Basic Business Statistics
12th Edition
Chapter 1
Introduction
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-1
Learning Objectives
In this chapter you learn:
How businesses use statistics
The basic vocabulary of statistics
The types of data used in business
How to use Microsoft Excel and / or
Minitab with this book
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-2
Why Learn Statistics
Make better sense of the world Make better business decisions
Internet articles / reports Business memos
Magazine articles Business research
Newspaper articles Technical journals
Television & radio reports Technical reports
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-3
In Business, Statistics Has
Many Important Uses
To summarize business data
To draw conclusions from business data
To make reliable forecasts about business
activities
To improve business processes
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-4
Two Different Branches Of
Statistics Are Used In Business
Statistics
The branch of mathematics that transforms data into
useful information for decision makers.
Descriptive Statistics Inferential Statistics
Collecting, summarizing, Using data collected from a
presenting and analyzing data small group to draw conclusions
about a larger group
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-5
These Two Branches Are Used
In The Important Activities
To summarize business data
Descriptive methods used to create charts & tables
To draw conclusions from business data
Inferential methods used to reach conclusions about
a large group based on data from a smaller group
To make reliable forecasts about business
activities
Inferential methods used to develop, quantify, and
improve the accuracy of predictive models
To improve business processes
Involves managerial approaches like Six Sigma
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-6
Descriptive Statistics
Collect data
e.g., Survey
Present data
e.g., Tables and graphs
Characterize data
e.g., The sample mean
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-7
Inferential Statistics
Estimation
e.g., Estimate the population
mean weight using the sample
mean weight
Hypothesis testing
e.g., Test the claim that the
population mean weight is 120
pounds
Drawing conclusions about a large group of
individuals based on a smaller group.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-8
Basic Vocabulary of Statistics
VARIABLES
Variables are characteristics of an item or individual and are what you
analyze when you use a statistical method.
DATA
Data are the different values associated with a variable.
OPERATIONAL DEFINITIONS
Data values are meaningless unless their variables have operational
definitions, universally accepted meanings that are clear to all associated
with an analysis.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-9
Basic Vocabulary of Statistics
POPULATION
A population consists of all the items or individuals about which
you want to draw a conclusion. The population is the “large
group.”
SAMPLE
A sample is the portion of a population selected for analysis. The
sample is the “small group.”
PARAMETER
A parameter is a numerical measure that describes a characteristic
of a population.
STATISTIC
A statistic is a numerical measure that describes a characteristic of
a sample.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-10
Population vs. Sample
Population Sample
Measures used to describe the Measures used to describe the
population are called parameters sample are called statistics
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-11
This Book Is Organized To Show
The Four Uses Of Statistics
To summarize business data (Chapters 2 & 3)
To draw conclusions from business data
(Chapters 4 – 12)
To make reliable forecasts about business
activities (Chapters 13 – 16)
To improve business processes (Chapter 18)
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-12
Types of Variables
Categorical (qualitative) variables have values that
can only be placed into categories, such as “yes” and
“no.”
Numerical (quantitative) variables have values that
represent quantities.
Discrete variables arise from a counting process
Continuous variables arise from a measuring process
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-13
Types of Variables
Variables
Categorical Numerical
Examples:
Marital Status
Political Party Discrete Continuous
Eye Color
(Defined categories) Examples: Examples:
Number of Children Weight
Defects per hour Voltage
(Counted items) (Measured characteristics)
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-14
Levels of Measurement
A nominal scale classifies data into distinct
categories in which no ranking is implied.
Categorical Variables Categories
Personal Computer Yes / No
Ownership
Type of Stocks Owned Growth / Value / Other
Internet Provider Microsoft Network / AOL/ Other
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-15
Levels of Measurement (con’t.)
An ordinal scale classifies data into distinct
categories in which ranking is implied
Categorical Variable Ordered Categories
Freshman, Sophomore, Junior,
Student class designation
Senior
Product satisfaction Satisfied, Neutral, Unsatisfied
Professor, Associate Professor,
Faculty rank
Assistant Professor, Instructor
AAA, AA, A, BBB, BB, B, CCC, CC,
Standard & Poor’s bond ratings
C, DDD, DD, D
Student Grades A, B, C, D, F
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-16
Levels of Measurement (con’t.)
An interval scale is an ordered scale in which the
difference between measurements is a meaningful
quantity but the measurements do not have a true
zero point.
A ratio scale is an ordered scale in which the
difference between the measurements is a
meaningful quantity and the measurements have a
true zero point.
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-17
Interval and Ratio Scales
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-18
Chapter Summary
In this chapter, we have
Introduced the basic vocabulary and definitions of statistics, and
the role of statistics in turning data into information to facilitate
decision making
Examined the use of statistics to:
Summarize data
Draw conclusions from data
Make reliable forecasts
Improve business processes
Examined descriptive vs. inferential statistics
Reviewed data types and measurement level
Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chap 1-19