CHAPTER ONE

INTRODUCTION TO STATISTICS
1.1. INTRODCTION
The subject of statistics involves the study of how to collect, summarize, and interpret data. Data
are numerical facts and figures from which conclusions can be drawn. Such conclusions are
important to the decision making processes of many professions and organizations.
For example, government officials use conclusions drawn from the latest data on unemployment
and inflation to make policy decisions. Financial planners use recent trends in stock market
prices to make investment decisions. Business decides which products to develop and market by
using data that reveal consumer preferences. Production supervisors use manufacturing data to
evaluate, control and improve product quality, politicians rely on data from public opinion polls
to formulate legislation and to devise campaign strategies. Physicians and hospitals use data on
the effectiveness of drugs and surgical procedures to provide patients with the best possible
treatment. Most of these information requirements are quantitative and need a scientific approach
or technique to gather and use. Therefore, it is extremely important to know about the basics of
statistics.

1.2. DEFINITION
The word statistics has three different meanings (sense) which are discussed below:
(1) Plural Sense: In plural sense, the word statistics refer to numerical facts and figures collected
in a systematic manner with a definite purpose in any field of study. In this sense, statistics are
also aggregates of facts which are expressed in numerical form. For example, Statistics on
industrial production, statistics or population growth of a country in different years etc.
(2) Singular Sense: In singular sense, it refers to the science comprising methods which are used
in collection, analysis, interpretation and presentation of numerical data. These methods are used
to draw conclusion about the population parameter. For Example: If we want to have a study
about the distribution of weights of students in a certain college. First of all, we will collect the
information on the weights which may be obtained from the records of the college or we may
collect from the students directly. The large number of weight figures will confuse the mind. In
this situation we may arrange the weights in groups such as: “50 Kg to 60 Kg” “60 Kg to 70 Kg”
and so on and find the number of students fall in each group. This step is called a presentation of
data. We may still go further and compute the averages and some other measures which may
give us complete description of the original data.
(3) Plural of Word “Statistic”: The word statistics is used as the plural of the word “Statistic”
which refers to a numerical quantity like mean, median, variance etc…, calculated from sample
value. For Example: If we select 15 students from a class of 80 students, measure their heights
and find the average height. This average would be a statistic
Statistics has been defined differently by different authors and each author has assigned new
limits to the field which should be included in its scope.
Statistics refers to the collection, presentation, analysis and utilization of numerical data to make
inference and reach decision in the face of uncertainty in economics, business & other social
science and physical science. It is concerned with collection, classification, analysis, and
interpretation of numerical facts, for drawing inferences on the basis of their quantifiable
likelihood (probability).

Summing up all the above definitions, one can define Statistics preferably as:
Statistics is the study of the principles and methods used in the collection, presentation,
analysis and interpretation of numerical data in any sphere of enquiry.

1.3. BASIC TERMINOLOGIES IN STATISTICS

As a subject (science), Statistics has its own terms and terminologies. Knowing these terms and
terminologies is fundamental in understanding the Statistical methods and concepts. To that end,
this section presents the meaning of the most commonly used Statistical terms falling under the
scope of this course.

Variable: A variable is a factor or characteristic that can take on different possible values or
outcomes. A variable differs from a constant is that the latter term implies that the values or
outcomes are always the same. Income, height, weight, sex, age, etc are examples of variables. In
an investigation, data are collected about one or more variables of interest. A variable can be
qualitative or quantitative (numeric).

Elements: Elements are the entities on which data are collected.

Population: In Statistics the term population is used to mean the totality of causes (items) under
consideration in a given investigation or research. In other words, the largest collection of
observations on a variable constitutes the population. Population can be finite (limited in its size)
or infinite (unrestricted). In finite population, observations are countable- at least in theory. In
contrast, infinite population is indefinitely large. The observations cannot be even in theory.

