Household Survey is conducted

annually and serves as an information source for the U.S. Department of
Transportation. In one part of the survey the person being interviewed was asked to
respond to the following statement: “Drivers of motor vehicles should be allowed to
talk on a hand-held cell phone while driving.” Possible responses were strongly agree,
somewhat agree, somewhat disagree, and strongly disagree. Forty-four respondents
said that they strongly agree with this statement, 130 said that they somewhat agree,
165 said they somewhat disagree, and 741 said they strongly disagree with this
statement.

a.Do the responses for this statement provide categorical or quantitative data?

● Categorical

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 Data and Statistics

b. Would it make more sense to use averages or percentages as a summary of

the responses for this statement?

● Percentages

c. What percentage of respondents strongly agree with allowing drivers of motor

vehicles to talk on a hand-held cell phone while driving?

● 44 of 1080 respondents or approximately 4% strongly agree with allowing

drivers of motor vehicles to talk on a hand-held cell phone while driving.

d. Do the results indicate general support for or against allowing drivers of motor
vehicles to talk on a hand-held cell phone while driving?

● 165 of the 1080 respondents or 15% of said they somewhat disagree and
741 or 69% said they strongly disagree. Thus, there does not appear to be
general support for allowing drivers of motor vehicles to talk on a hand-
held cell phone while driving.

11. In a Gallup telephone survey conducted on April 9–10, 2013, each person being
interviewed was asked if they would vote for a law in their state that would increase
the gas tax by up to 20 cents a gallon, with the new gas tax money going to improve
roads and bridges and build more mass transportation in their state. Possible
responses were vote for, vote against, and no opinion. Two hundred and ninety-five
respondents said they would vote for the law, 672 said they would vote against the law,
and 51 said they had no opinion (Gallup website, June 14, 2013).

a. Do the responses for this question provide categorical or quantitative data?

● Categorical

b. What was the sample size for this Gallup poll?

● 295 + 672 + 51 = 1018

c. What percentage of respondents would vote for a law increasing the gas tax?

● ( 295/1018 )100 = .29 or 29%

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Chapter 1

d. Do the results indicate general support for or against increasing the gas tax to
improve roads and bridges and build more mass transportation?

● Support against; ( 672/1018 )100 = .66 or 66% said they would vote
against the law

12. The Hawaii Visitors Bureau collects data on visitors to Hawaii. The following
questions were among 16 asked in a questionnaire handed out to passengers during
incoming airline flights.

● This trip to Hawaii is my: 1st, 2nd, 3rd, 4th, etc.

● The primary reason for this trip is: (10 categories, including vacation, convention,
honeymoon)
● Where I plan to stay: (11 categories, including hotel, apartment, relatives, camping)
● Total days in Hawaii

a. What is the population being studied?

● The population is all visitors coming to the state of Hawaii.

b. Is the use of a questionnaire a good way to reach the population of passengers on incoming
airline flights?

● Since airline flights carry the vast majority of visitors to the state, the use of
questionnaires for passengers during incoming flights is a good way to reach this
population. The questionnaire actually appears on the back of a mandatory plants and
animals declaration form that passengers must complete during the incoming flight. A
large percentage of passengers complete the visitor information questionnaire.

c. Is the use of a questionnaire a good way to reach the population of passengers on incoming
airline flights?

● Questions 1 and 4 provide quantitative data indicating the number of visits and the
number of days in Hawaii. Questions 2 and 3 provide categorical data indicating the
categories of reason for the trip and where the visitor plans to stay.

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 Data and Statistics

13. Figure 1.10 provides a bar chart showing the annual revenue for Google
from 2004 to 2014. (The Wall Street Journal, August 19, 2014).

A. What is the variable of interest?

 Google revenue in billions of dollars

B. Are the data categorical or quantitative?

● Quantitative

C. Are the data time series or cross-sectional?

● Time series

D. Comment on the trend in Google revenue over time.

● Google revenue is increasing over time.

14. The following data show the number of rental cars in service for three rental
car companies: Hertz, Avis, and Dollar, over a four-year period.

