Business Statistics

Chapter 1 Statistics, Data, & Statistical Thinking

Business Statistics What is Statistics ?

1.

Collecting Data
e.g., Survey

Data Analysis

2. Presenting Data
e.g., Charts & Tables

3. Characterizing Data
e.g., Average

Making decision

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Statistical Methods Statistical Methods

Descriptive Statistics

Inferential Statistics

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Descriptive Statistics
1.

Involves Collecting Data Presenting Data Characterizing Data

Purpose Describe Data

50

25
0 Q1 Q2 Q3 Q4

2.

X = 30.5 S2 = 113

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Inferential Statistics
1.

Involves

Estimation Hypothesis Testing

2.

Purpose

Make decisions about population characteristics

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Types of Data

Quantitative Data

Qualitative Data

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Quantitative Data
Measured on a numeric scale. Number of defective items in a lot. Salaries of CEO's of oil companies. Ages of employees at a company.

4 943 21 120 52

12
8

71

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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

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Type of Data

Four type of data : Nominal

Ordinal Interval

Rasio

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Data

Categorical
Examples:

Numerical

Marital Status Political Party Eye Color (Defined categories)

Discrete
Examples: Number of Children Defects per hour (Counted items)

Continuous
Examples:

Weight Voltage (Measured characteristics)

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Levels of Measurement and Measurement Scales
Differences between measurements, true zero exists Differences between measurements but no true zero Ordered Categories (rankings, order, or scaling) Categories (no ordering or direction)

Ratio Data

Highest Level (Strongest forms of measurement)

Interval Data
Higher Levels

Ordinal Data
Lowest Level (Weakest form of measurement)

Nominal Data

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Levels of Measurement and Measurement Scales
EXAMPLES:

Ratio Data

Differences between measurements, true zero exists

Height, Age, Weekly Food Spending

Interval Data

Differences between measurements but no true zero

Temperature in Fahrenheit, Standardized exam score

Ordinal Data

Ordered Categories (rankings, order, or scaling)

Service quality rating, Standard & Poors bond rating, Student letter grades

Nominal Data

Categories (no ordering or direction)

Marital status, Type of car owned

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Application Areas

Economics
Sports
Engineering

Forecasting
Demographics Individual & Team Performance Construction Materials Consumer Preferences Financial Trends

Business

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Random Sample
Every sample of size n has an equal chance of selection.

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Key Tems
1. 2.

Population (Universe)

All items of interest Portion of population

P in Population & Parameter

Sample

S in Sample & Statistic

3.
4.

Parameter

Summary measure about population

Statistic

Summary measure about sample

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Activities of Statistics
1. Designing the study:
First step Plan for data-gathering Random sample (control bias and error)

2. Exploring the data:

First step (once you have data) Look at, describe, summarize the data Are you on the right track?

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3. Modeling the data A framework of assumptions and equations Parameters represent important aspects of the data Helps with estimation and hypothesis testing 4. Estimating an unknown: Best guess based on data Wrong - buy by how much? Confidence interval - were 95% sure that the unknown is between

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5. Hypothesis testing: Data decide between two possibilities Does it really work? [or is it just randomly better?] Is financial statement correct? [or is error material?] Whiter, brighter wash?

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Probability
Inverse of statistics

Statistics The world Probability You see

world works, what data are you likely to see? Examples of probability: Flip coin, stock market, future sales, IRS audit, Foundation for statistical inference

Statistics: generalizes from data to the world Probability: What if Assuming you know how the

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Statistical View of the World
Data are imperfect We do the best we can -- Statistics helps! Events are random Cant be right 100% of the time Use statistical methods Along with common sense and good

judgment Be skeptical! Statistics can be used to support contradictory conclusions Look at who funded the study?

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Statistical Computer Packages
1.

Typical Software

SAS SPSS MINITAB Excel

2.

Need Statistical Understanding

Assumptions Limitations