Business Statistics

Facilitator: Dr. Abhijeet Lele

04/19/2022 1
Concept of Population Parameter and Sample
Estimator

04/19/2022 3
Concept of Population Parameter and Sample
Estimator
• Parameters are descriptive measures of an entire population.

• Parameters are usually signified by Greek letters to distinguish them from

sample statistics. For example, the population mean is represented by the
Greek letter mu (μ) and the population standard deviation by the Greek letter
sigma (σ)

• Estimator (also called sample statistic or point estimator) are measures of

sample.

04/19/2022 7
Sampling Distribution
• A sampling distribution is a statistic that is arrived out through
repeated sampling from a larger population.

• It describes a range of possible outcomes that of a statistic, such as

the mean, standard deviation of sampling distribution.

• The majority of data analyzed by researchers are actually drawn from

samples, and not populations.

04/19/2022 8
Central Limit Theorem
CLT states that regardless of the variable’s
distribution in the population, the sampling
distribution of the mean will tend to approximate the
normal distribution.

04/19/2022 11
Confidence Interval, Margin of Error,
Critical Value and Test Statistic

04/19/2022 15
Z Test Statistics and Critical Value

04/19/2022 23
Hypothesis Testing and Critical Value

04/19/2022 24
 Note

• Read all questions carefully. There may be very small changes in some
questions which may lead to complete opposite conclusions.
• Do solve questions step by step and do not jump to answers. Write each step
on your notebook for each question. This will ensure better learning and
retention of concepts. Following are steps which are required for each
question related to hypothesis testing using z test
• Step 1: Identify and mark all population and sample information given.
• Step 2: Create null and alternate hypothesis as per question.
• Step 3: Calculate z statistic.
• Step 4: Draw normal distribution curve and plot population parameter,
sample statistic and critical values.
• Step 5: Perform hypothesis testing and write interpretation.
04/19/2022 25
Exercise
• A brochure inviting subscriptions for a new diet program states that
the participants are expected to lose over 22 pounds in five weeks
with a standard deviation of 10.2 pounds. Suppose that, from the
data of the five-week weight losses of 56 participants, the sample
mean was found to be 23.5. Could the statement in the brochure be
substantiated on the basis of these findings? Test at the α = .05 level.

04/19/2022 26
Example 1
• A principal at a certain school claims that the students in his school
are above average intelligence. A random sample of 30 students IQ
scores have a mean score of 112. Is there sufficient evidence to
support the principal’s claim? The mean population IQ is 100 with
standard deviation of 15.

04/19/2022 30
Example 2
• Blood glucose levels for obese patients have a mean of 100 with a
standard deviation of 15. A researcher thinks that a diet high in raw
cornstarch will have a positive or negative effect on blood glucose
levels. A sample of 30 patients who have tried the raw cornstarch diet
have a mean glucose level of 140. Test the hypothesis that the raw
cornstarch had an effect.

04/19/2022 35
Example 3

Researcher reported that the population mean and standard deviation

on the quantitative portion of the GRE General Test for those taking the
exam between 1994 and 1997 was 558 and 139 respectively. Suppose
researcher select a sample of 100 students enrolled in a school.
Researcher hypothesize that students at this school will score higher
than the general population. We record a sample mean equal to 585.
Test at a .05 level of significance to find if researcher’s hypothesis is
correct?

04/19/2022 39
Example 4
Researcher reported that the population mean and standard deviation
on the quantitative portion of the GRE General Test for those taking the
exam between 1994 and 1997 was 558 and 139 respectively. Suppose
researcher select a sample of 100 students enrolled in a school.

Researcher hypothesize that students at this school will score lower than
the general population. We record a sample mean equal to 585. Test at a
.05 level of significance to find if researcher’s hypothesis is correct?

04/19/2022 43
Exercise
A set of elementary school student heights are normally
distributed with a mean of 105 centimeters and a standard
deviation of 10 centimeters. Faisal is an elementary school
student with a height of 103.1 centimeters.
What proportion of student heights are lower than
Faisal's height?

04/19/2022 47
Exercise

A set of shirt prices are normally distributed with a mean

of 45 dollars and a standard deviation of 5 dollars.
What proportion of shirt prices are between 37 dollars
and 59.35 dollars?

04/19/2022 50
 Exercise
Machine produces washer with 0.502 inches and the
standard deviation is 0.005 inches. The purpose for
which these washers are intended allows a maximum
tolerance in the diameter of 0.496 to 0.508 inches,
otherwise the washers are considered defective.
Determine the percentage of defective washers
produced by the machine, assuming the diameters are
normally distributed.
04/19/2022 53
Correlation Analysis
Correlation Analysis
• Correlation analysis is a statistical technique used to analyse the
strength and direction of the relationship between two quantitative
variables.

• Coefficient of correlation is a number that indicates the strength and

direction of statistical relation between two variables

• Correlation analysis measures the strength and direction of linear

relationships and does not necessarily imply a relationship between
the variables.
Properties of Coefficient of Correlation
• The value of the coefficient of correlation (r) always lies between ±1.
Such as:
r=+1, perfect positive correlation
r=-1, perfect negative correlation
r=0, no correlation

• The coefficient of correlation is “ zero” when the variables X and Y are

absolutely not related.
Karl Pearson’s Coefficient of Correlation
• Karl Pearson’s coefficient of correlation measure quantitatively the
strength and direction of the relationship between two variables.

• Pearson’s Coefficient of Correlation is denoted by “r”.

Karl Pearson’s Coefficient of Correlation
If the relationship between two variables x and y is to be ascertained,
then the following formula is used where n is the number of
observations:
Example
Q.1 The following table gives indices of industrial production and
number of registered unemployed people (in lakh). Calculate the value
of correlation coefficient.

Year 1991 1992 1993 1994 1995 1996 1997 1998

Index of
100 102 104 107 105 112 103 99
Production

Number of
Unemployed 15 12 13 11 12 12 19 26
 Thank You !

04/19/2022 72