Cars in Service (1000s)

Company Year 1 Year 2 Year 3 Year 4

Hertz 327 311 286 290

Dollar 167 140 106 108

Avis 204 220 300 270

Formatted: Font: 12 pt, Font color: Text 1

A. Construct a time series graph for the years 1 to 4 showing the number of rental cars
in service for each company. Show the time series for all three companies on the
same graph.
● The graph of the time series follows: Formatted: Font: 12 pt, Font color: Text 1
Formatted: Font: 12 pt, Font color: Text 1

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Chapter 1

B. Comment on who appears to be the market share leader and how the market shares are
changing over time.

● In Year 1 and Year 2 Hertz was the clear market share leader. In Year 3 and Year 4 Hertz
and Avis have approximately the same market share. The market share for Dollar appears
to be declining.

C. Construct a bar chart showing rental cars in service for Year 4. Is this chart based on
cross-sectional or time series data?

● The bar chart for Year 4 is shown below.

This chart is based on cross-sectional data.

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 Data and Statistics

15. The U.S. Census Bureau tracks sales per month for various products and
services through its Monthly Retail Trade Survey. Figure 1.11 shows monthly
bookstore sales in millions of dollars for 2014.

A. Are the data quantitative or categorical?

● Quantitative

B. Are the data cross-sectional or time series?

● Time series

C. Which month has the highest sales?

● August

D. Which month has the second highest sales?

● January

E. Why do you think the answers to parts (c) and (d) might be the two highest months?
Explain
● August and January are likely the highest book sales months because of the start of the
fall and spring semesters at colleges and universities.

16. The Energy Information Administration of the U.S. Department of Energy

provided time series data for the U.S. average price per gallon of conventional regular
gasoline between January 2007 and March 2012 (Energy Information Administration
website, April 2012). Use the Internet to obtain the average price per gallon of conventional
regular gasoline since March 2012.

A. Extend the graph of the time series shown in Figure 1.1.

B. What interpretations can you make about the average price per gallon of conventional regular
gasoline since March 2012?

C. Does the time series continue to show a summer increase in the average price per gallon?
Explain.

● The answer to this exercise depends on updating the time series of the average price per
gallon of conventional regular gasoline as shown in Figure 1.1. Contact the website
www.eia.doe.gov to obtain the most recent time series data. The answer should focus on
the most recent changes or trend in the average price per gallon.

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Chapter 1

17. A manager of a large corporation recommends a $10,000 raise be given to keep a

valued subordinate from moving to another company. What internal and external
sources of data might be used to decide whether such a salary increase is appropriate?

● Internal data on salaries of other employees can be obtained from the personnel
department. External data might be obtained from the Department of Labor or industry
associations

18. A random telephone survey of 1021 adults (aged 18 and older) was conducted by
Opinion Research Corporation on behalf of CompleteTax, an online tax
preparation and e-filing service. The survey results showed that 684 of those
surveyed planned to file their taxes electronically.

A. Develop a descriptive statistic that can be used to estimate the percentage of all taxpayers who
file electronically.

● 684/1021; or approximately 67%

B. The survey reported that the most frequently used method for preparing the tax return was to
hire an accountant or professional tax preparer. If 60% of the people surveyed had their tax
return prepared this way, how many people used an accountant or professional tax preparer?

● (.6)*(1021) = 612.6 Therefore, 612 or 613 used an accountant or professional tax

preparer.

C. Other methods that the person filing the return often used include manual preparation,
use of an online tax service, and use of a software tax program. Would the data for the
method for preparing the tax return be considered categorical or quantitative?

● Categorical

19. A Bloomberg Businessweek North American subscriber study collected data from
a sample of 2861 subscribers. Fifty-nine percent of the respondents indicated an
annual income of $75,000 or more, and 50% reported having an American Express
credit card.
A. What is the population of interest in this study?

● All subscribers of Business Week in North America at the time the survey was
conducted.

