Chapter (1)

Introduction to Statistics

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LEARNING OBJECTIVES:
The primary objective of Chapter 1 is to introduce you to the world of
statistics, thereby enabling you to:
1. List quantitative and graphical examples of statistics within a
business context.
2. Define important statistical terms, including population, sample,
and parameter, as they relate to descriptive and inferential
statistics.
3. Compare the four different levels of data: nominal, ordinal, interval,
and ratio.

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1.1 Statistics in Business
Virtually every area of business uses statistics in decision making. Here are
some recent examples:
■ According to a TNS Retail Forward ShopperScape survey, the average
amount spent by a shopper on electronics in a three-month period is $629 at
Circuit City, $504 at Best Buy, $246 at Wal-Mart, $172 at Target, and $120 at
RadioShack.
■ A survey of 1465 workers by Hotjobs reports that 55% of workers believe
that the quality of their work is perceived the same when they work
remotely as when they are physically in the office.
■ A survey of 477 executives by the Association of Executive Search
Consultants determined that 48% of men and 67% of women say they are
more likely to negotiate for less travel compared with five years ago.
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1.1 Statistics in Business
■ A survey of 1007 adults by RBC Capital Markets showed that 37% of adults
would be willing to drive 5 to 10 miles to save 20 cents on a gallon of gas.
■ A Deloitte Retail “Green” survey of 1080 adults revealed that 54% agreed
that plastic, non-compostable shopping bags should be banned.
■ A recent Household Economic Survey by Statistic New Zealand determined
that the average weekly household net expenditure in New Zealand was
$956 and that households in the Wellington region averaged $120 weekly on
recreation and culture. In addition, 75% of all households were satisfied or
very satisfied with their material standard of living.
■ The Experience’s Life After College survey of 320 recent college graduates
showed that 58% moved back home after college. Thirty-two percent then
remained at home for more than a year
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1.2 Basic Statistical Business:
Statistics as a science dealing with the collection, analysis,
interpretation, and presentation of numerical data.

The study of statistics can be organized in a variety of ways. One of the

main ways is to subdivide statistics into two branches: descriptive
statistics and inferential statistics.

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1.2 Basic Statistical Business:
Population as a collection of persons, objects, or items of interest.

When researchers gather data from the whole population for a given
measurement of interest, they call it a census.

A sample is a portion of the whole and, if properly taken, is

representative of the whole.

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1.2 Basic Statistical Business:
If a business analyst is using data gathered on a group to describe or
reach conclusions about that same group, the statistics are called
descriptive statistics.
For example, if an instructor produces statistics to summarize a class’s
examination effort and uses those statistics to reach conclusions about
that class only, the statistics are descriptive.

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1.2 Basic Statistical Business:
Another type of statistics is called inferential statistics. If a researcher
gathers data from a sample and uses the statistics generated to reach
conclusions about the population from which the sample was taken, the
statistics are inferential statistics.
The data gathered from the sample are used to infer something about a
larger group. Inferential statistics are sometimes referred to as inductive
statistics. The use and importance of inferential statistics continue to grow.
One application of inferential statistics is in pharmaceutical research. Some
new drugs are expensive to produce, and therefore tests must be limited to
small samples of patients. Utilizing inferential statistics, researchers can
design experiments with small randomly selected samples of patients and
attempt to reach conclusions and make inferences about the population.

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1.2 Basic Statistical Business:
The advantage of using inferential statistics is that they enable the researcher to
study effectively a wide range of phenomena without having to conduct a census.

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1.2 Basic Statistical Business:

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1.2 Basic Statistical Business:
A business researcher often wants to estimate the value of a parameter
or conduct tests about the parameter. However, the calculation of
parameters is usually either impossible or infeasible because of the
amount of time and money required to take a census. In such cases,
the business researcher can take a random sample of the population,
calculate a statistic on the sample, and infer by estimation the value of
the parameter. The basis for inferential statistics, then, is the ability to
make decisions about parameters without having to complete a census
of the population.

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1.2 Basic Statistical Business:

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1.3 Data measurement:
Four common levels of data measurement follow:
1. Nominal
2. Ordinal
3. Interval
4. Ratio

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1.3 Data measurement:
Nominal Level:
The lowest level of data measurement is the nominal level. Numbers
representing nominal level data (the word level often is omitted) can be
used only to classify or categorize.

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1.3 Data measurement:
Nominal Level:
Some other types of variables that often produce nominal-level data
are sex, religion, ethnicity, geographic location, and place of birth.
Social Security numbers, telephone numbers, employee ID numbers,
and ZIP code numbers are further examples of nominal data.

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1.3 Data measurement:
Ordinal Level:
Ordinal-level data measurement is higher than the nominal level. In
addition to the nominal level capabilities, ordinal-level measurement
can be used to rank or order objects.

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1.3 Data measurement:
Because nominal and ordinal data are often derived from imprecise
measurements such as demographic questions, the categorization of
people or objects, or the ranking of items, nominal and ordinal data are
nonmetric data and are sometimes referred to as qualitative data.

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1.3 Data measurement:
Interval Level:
Interval-level data measurement is the next to the highest level of data
in which the distances between consecutive numbers have meaning
and the data are always numerical.
An example of interval measurement is Fahrenheit temperature. With
Fahrenheit temperature numbers, the temperatures can be ranked,
and the amounts of heat between consecutive readings, such as 20, 21,
and 22, are the same.
Or the difference between 12C and 20C is the same as the difference
between 22C and 30 C.
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1.3 Data measurement:
Interval Level:
A 30 degree Celsius is less than 90 degrees Celsius by 60 but we cannot
say that a 90 degrees Celsius is 3 times hot as 30 degrees Celsius.
Zero is just another point on the scale and does not mean the absence
of the phenomenon. For example, zero degrees Fahrenheit is not the
lowest possible temperature

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1.3 Data measurement:
Ratio Level:
Ratio-level data measurement is the highest level of data
measurement. Ratio data have the same properties as interval data,
but ratio data have an absolute zero, and the ratio of two numbers is
meaningful.
Examples of ratio data are height, weight, time, volume, income,
number of trucks sold, production cycle time and number of
employees. With ratio data, a researcher can state that 180 pounds of
weight is twice as much as 90 pounds or, in other words, make a ratio
of 180:90.

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