Basic Concepts

of
Statistical
Studies
1
 Introduction
■ Decision makers make better decisions when they use
all available information in an effective and
meaningful way. The primary role of statistics is to to
provide decision makers with methods for obtaining
and analyzing information to help make these
decisions. Statistics is used to answer long-range
planning questions, such as when and where to locate
facilities to handle future sales.

2
 Definition
■ Statistics
is defined as the
science of collecting,
organizing, presenting,
analyzing and interpreting
numerical data for the
purpose of assisting in making
a more effective decision.

3
Applications in Management
■ Accounting
Public accounting firms use statistical
sampling procedures when conducting
audits for their clients.

■ Economics
Economists use statistical information
in making forecasts about the future of
the economy or some aspect of it.

4
Applications in Management
■ Marketing
Electronic point-of-sale scanners at
retail checkout counters are used to
collect data for a variety of marketing
research applications.

■ Production
A variety of statistical quality
control charts are used to monitor
the output of a production process.

5
 Types of Statistics
■ There are two types of statistics

1. Descriptive Statistics is concerned with

summary calculations, graphs, charts and tables.

2. Inferential Statistics is a method used to

generalize from a sample to a population. For
example, the average income of all families (the
population) in India can be estimated from
figures obtained from a few hundred (the sample)
families.

6
 Statistical Population
■A Population is a collection of all
distinct individuals or objects or items
under study. The number of entities in
a population, Called the Population
Size, is denoted by N
■ A descriptive measure of a population
is called a Parameter

7
 Sample
■A Sample is a part of a population
and the sample size is denoted by
n. A sample should be a
representative of the population.
■A descriptive measure of a population
is called a Statistic

8
 Data and Data Sets
■ Data are the facts and figures collected, summarized,
analyzed, and interpreted.

 The data collected in a particular study are referred

to as the data set.

9
 Elements, Variables, and Observations

 The elements are the entities on which data are

collected.
 A variable is a characteristic of interest for the elements.
 The set of measurements collected for a particular
element is called an observation.
 The total number of data values in a complete data
set is the number of elements multiplied by the
number of variables.

10
 Data, Data Sets,
Elements, Variables, and Observations
Observatio Variable
Elemen n s
t Stock Annual Earn/
Names
Company Exchange Sales($M) Share($)

Dataram NQ 73.10 0.86

EnergySouth N 74.00 1.67
Keystone N 365.70 0.86
LandCare NQ 111.40 0.33
Psychemedics N 17.60 0.13

Data Set

11
 Scales of Measurement
Scales
Scales of
of measurement
measurement include:
include:
Nominal Interval
Ordinal Ratio

The
The scale
scale determines
determines thethe amount
amount of
of information
information
contained
contained in
in the
the data.
data.

The
The scale
scale indicates
indicates the
the data
data summarization
summarization and
and
statistical
statistical analyses
analyses that
that are
are most
most appropriate.
appropriate.

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 Scales of Measurement
■ Nominal

Data
Data are
are labels
labels or
or names
names used
used to
to identify
identify an
an
attribute
attribute of
of the
the element.
element.

A
A nonnumeric
nonnumeric label
label or
or numeric
numeric code
code may
may be
be used.
used.

13
 Scales of Measurement

■ Nominal

Example:
Example:
Students
Students of
of aa university
university are
are classified
classified by
by the
the
school
school in
in which
which they
they are
are enrolled
enrolled using
using aa
nonnumeric
nonnumeric label
label such
such as
as Business,
Business, Humanities,
Humanities,
Education,
Education, and
and soso on.
on.
Alternatively,
Alternatively, aa numeric
numeric code
code could
could be
be used
used for
for
the
the school
school variable
variable (e.g.
(e.g. 1
1 denotes
denotes Business,
Business,
2
2 denotes
denotes Humanities,
Humanities, 3 3 denotes
denotes Education,
Education, and
and
so
so on).
on).