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 Data and Statistics

B. Is annual income a categorical or quantitative variable?

● Quantitative

C. Is ownership of an American Express card a categorical or quantitative variable?

● Categorical (yes or no)

D. Does this study involve cross-sectional or time series data?

● Cross-sectional - all the data relate to the same time.

E. Describe any statistical inferences Bloomberg Businessweek might make on the basis of
the survey.

● Using the sample results, we could infer or estimate 59% of the population of
subscribers have an annual income of $75,000 or more and 50% of the population of
subscribers have an American Express credit card.

20. A survey of 131 investment managers in Barron’s Big Money poll revealed the
following:

● Forty-three percent of managers classified themselves as bullish or very bullish on

the stock market.
● The average expected return over the next 12 months for equities was 11.2%.
● Twenty-one percent selected health care as the sector most likely to lead the market
in the next 12 months.
● When asked to estimate how long it would take for technology and telecom stocks to
resume sustainable growth, the managers’ average response was 2.5 years.

A. Cite two descriptive statistics

43% of managers were bullish or very bullish. 21% of managers expected health care to
be the leading industry over the next 12 months.

B. Make an inference about the population of all investment managers concerning the
average return expected on equities over the next 12 months.

● We estimate the average 12-month return estimate for the population of investment
managers to be 11.2%.

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Chapter 1

● We est Make an inference about the length of time it will take for technology and telecom
stocks to resume sustainable growth.imate the average over the population of investment
managers to be 2.5 years.

21. A seven-year medical research study reported that women whose mothers took the
drug DES during pregnancy were twice as likely to develop tissue abnormalities that might
lead to cancer as were women whose mothers did not take the drug.

a. This study compared two populations. What were the populations?

● The two populations are the population of women whose mothers took the drug DES
during pregnancy and the population of women whose mothers did not take the drug DES
during pregnancy.

b. Do you suppose the data were obtained in a survey or an experiment?

● It was a survey.

c. For the population of women whose mothers took the drug DES during pregnancy, a
sample of 3980 women showed that 63 developed tissue abnormalities that might lead to cancer.
Provide a descriptive statistic that could be used to estimate the number of women out of 1000 in
this population who have tissue abnormalities.
● 63 / 3.980 = .0158 or 15.8 women out of each 1000 developed tissue abnormalities.

d. For the population of women whose mothers did not take the drug DES during
pregnancy, what is the estimate of the number of women out of 1000 who would be expected to
have tissue abnormalities?
● The article reported “twice” as many abnormalities in the women whose mothers had
taken DES during pregnancy. Thus, a rough estimate would be 15.8/2 = 7.9
abnormalities per 1000 women whose mothers had not taken DES during pregnancy.

e. Medical studies often use a relatively large sample (in this case, 3980). Why?
● In many situations, disease occurrences are rare and affect only a small portion of the
population. Large samples are needed to collect data on a reasonable number of cases
where the disease exists.

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 Data and Statistics

22. A survey conducted by Better Homes and Gardens Real Estate LLC showed that
one in five U.S. homeowners have either moved from their home or would like to move
because their neighborhood or community isn’t ideal for their lifestyle (Better Homes and
Gardens Real Estate website, September 26, 2013). The top lifestyle priorities of
respondents when searching for their next home include ease of commuting by car, access
to health and safety services, family-friendly neighborhood, availability of retail stores,
access to cultural activities, public transportation access, and nightlife and restaurant
access. Suppose a real estate agency in Denver, Colorado, hired you to conduct a similar
study to determine the top lifestyle priorities for clients that currently have a home listed
for sale with the agency or have hired the agency to help them locate a new home.

a. What is the population for the survey you will be conducting?

● The population consists of all clients that currently have a home listed for sale with the
agency or have hired the agency to help them locate a new home.

b. How would you collect the data for this study?

● Some of the ways that could be used to collect the data are as follows:

● A survey could be mailed to each of the agency’s clients.

● Each client could be sent an email with a survey attached.

● The next time one of the firm’s agents meets with a client they could conduct a
personal interview to obtain the data.

