BBAZ16011

Introduction to Business
Statistics

2025-2026
Semester A
 Describing Data: Numerical
Measures

Chapter 3

1-2
© McGraw Hill LLC. All rights reserved. No reproduction or distribution without the prior written consent of McGraw Hill LLC.
Learning Objectives

LO3.1: Compute and interpret the mean, the median, and

the mode.
LO3.2: Compute a weighted mean.
LO3.3: Compute and interpret the range, variance, and
standard deviation.
LO3.4: Explain and apply Chebyshev’s theorem and the
Empirical Rule.

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Measures of Location
• A measure of location is a value used to describe the
central tendency of a set of data.
• Common measures of location:
• Mean
• Median
• Mode
• The arithmetic mean is the most widely reported
measure of location.
• The mean is both a population parameter and sample
statistic.

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Population Mean
• Many studies involve all the individuals in a population.
• When the values are not summarized in a frequency distribution
“sigma” and indicates the operation is adding
the sum of the values
any particular value

the mean
the number of values in the population

• Parameter: A characteristic of a population.

• The mean, of a population is a parameter.

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Population Mean
• Example: There are 42 exits on I-75 through the state of Kentucky,
here are the distances between exits (in miles).

11 4 10 4 9 3 8 10 3 14 1 6

4 3 5 2 2 5 4 2 3 2 5 5

1 1 2 7 8 10 2 3 7 5 4 3

2 1 1 2 1 1 2 1 2 1

• Why is this information a population?

• What is the mean number of miles between exits?

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Population Mean
• Example: There are 42 exits on I-75 through the state of Kentucky,
here are the distances between exits (in miles).

11 4 10 4 9 3 8 10 3 14 1 6

4 3 5 2 2 5 4 2 3 2 5 5

1 1 2 7 8 10 2 3 7 5 4 3

2 1 1 2 1 1 2 1 2 1

• Why is this information a population?

• What is the mean number of miles between exits?

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Population Mean
• Example
11 4 10 4 9 3 8 10 3 14 1 6
4 3 5 2 2 5 4 2 3 2 5 5
1 1 2 7 8 10 2 3 7 5 4 3
2 1 1 2 1 1 2 1 2 1

• This is a population because we are considering all the exits on I-

75 and the distances between them.

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Sample Mean
• We select a sample from the population to estimate a specific characteristic.
the sum of the values “sigma” and indicates the operation is adding

The sample mean any particular value

is read “x bar”.

the number of values in the sample

• Statistic: A characteristic of a sample.

• The sample mean is a statistic.

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Sample Mean
• Example: The number of hours per day that Verizon customer use their mobile
phones.

4.1 3.7 4.3 4.2 5.5 5.1

4.2 5.1 4.2 4.6 5.2 3.8

• What is the arithmetic mean number of hours per day used?

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Sample Mean
• Interval or ratio scale of measurement is required.
• All the data values are used in the calculation.
• The mean is unique.
• The sum of the deviations from the mean equals zero.
• A weakness of the mean is that it is affected by extreme values
(large or small).

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The Median
• For data containing extreme values, the mean may not fairly represent
the central location.
• Median
• The midpoint of the values after they have been ordered from the
minimum to the maximum values (or vice versa).
• Example: The median price of housing units.

Prices Ordered from Prices Ordered from

Minimum to Maximum Maximum to Minimum
$ 60,000 $275,000
65,000 80,000
70,000 ←---- Median ----→ 70,000
80,000 65,000
275,000 60,000

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The Median
• The median is the value in the middle of a set of ordered data.
• At least the ordinal scale of measurement is required.
• It is not influenced by extreme values.
• Fifty percent of the observations are larger than the median.
• Fifty percent of the observations are smaller than the median.
• It is unique to a set of data.

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The Median

• Odd numbered data

• The median is the middle value.
• Even numbered data
• The median is the average of the two middle values.
• Example: The number of hours a sample of 10 adults used
Facebook last month.
• Unsorted data: 3 5 7 5 9 1 3 9 17 10
• Sorted data: 1 3 3 5 5 7 9 9 10 17
• The median is 6

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The Mode
• MODE
• The value of the observation that occurs most frequently.
• The mode can be found for nominal level data.
• A set of data can have more than one mode.
• A set of data could have no mode.
• Example: The number of respondents that favor bath oils.

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Relative Positions of Mean, Median, and Mode

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The Weighted Mean
• The weighted mean is found by multiplying each observation by its
corresponding weight.
• A convenient way to compute the mean when there are several observations
with the same value.

• is read “x bar sub w”

• is the set of numbers
• are the corresponding weights

• The denominator is always the sum of the weights.

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The Weighted Mean

• Example:
• The Carter Construction Company pays its hourly employees
$16.50, $19.00, or $25.00 per hour.
• There are 26 hourly employees: 14 are paid at the $16.50 rate, 10
at the $19.00 rate, and 2 at the $25.00 rate.

• What is the mean hourly rate paid for the 26 employees?

