What is Statistics

Chapter 1

McGrawHill/Irwin

TheMcGrawHillCompanies,Inc.2008

GOALS

What is meant by statistics?

Understand why we study statistics.
Explain what is meant by descriptive statistics and
inferential statistics.
Distinguish between a qualitative variable and a
quantitative variable.
Describe how a discrete variable is different from a
continuous variable.
Distinguish among the nominal, ordinal, interval, and
ratio levels of measurement.

What Is Meant By Statistics?

Common meaning:

Numerical information such as:

Mean

time waiting on hold for technical support is 17

minutes
In a recent poll, 21% of respondents approved of the
Presidents policies

Statistic: One figure

Statistics: more than one figure

What Is Meant By Statistics?

Statistics is interested in what is a typical value
and how much variation there is in the data
Typical value:

Variation

Some sort of average (Mean, Median, Mode)

How reliable is the average
How clustered are the data points around the mean

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.

Understand why we study statistics

Because

numeric and non-numeric data are

everywhere
In marketing, accounting, finance,
economics, politics, sciences, and
elsewhere, there are statistics

We need to be able to understand statistics when

we encounter them
We need to not be tricked by misleading statistics
We need to use statistics to help us make
decisions under future uncertainty

Who Uses Statistics?

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

Types of Statistics Descriptive

Statistics

Descriptive Statistics - methods of

organizing, summarizing, and
presenting data in an informative
way.

Descriptive Statistics
EXAMPLE 2: According
to Consumer Reports,
General Electric
washing machine
owners reported 9
problems per 100
machines during
2001. The statistic 9
describes the number
of problems out of
every 100 machines.
9

Descriptive Statistics

EXAMPLE 3: Pie Chart (chapter 2) For Running

Shoes Sold At Big 5 Sports
10

Descriptive Statistics

EXAMPLE 4: Frequency Distribution (chapter 2)

11

Types of Statistics Descriptive

Statistics
Inferential

Statistics definition 1: The

methods used to estimate a
property of a population on the basis
of a sample.
Inferential Statistics definition 2: A
decision, estimate, prediction, or
generalization about a population,
based on a sample.
12

Population versus Sample

A population is a collection of all possible individuals, objects, or
measurements of interest.
A sample is a portion, or part, of the population of interest

13

Inferential Statistics
Example 1: TV networks
constantly monitor
the popularity of their
programs by hiring
Nielsen and other
organizations to
sample the
preferences of TV
viewers.

14

#1

Inferential Statistics
Example 2: Wine tasters
sip a few drops of
wine to make a
decision with respect
to all the wine waiting
to be released for
sale.

15

Example 3: The
accounting
department of a large
firm will select a
sample of the
invoices to check for
accuracy for all the
invoices of the
company.

Descriptive Statistics Or Inferential

Statistics?
There

are a total of 42,796 miles of interstate

highways in the United States

Auditors

take a sample of a firms invoices in

order to assess the magnitude of reliability of
the accounting invoicing system

16

Types of Variables
Qualitative

or Attribute variable - the

characteristic being studied is
nonnumeric.

EXAMPLES: Gender, type of automobile owned, state

of birth, eye color are examples.

Qualitative

data are usually summarized in

graphs or bar charts
(Nominal or ordinal level of measurement)
17

Types of Variables
Quantitative

variable - information is
reported numerically.

EXAMPLES: balance in your checking account,

minutes remaining in class, or number of children in a
family.

Quantitative

variables can be
classified as either Discrete or
Continuous.

18

Quantitative Variables - Classifications

Discrete

variables: can only assume

certain values and there are usually
gaps between values.

19

EXAMPLE: the number of bedrooms in a house, or the number of

hammers sold at the local Home Depot (1,2,3,,etc).

Quantitative Variables - Classifications

Continuous

variable can assume any

value within a specified range.

20

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

the height of students in a class.
Usually is measured (accuracy depends on measuring
instrument)
Money is often categorized as a continuous variable (even though
you cant count between pennies)

Distinguish Between A Qualitative Variable

And A Quantitative Variable
Colors

of M & M candies?
Amount of money in your retirement
account?
Score on test?
Type of bike you own?