Sample: Any non-empty subset of a population is called a sample. There are different possible
samples that can be selected from a single population. Nevertheless, the one that best reflects or
represents the behavior of the population is considered to be the most appropriate one. The
critical question is “How to identify and get that best representative sample?” In fact, the whole
aim of the theory of sampling is to answer this question.

Survey: Survey is an investigation of a certain population to assess its characteristics. It may be

census or sample survey. Survey or experiment is a device of obtaining the desired data.

Census survey: Census survey a complete enumeration of the population under study.

Sample survey: Sample survey the process of collecting data covering a representative part or
portion of a population.

Sampling Frame: It is the listing of all elementary units in the population understudy. Strictly
speaking, one cannot present frame for infinite population, as the units in an infinite population
are infinite.

Sampling: Sampling is the process or method of sample selection from the population.

Sample size: Sample size is the number of elements or observation to be included in the sample.

Parameter: It is a measurable characteristic of the population or it is a numerical result obtained

as measuring the population.

Statistic: It is a measurable characteristic of the sample. In short it is a sample result.

1.4. WHY DO WE STUDY STATISTICS?
Because statistical methods are used to organize, summarize, and draw conclusions from data, a
familiarity with statistical techniques and statistical literacy is vital in today’s society. There are
three important reasons why statistical literacy is important:
(1) To be informed
(2) To understand issues and be able to make sound decisions based on data, and
(3) To be able to evaluate decisions that affects your life.