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Another example
• There are two classes -- Class A: 20 students; Class B: 30 students
• Class A = {62, 67, 71, 74, 76, 77, 78, 79, 79, 80, 80, 81, 81, 82, 83, 84, 86,
89, 93, 98}
• Class B = {81, 82, 83, 84, 85, 86, 87, 87, 88, 88, 89, 89, 89, 90, 90, 90, 90,
91, 91, 91, 92, 92, 93, 93, 94, 95, 96, 97, 98, 99}
• The mean for Class A: 80
• The mean for Class B: 90
• The mean score of these two classes: (80+90)/2 = 85

Is it correct?
Why Study Dispersion?
• Measures of location only describe the center.
• Do not describe the spread or variation.
• The dispersion is the variation or spread in a set of data.
• Study dispersion to compare the spread in two or more distributions.
• Measures of dispersion include:
• Range
• Variance
• Standard Deviation

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Why Study Dispersion?

• Example: Hourly production at two computer monitor plants.

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Range
• The simplest measure of dispersion is range
• Range = Maximum value − Minimum value
• Only two values are used in its calculation
• It is influenced by extreme values
• It is easy to compute and to understand

• Example: Hourly production at

two computer monitor plants.
• Baton Rouge: 52-48=4
• Tucson: 60-40=20

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Population Variance
• The range is based on only two numbers.
• The variance measures how much the values vary from their mean.
• The mean squared deviation from the mean.
• Units are the units of measurement squared.

• is lower case Greek “sigma squared”

• x is the value of a particular observation
• is the population mean

• N is number of observations in the population

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Population Variance
• The process for computing the mean is implied by

1. Begin by finding the mean.

2. Find the difference between each observation and the mean, square
that difference.
3. Sum all the squared differences.
4. Divide the sum of the squared differences by the number of items in
the population.

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 Population Variance
• Example: The number of traffic citations.
• Citations by Month
January Februar March April May June July August September October November December
y
19 17 22 18 28 34 45 39 38 44 34 10
Month Citation (x)

January 19 −10 100

February 17 −12 144

• March 22 −7 49
April 18 −11 121
May 28 −1 1
June 34 5 25
• July 45 16 256
August 39 10 100
September 38 9 81

• Units are citations squared!

October 44 15 225
November 34 5 25
December 10 −19 361
Total 348 0 1,488
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Standard Deviation
• The units of the variance is the units of measurement squared.
• The variance is difficult to interpret.
• The standard deviation is the square root of the variance.

Example:
• The number of traffic citations.
• The variance is 124 citations²
• The standard deviation is 11.14 citations

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Sample Variance and Standard Deviation
• The sample variance and standard deviation uses the sample mean

• Using n in the denominator tends to underestimate the population

variance, so
• Using n − 1 provides an appropriate correction.

• The units of the variance is the units of measurement squared.

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Sample Variance and Standard Deviation
• Example: The hourly wages for part-time employees are $12, $20, $16, $18 and $19.

Hourly Wage
(x)
$12 −$5 25
20 3 9 •
16 −1 1
18 1 1
19 2 4 • s = 3.16 dollars
$85 0 40

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Interpretations and Uses of the Standard
Deviation

• The standard deviation is used to compare the spread of two or more sets of
observations.
• Small: The values are close to the mean.
• Large: The values are widely scattered about the mean.

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Interpretations and Uses of the Standard
Deviation
• Chebyshev’s theorem defines the dispersion of data around the mean.
• For any set of observations, the proportion of values within k standard deviations
is at least

• For example, if k = 2,
then • k = 3 then

that means, at least 75% of the

observation are within 1 standard
deviation of the mean
Interpretations and Uses of the Standard
Deviation
• Example:
• Employees at a company contribute a mean of $51.54 to the company profit-
sharing plan every 2 weeks.
We don’t know the distribution of the values
• The standard deviation is $7.51.
• At least what proportion of employees make a contribution within 3.5 standard
deviations of the mean?
• 3.5 standard deviations of the mean is a range of values.
• 51.54 − 3.5 × 7.51 = $25.26
• 51.54 + 3.5 × 7.51 = $77.83

( )

• At least 92% of the employees contribute between $25.26 and $77.83.

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Interpretations and Uses of the Standard
Deviation
• Chebyshev’s theorem is for any set of values regardless of the shape of the
distribution.
• If the data have a symmetrical and bell-shaped distribution, we can be
more precise without the “at least”.
• The Empirical Rule or Normal Rule provides an approximation.
• 1 standard deviation of the mean: about 68% of values.
• 2 standard deviations of the mean: about 95% of values.
• 3 standard deviations of the mean: about 99% of values.

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Interpretations and Uses of the Standard
Deviation
• Example: A mean of 100 and a standard deviation of 10.

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Interpretations and Uses of the Standard
Deviation
Example:
Rental rates are approximately symmetric and bell shaped. The mean is $500
and the standard deviation is $20.

• About 68%:
• About 95%:
• About 99%:

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Ethics and Reporting Results
• Useful to know the advantages and disadvantages of mean, median, and mode as we
report statistics and as we use statistics to make decisions.
• Similarly for measures of dispersion.
• Important to maintain an independent and principled point of view.
• Statistical reporting requires objective and honest communication of any results.

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