What is Statistics?

McGraw-Hill/Irwin Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
 What is Meant by Statistics?

Statistics is the science of collecting,

organizing, presenting, analyzing, and
interpreting numerical data to assist in
making more effective decisions.
OR A set of mathematically based tools
and techniques to transform raw data
into few summary measures

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 Why Study Statistics?

1. Numerical information is everywhere

2. Statistical techniques are used to make decisions
that affect our daily lives
3. The knowledge of statistical methods will help you
understand how decisions are made and give you a
better understanding of how they affect you.
Is a vital tool in research.
No matter what line of work you select, you will find
yourself faced with decisions where an
understanding of data analysis is helpful.

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 Why Study Statistics

 Strengthens management decisions by

providing evidence based information or
quantifiable basis.
 This increases the confidence in decision
making
TASK 1: Give a detailed account on how and
why managers use Statistics?

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 What is Meant by Statistics?

 In the more common usage, statistics refers

to numerical information
Examples: the average starting salary of college graduates, the
number of deaths due to alcoholism last year, the change in the
Dow Jones Industrial Average from yesterday to today, and the
number of home runs hit by the Chicago Cubs during the 2007
season.
 We often present statistical information in a
graphical form for capturing reader attention
and to portray a large amount of information.

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 Formal Definition of Statistics

STATISTICS The science of collecting, organizing, presenting,

analyzing, and interpreting data to assist in making more effective
decisions.
Some examples of the need for data collection.
1. Research analysts for Merrill Lynch evaluate many facets of a
particular stock before making a “buy” or “sell” recommendation.
2. The marketing department at Colgate-Palmolive Co., a manufacturer
of soap products, has the responsibility of making recommendations
regarding the potential profitability of a newly developed group of
face soaps having fruit smells.
3. The United States government is concerned with the present
condition of our economy and with predicting future economic trends.
4. Managers must make decisions about the quality of their product or
service.

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 Who Uses Statistics?

Statistical techniques are used

extensively by marketing,
accounting, quality control,
consumers, professional sports
people, hospital administrators,
educators, politicians, physicians,
etc...

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 Types of Statistics – Descriptive Statistics and
Inferential Statistics

Descriptive Statistics - methods of organizing,

summarizing, and presenting data in an
informative way.
EXAMPLE 1: The United States government reports the population of the
United States was 179,323,000 in 1960; 203,302,000 in 1970;
226,542,000 in 1980; 248,709,000 in 1990, and 265,000,000 in 2000.

EXAMPLE 2: According to the Bureau of Labor Statistics, the average hourly

earnings of production workers was $17.90 for April 2008.

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 Types of Statistics – Descriptive Statistics and
Inferential Statistics

Inferential Statistics: A decision, estimate,

prediction, or generalization about a
population, based on a sample.

Note: In statistics the word population and sample have a broader

meaning. A population or sample may consist of individuals or
objects

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 Population versus Sample

A population is a collection of all possible individuals, objects, or

measurements of interest under study.

A sample is a portion, or part, or subset of data values drawn

from a population of interest

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 Why take a sample instead of studying every
member of the population?

1. Prohibitive cost of census

2. Destruction of item being studied may be
required
3. Not possible to test or inspect all members
of a population being studied
4. Time constraint

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 A Sampling Unit

 Is the object being measured, counted or

observed with respect to the random variable
under study.
 The question is “What is a Random
Variable?”
 Any attribute of interest on which data is
collected and analysed.
 Eg brand of coffee preferred, daily
occupancy rates, output per worker etc.

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 Population Parameter

 A measure that describes a characteristic of

a population e.g population average,
population proportion.

 It is a parameter because it uses all the

population data to compute its value.

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 Sample Statistic

 A measure that describes a characteristic of

a sample e.g sample average and sample
proportion.
 Give any two examples of appropriate
sample statistics in business.

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 Usefulness of a Sample in Learning about a
Population

Using a sample to learn something about a

population is done extensively in business,
agriculture, politics, and government.

EXAMPLE: Television networks constantly

monitor the popularity of their programs by
hiring Nielsen and other organizations to
sample the preferences of TV viewers.

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 Components of Statistics

1. Descriptive Statistics: condenses data into

few summary descriptive measures.
2. Inferential statistics: generalises sample
findings to the broader population.
3. Statistical modelling: builds models of
relationships between variables by
constructing equations (or models) to
estimate one of these variables based on
values of related variables.

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 Data and Data Quality

 Define data.
 The usefulness of data depends of the
quality of data collected.
 The quality of data depends on:

i) The data type

ii) The source of data
iii) Methods of data collection.

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 Types of Variables

A. Qualitative or Attribute variable - the characteristic being

studied is nonnumeric or categorical.
EXAMPLES: Gender, religious affiliation, type of automobile owned,
state of birth, eye color are examples.