21

Summary of Types of Variables

22

Four Levels of Measurement

Levels of measurement dictate:

The calculations that can be done to summarize & present the

data
The statistical tests that can be preformed

Nominal

level No order
Ordinal level Order but no set distance between
levels

Interval

level - Order with set distances between

levels, zero just a point on the scale, no division

Ratio

level - Order with set distances between levels,

inherent zero starting point, division OK

23

Nominal Level

Nominal level - data that is classified into

categories and cannot be arranged in any particular
order.

Observations of a qualitative variable can only be

classified and counted. There is no particular order
to the labels.
Nominal level properties:
1.
2.

24

EXAMPLES: Eye color, gender, car make

Data categories are represented by labels or names.

Even when the labels are numerically coded, the data
categories have no logical order.

Nominal Level

25

Ordinal Level

Ordinal level involves data arranged in some

order, but the differences between data values
cannot be determined or are meaningless.

Ordinal level properties:

1.

2.

26

EXAMPLE: During a taste test of 4 soft drinks, Mellow Yellow

was ranked number 1, Sprite number 2, Seven-up number 3,
and Orange Crush number 4.
EXAMPLE: How do you rate your instructor?
EXAMPLE: Order of finish in race.

Data classifications are represented by sets of labels or

names (high, medium, low or very good, good, poor) that
have relative values.
Because of the relative values, the classified data can be
ranked or ordered.

Ordinal Level
During a taste test
of 4 soft drinks,
Coca Cola was
ranked number 1,
Dr. Pepper number
2, Pepsi number 3,
and Root Beer
number 4.

2
1

Interval Level

Interval level:

28

One category is higher than

another (Ordered).
There is a constant unit of
measurement.
Zero is just a point on the
scale; or there is no natural
zero point.
Division of two numbers does
not make sense.
Scale or rank are good
examples

EXAMPLE: Temperature on
the Fahrenheit scale.

EXAMPLE: Shoe size and

dress size.

There is no natural zero point

EXAMPLE: Years in which

Whole Foods Market Inc. stock
split.

Zero is just a point on the

scale.

Division of 1992 and 1993

does not make sense.

EXAMPLES: Rank of Indi 500

results, Test scores.

Interval Level

Interval level properties:

1.
2.

Data classifications are ordered according to the

amount of the characteristic they possess.
Equal differences in the characteristic are
represented by equal differences in the
measurement.
1.

29

The increment amount up or down is always the same.

Ratio Level
Ratio

level - the interval level with an inherent

zero starting point. Differences and ratios are
meaningful for this level of measurement.

30

Practically all quantitative data are the ratio level

of measurement.
EXAMPLES: Monthly income of surgeons,
distance traveled by Sales Rep. per month, Bank
account amount, weight, height, wages, units of
production.

Ratio Level
Bank

account dollars

Zero is not just a point on the scale, it is the

inherent starting point.
Zero means that you dont have any money.
Zero means that there is a complete absence of
money.
Division has meaning:
Starting

balance = $1000.
Ending balance = $1500.
Decimal equivalent change = 1500/1000-1 = .50.
31

Ratio Level
Ratio
1.
2.

3.

32

level properties:

Data classifications are ordered according to the

amount of the characteristics they posses.
Equal differences in the characteristics are
represented by equal differences in the number
assigned to the classification.
The zero point is the absence of the
characteristic and the ratio between two
numbers is meaningful.

Summary of the Characteristics for

Levels of Measurement (example 1)

33

Summary of the Characteristics for

Levels of Measurement (example 2)
Levels of Data

Nominal

Data may only

be classified
(no order)

1.
2.

34

Jersey #
Make of car

Ordinal

Interval

Ratio

Meaningful 0 point

Data are ranked

Meaningful
differences
between values

1.
2.

Team standings
in the Pac 10
CPA exam rank

1.
2.
3.

Temperature
Shoe size
Score on Test

& ratio
between values

1.
2.

Checkbook Bal.
Stock values

End of Chapter 1

35