23.Pew Research Center is a nonpartisan polling organization that provides information

about issues, attitudes, and trends shaping America. In a poll, Pew researchers found that
73% of teens aged 13–17 have a smartphone, 15% have a basic phone and 12% have no
phone. The study also asked the respondents how they communicated with their closest
friend. Of those with a smartphone, 58% responded texting, 17% social media and 10%
phone calls. Of those with no smartphone, 25% responded texting, 29% social media and
21% phone calls. (Pew Research Center website, October 2015).

a. One statistic (58%) concerned the use of texting to contact his/her closest friend, if the
teen owns a smartphone. To what population is that applicable?
● The population is American teens aged 13-17 who own a smartphone.

b. Another statistic (25%) concerned the use of texting by those who do not own a
smartphone. To what population is that applicable?
● The population is American teens aged 13-17 who do not own a smartphone.

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Chapter 1

c. Do you think the Pew researchers conducted a census or a sample survey to obtain their
results? Why?
● Pew Research conducted a sample survey. It would not be practical to conduct a census
as it would take too much time and money to do so.

24. A sample of midterm grades for five students showed the following results: 72, 65, 82,
90, 76. Which of the following statements are correct, and which should be challenged as
being too generalized?

a. The average midterm grade for the sample of five students is 77.
● This is a statistically correct descriptive statistic for the sample.

b. The average midterm grade for all students who took the exam is 77.
● An incorrect generalization since the data was not collected for the entire population.

c. An estimate of the average midterm grade for all students who took the exam is 77.
● An acceptable statistical inference based on the use of the word “estimate.”

d. More than half of the students who take this exam will score between 70 and 85.
● While this statement is true for the sample, it is not a justifiable conclusion for the entire
population.

e. If five other students are included in the sample, their grades will be between
65 and 90.
● This statement is not statistically supportable. While it is true for the particular sample
observed, it is entirely possible and even very likely that at least some students will be
outside the 65 to 90 range of grades.

25. Table 1.8 shows a data set containing information for 25 of the shadow stocks tracked by
the American Association of Individual Investors. Shadow stocks are common stocks of
smaller companies that are not closely followed by Wall Street analysts. The data set is also
on the website that accompanies the text in the DATAfile named Shadow02.

a. How many variables are in the data set?

● There are five variables: Exchange, Ticker Symbol, Market Cap, Price/Earnings Ratio and
Gross Profit Margin.

b. Which of the variables are categorical and which are quantitative?

● Categorical variables: Exchange and Ticker Symbol

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 Data and Statistics

● Quantitative variables: Market Cap, Price/Earnings Ratio, Gross Profit Margin

c. For the Exchange variable, show the frequency and the percent frequency for AMEX,
NYSE, and OTC. Construct a bar graph similar to Figure 1.4 for the Exchange variable.
● Exchange variable:

Exchange Frequency Percent Formatted: Font: 12 pt

Frequency
AMEX 5 (5/25) 20% Formatted: Font: 12 pt
NYSE 3 (3/25) 12% Formatted: Font: 12 pt
OTC 17 (17/25) 68% Formatted: Font: 12 pt
25 100% Formatted: Font: 12 pt
Formatted: Font: 12 pt

d. Show the frequency distribution

for the Gross Profit Margin using the five intervals: 0–14.9, 15–29.9, 30–44.9, 45–59.9, and 60–
74.9. Construct a histogram similar to Figure 1.5.
● Gross Profit Margin variable:

Gross Profit Margin Frequency

0.0 – 14.9 2 Formatted: Font: 12 pt
15.0 – 29.9 6 Formatted: Font: 12 pt
30.0 – 44.9 8 Formatted: Font: 12 pt
45.0 – 59.9 6 Formatted: Font: 12 pt
60.0 – 74.9 3
Formatted: Font: 12 pt
25

e. What is the average price/earnings ratio?

● Sum the Price/Earnings Ratio data for all 25 companies.

Sum = 505.4

Average Price/Earnings Ratio = Sum/25 = 505.4/25 = 20.2

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