B. Quantitative variable - information is reported

numerically and in real numbers
EXAMPLES: balance in your checking account, age of a student,
minutes remaining in class, or number of children in a family, price of
a product, distance travelled by a car.

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 Quantitative Variables - Classifications

Quantitative variables can be classified as either discrete

or continuous.

A. Discrete variables: can only assume certain values and

there are usually “gaps” between values. Is whole number (or
integer) data.
EXAMPLE: the number of bedrooms in a house, or the number of
hammers sold at the local Home Depot (1,2,3,…,etc).

B. Continuous variable can assume any value within a

specified range. Any number that can occur in an interval

EXAMPLE:The pressure in a tire, the weight of a pork chop, or the

height of students in a class, passengers’ hand luggage
(0.8kg), volume of fuel 50l ; 45.5l
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 Summary of Types of Variables

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 Four Levels of Measurement or
Measurement scales
Interval level
Nominal level- -similar
data that isordinal
to the classified
level,into
withcategories andproperty
the additional cannotthat
be
arranged inamounts
meaningful any particular order.between data values can be determined.
of differences
There is no natural zero point.
EXAMPLE: Temperature on the Fahrenheit scale.
EXAMPLES: eye color, gender, religious affiliation.

Ratio level
Ordinal - the– interval
level level within
data arranged ansome
inherent zerobut
order, starting point. Differences
the differences and
between
ratios are meaningful
data values cannot for
be this level of measurement.
determined or are meaningless.
EXAMPLES: Monthly income of surgeons, or distance traveled by manufacturer’s
EXAMPLE: During aper
representatives taste test of 4 soft drinks, Mellow Yellow was ranked number 1, Sprite
month.
number 2, Seven-up number 3, and Orange Crush number 4.

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 Nominal-Level Data

Properties:
1. Observations of a qualitative variable can
only be classified and counted.
2. There is no particular order to the labels.
3. Eg. Gender (1-male; 2- female); mode of
transport ( 1- bus, 2-car, 3-train, 4- bicycle)

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 Ordinal-Level Data

Properties:
1. Has implied ranking between the categories.
2. Each consecutive category possesses either more or
less than the previous category
3. Data classifications are represented by sets of labels
or names (high, medium, low); lower, middle, upper,
that have relative values.
4. Because of the relative values, the data classified
can be ranked or ordered.
5. The distance between the ranks are not equal
6. Although it is weak, can be analysed by more
statistical methods

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 Interval-Level Data

Properties: Is associated with numeric data

1. Data classifications are ordered according to the amount of
the characteristic they possess.
2. They possess two properties:
 Rank order- same as ordinal data
 Distance- how much more or less an object possess of a
characteristic
 However, it is meaningless to conclude that a rating of 4 is
twice as important as a rating of 2, or that a rating of 1 is only
one third as important as a rating of 3

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 Examples of interval-scaled data

 How would you rate your chances of getting

employed after completing your first degree?
1. Very low 2. Low 3. Moderate 4. high 5. Very high
 How satisfied are you with your current job
description?
1. Very dissatisfied 2. Dissatisfied 3. Satisfied 4.
Very Satisfied
The above two examples are examples of semantic
differential scales that bipolar adjectives
 Has no zero point, hence it is meaningless to
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 Ratio-Level Data

 Consists of all real numbers associated with

quantitative variables. Eg employee ages, customer
incomes, distance travelled (km) number of shopping
trips per month (0; 1; 2; 3; etc
 Ratio level is the “highest” level of measurement.

Properties:
1. Data classifications are ordered according to the amount of the
characteristics they possess.
2. Equal differences in the characteristic are represented by equal
differences in the numbers assigned to the classifications.

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 Properties of Ratio data

 Has all properties of numbers (order, distance and

an absolute origin of zero) that allow such data to be
added, subtracted, multiplied or divided.
 Is the strongest data for statistical analysis since the
most amount of statistical information can be
extracted.
 More statistical methods can be applied to ratio data
than any other type.
 The zero property means that ratios can be
computed eg 5 is half of 10.

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 Why Know the Level of Measurement of a
Data?

 The level of measurement of the data

dictates the calculations that can be done to
summarize and present the data.
 To determine the statistical tests that should
be performed on the data

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 Summary of the Characteristics for
Levels of Measurement

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 Data Sources

 Sources of data can be internal, sourced

from within the company.
 Data can be sourced externally, existing
outside an organisation e.g from external
databases.
 Most commonly, researchers use primary
data that is recorded for the first time at
source.
 Sometimes secondary data is used, data that
already exist.
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 Primary and Secondary data

Question: discuss the advantages and

disadvantages of using:
i. Primary data.
ii. Secondary data.

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 Data collection methods

i. Observation.
ii. experiments
iii. Panels
iv. Focus groups
v. Surveys
 Face-to-face interviews
 Telephone interviews
 Computer assisted interviews
 personal interviews,
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 e-surveys).
 What are the advantages and
disadvantages of gathering data
using each method listed above?

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