1.5. CLASSIFICATION OF STATISTICS

Statistics may be divided into two main branches:
(1) Descriptive Statistics: It deals with collection of data, its presentation in various forms,
such as tables, graphs and diagrams and findings averages and other measures which would
describe the data. Just summarizing and describing body of data.
For Example: Industrial statistics, population statistics, trade statistics etc… Such as
businessman make to use descriptive statistics in presenting their annual reports, final
accounts, bank statements.
(2) Inferential Statistics: It deals with techniques used for analysis of data, making the
estimates and drawing conclusions from limited information taken on sample basis and
testing the reliability of the estimates. It is the process of reaching generalizing about the
whole (population) by examining a portion (sample).For Example: Suppose we want to have
an idea about the percentage of illiterates in our country. We take a sample from the
population and find the proportion of illiterates in the sample. This sample proportion with
the help of probability enables us to make some inferences about the population proportion.
This study belongs to inferential statistics.
1.6. APPLICATION OF STATISTICS
Statistics plays a vital role in every fields of human activity. Statistics has important role in
determining the existing position of per capita income, unemployment, population growth rate,
housing, schooling medical facilities etc…in a country. Now statistics holds a central position in
almost every field like Industry, Commerce, Trade, Physics, Chemistry, Economics,
Mathematics, Biology, Botany, Psychology, Astronomy etc…, so application of statistics is very
wide. Now we discuss some important fields in which statistics is commonly applied.
(1) Business: Statistics play an important role in business. A successful businessman must be
very quick and accurate in decision making. He knows that what his customers wants, he should
therefore, know what to produce and sell and in what quantities. Statistics helps businessman to
plan production according to the taste of the costumers, the quality of the products can also be
checked more efficiently by using statistical methods. So all the activities of the businessman
based on statistical information. He can make correct decision about the location of business,
marketing of the products, financial resources etc…
(2) In Economics: Statistics play an important role in economics. Economics largely depends
upon statistics. National income accounts are multipurpose indicators for the economists and
administrators. Statistical methods are used for preparation of these accounts. In economics
research statistical methods are used for collecting and analysis the data and testing hypothesis.
The relationship between supply and demands is studied by statistical methods, the imports and
exports, the inflation rate, the per capita income are the problems which require good knowledge
of statistics.
(3) In Mathematics: Statistical plays a central role in almost all natural and social sciences. The
methods of natural sciences are most reliable but conclusions draw from them are only probable,
because they are based on incomplete evidence. Statistical methods helps in describing these
measurements more precisely. Statistics is branch of applied mathematics. The large number of
statistical methods like probability averages, dispersions, estimation etc… is used in mathematics
and different techniques of pure mathematics like integration, differentiation and algebra are
used in statistics.
(4) In Banking: Statistics play an important role in banking. The banks make use of statistics for
a number of purposes. The banks work on the principle that all the people who deposit their
money with the banks do not withdraw it at the same time. The bank earns profits out of these
deposits by lending to others on interest. The bankers use statistical approaches based on
probability to estimate the numbers of depositors and their claims for a certain day.
(5) In State Management (Administration): Statistics is essential for a country. Different
policies of the government are based on statistics. Statistical data are now widely used in taking
all administrative decisions. Suppose if the government wants to revise the pay scales of
employees in view of an increase in the living cost, statistical methods will be used to determine
the rise in the cost of living. Preparation of federal and provincial government budgets mainly
depends upon statistics because it helps in estimating the expected expenditures and revenue
from different sources. So statistics are the eyes of administration of the state.
(6) In Accounting and Auditing: Accounting is impossible without exactness. But for decision
making purpose, so much precision is not essential, the decision may be taken on the basis of
approximation, known as statistics. The correction of the values of current asserts is made on the
basis of the purchasing power of money or the current value of it. In auditing sampling
techniques are commonly used. An auditor determines the sample size of the book to be audited
on the basis of error.
(7) In Natural and Social Sciences: Statistics plays a vital role in almost all the natural and
social sciences. Statistical methods are commonly used for analyzing the experiment results,
testing their significance in Biology, Physics, Chemistry, Mathematics, Meteorology, Research
chambers of commerce, Sociology, Business, Public Administration, Communication and
Information Technology etc…
(8) In Astronomy: Astronomy is one of the oldest branches of statistical study; it deals with the
measurement of distance, sizes, masses and densities of heavenly bodies by means of
observations. During these measurements errors are unavoidable so most probable measurements
are founded by using statistical methods. Example: This distance of moon from the earth is
measured. Since old days the astronomers have been statistical methods like method of least
squares for finding the movements of stars.
1.7. FUNCTIONS OF STATISTICS
The main function of Statistics is to collect and present numerical data in a systematic manner so
that it may be analyzed in a scientific way. Statistics basically concentrates on the analysis of a
phenomenon in a scientific manner, without proving it. The analysis of data, which is the core
objective of Statistics, is important because it helps to avoid or replace arbitrary decisions,
dogmatism, rule of thumb, tradition, and it tries to increase the custom of making decision based
on analyzed quantitative facts.

The following are the major functions of Statistics:

o It simplifies mass of data (condensation)
o It presents facts in a definite form (Definiteness)
o It facilitates Comparison
o Predictions
 o It helps in formulation of suitable policies
o Formulating and Testing hypothesis

1.8. LIMITATIONS OF STATISTICS

The fact that Statistics is applicable in almost all fields of study is not a guarantee for its
perfection. Of course, there is no perfect science in the globe. Statistical methods as well have
their own limitations. The following are the major limitations:
Statistics does not deal with individual items
Statistics deals only with quantitatively expressed items
Statistical results are not universally true
Statistics is liable to be misused
1.9. STAGES IN STATISTICAL INVESTIGATION (SURVEY)
There are five stages of statistical investigations
Stage 1: Data Collection: Data collection is the process of gathering information or data about
the variable of interest
Stage 2: Organization of Data: Organization of data includes three major steps such as editing,
classification and tabulation.
Stage 3: Presentation of Data: The purpose of presentation is to display what is contained in our
data in the form of pictures.
Stage 4: Analysis of Data: The collected and organized data is manipulated so as to generate or
find different quantitative results
Stage 5: Interpretation: The task of interpretation associates meaning to the results obtained in
the analysis stage. Interpretation is by far the most difficult and skill requiring stage .