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 Scales of Measurement
■ Ordinal

The
The data
data have
have the
the properties
properties of
of nominal
nominal data
data and
and
the
the order
order or
or rank
rank of
of the
the data
data is
is meaningful
meaningful..

A
A nonnumeric
nonnumeric label
label or
or numeric
numeric code
code may
may be
be used.
used.

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 Scales of Measurement
■ Ordinal

Example:
Example:
Students
Students of
of aa university
university are
are classified
classified by
by their
their
class
class standing
standing using
using aa nonnumeric
nonnumeric label
label such
such asas
Freshman,
Freshman, Junior,
Junior, or
or Senior.
Senior.
Alternatively,
Alternatively, aa numeric
numeric code
code could
could be
be used
used for
for
the
the class
class standing
standing variable
variable (e.g.
(e.g. 1
1 denotes
denotes
Freshman,
Freshman, 2 2 denotes
denotes Juniors
Juniors and
and so
so on).
on).

16
 Scales of Measurement
■ Interval

The
The data
data have
have the
the properties
properties of
of ordinal
ordinal data,
data, and
and
the
the interval
interval between
between observations
observations is
is expressed
expressed in
in
terms
terms of
of aa fixed
fixed unit
unit of
of measure.
measure.

Interval
Interval data
data are
are always
always numeric
numeric..

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 Scales of Measurement
■ Interval

Example:
Example:
Shruti
Shruti has
has an
an MAT
MAT score
score of
of 605,
605, while
while Raj
Raj
has
has an
an MAT
MAT score
score of
of 655.
655. Raj
Raj scored
scored 50
50
points
points more
more than
than Shruti.
Shruti.

18
 Scales of Measurement
■ Ratio

The
The data
data have
have all
all the
the properties
properties of
of interval
interval data
data
and
and the
the ratio
ratio of
of two
two values
values is
is meaningful
meaningful..

Variables
Variables such
such as
as distance,
distance, height,
height, weight,
weight, and
and time
time
use
use the
the ratio
ratio scale.
scale.

This
This scale
scale must
must contain
contain aa zero
zero value
value that
that indicates
indicates
that
that nothing
nothing exists
exists for
for the
the variable
variable at
at the
the zero
zero point.
point.

19
 Scales of Measurement
■ Ratio

Example:
Example:
Raj’s
Raj’s college
college record
record shows
shows 36 36 credit
credit hours
hours
earned,
earned, while
while Kevin’s
Kevin’s record
record shows
shows 7272 credit
credit
hours
hours earned.
earned. Kevin
Kevin has
has twice
twice as
as many
many credit
credit
hours
hours earned
earned as Raj’s..
as Raj’s

20
 Qualitative and Quantitative Data

Data
Data can
can be
be further
further classified
classified as
as being
being qualitative
qualitative
or
or quantitative.
quantitative.

The
The statistical
statistical analysis
analysis that
that is
is appropriate
appropriate depends
depends
on
on whether
whether the
the data
data for
for the
the variable
variable are
are qualitative
qualitative
or
or quantitative.
quantitative.

In
In general,
general, there
there are
are more
more alternatives
alternatives for
for statistical
statistical
analysis
analysis when
when the
the data
data are
are quantitative.
quantitative.

21
 Qualitative Data
Labels
Labels or
or names
names used
used to
to identify
identify an
an attribute
attribute of
of each
each
element
element

Often
Often referred
referred to
to as
as categorical
categorical data
data

Use
Use either
either the
the nominal
nominal or
or ordinal
ordinal scale
scale of
of
measurement
measurement

Can
Can be
be either
either numeric
numeric or
or nonnumeric
nonnumeric

Appropriate
Appropriate statistical
statistical analyses
analyses are
are rather
rather limited
limited

22
 Quantitative Data

Quantitative
Quantitative data
data indicate
indicate how
how many
many or
or how
how much:
much:

discrete
discrete,, if
if measuring
measuring how
how many
many

continuous
continuous,, if
if measuring
measuring how
how much
much

Quantitative
Quantitative data
data are
are always
always numeric
numeric..

Ordinary
Ordinary arithmetic
arithmetic operations
operations are
are meaningful
meaningful for
for
quantitative
quantitative data.
data.

23
 Scales of Measurement

Data

Qualitative Quantitativ
e

Numerical Non- Numerical

numerical

Nomina
Nomina Ordina Nominal Ordinal Interval Ratio
ll l

24
 Cross-Sectional Data

Cross-sectional
Cross-sectional data
data are
are collected
collected atat the
the same
same or
or
approximately
approximately the
the same
same point
point in
in time.
time.

Example
Example:: data
data detailing
detailing the
the number
number of
of building
building
permits
permits issued
issued in
in June
June 2007
2007 in
in each
each of
of the
the Districts
Districts
of
of UP
UP

25
 Time Series Data

Time
Time series
series data
data are
are collected
collected over
over several
several time
time
periods.
periods.

Example
Example:: data
data detailing
detailing the
the number
number of
of building
building
permits
permits issued
issued in
in Districts
Districts of
of UP
UP in
in each
each of
of
the
the last
last 36
36 months
months

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 Data Sources
■ Existing Sources

Within a firm – almost any department

Business database services – Dow Jones & Co.
Government agencies - Department of Labor

Industry associations – Travel Industry Association

Special-interest organizations – Graduate Management

Admission Council
Internet – more and more firms

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 Descriptive Statistics
■ Descriptive statistics are the tabular,
graphical, and numerical methods used to
summarize and present data.

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 Example: Hudson Auto Repair

The manager of Hudson Auto

would like to have a better
understanding of the cost
of parts used in the engine
tune-ups performed in the
shop. She examines 50
customer invoices for tune-ups. The costs of
parts,
rounded to the nearest dollar, are listed on the
next
slide.

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 Example: Hudson Auto Repair

■ Sample of Parts Cost ($) for 50 Tune-

ups
91 78 93 57 75 52 99 80 97 62
71 69 72 89 66 75 79 75 72 76
104 74 62 68 97 105 77 65 80 109
85 97 88 68 83 68 71 69 67 74
62 82 98 101 79 105 79 69 62 73

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 Tabular Summary:
Frequency and Percent
Frequency
Parts Parts Percent
Cost ($) Frequency Frequency
50-59 2 4
60-69 13 26
(2/50)10
70-79 16 32 0
80-89 7 14
90-99 7 14
100-109 5 10
50 100

31
 Graphical Summary:
Histogram
Tune-up Parts Cost
18
16
14
Frequency

12
10
8
6
4
2
Parts
Cost ($)
50−59 60−69 70−79 80−89 90−99 100-110

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 Numerical Descriptive
Statistics
 The most common numerical descriptive statistic
is the average (or mean).
 Hudson’s average cost of parts, based on the 50
tune-ups studied, is $79 (found by summing the
50 cost values and then dividing by 50).

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 Statistical Inference

Population− the set of all elements of interest in a

particular study
Sample − a subset of the population

− the process of using data obtained

Statistical inference
from a sample to make estimates
and test hypotheses about the
characteristics of a population
Census− collecting data for a population

Sample survey− collecting data for a sample

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 Process of Statistical
Inference
1. Population
consists of all tune- 2. A sample of 50
ups. Average cost of engine tune-ups
parts is unknown.
unknown is examined.

3. The sample data

4. The sample average
provide a sample
is used to estimate the average parts cost
population average. of $79 per tune-up.

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 Computers and Statistical
Analysis
 Statistical analysis typically involves working with
large amounts of data.
 Computer software is typically used to conduct the
analysis.
 Instructions are provided in chapter appendices for
carrying out many of the statistical procedures
using Minitab and Excel.

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