Statistics for Business and Economics (14e, Metric Version)
Statistics for
Business and Economics (14e)
Metric Version
Anderson, Sweeney, Williams, Camm, Cochran, Fry, Ohlmann
© 2020 Cengage Learning
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password-protected website or school-approved learning management system for classroom use. 1
WARM-UP Statistics for Business and Economics (14e, Metric Version)
Brain exercises
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Statistics for Business and Economics (14e, Metric Version)
Chapter 1 - Data and Statistics
1.1 - Applications in Business and Economics
1.2 - Data
1.3 - Data Sources
1.4 - Descriptive Statistics
1.5 - Statistical Inference
1.6 - Analytics
1.7 - Big Data and Data Mining
1.8 - Computers and Statistical Analysis
1.9 - Ethical Guidelines for Statistical Practice
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Statistics for Business and Economics (14e, Metric Version)
What Is Statistics?
• The term statistics can refer to numerical facts such as averages, medians,
percentages, and maximums that help us understand a variety of business and
economic situations.
• Statistics can also refer to the art and science of collecting, analyzing, presenting,
and interpreting data.
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Statistics for Business and Economics (14e, Metric Version)
Applications in Business and Economics (1 of 2)
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.
Finance
• Financial advisors use price-earnings ratios and dividend yields to guide their
investment advice.
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Statistics for Business and Economics (14e, Metric Version)
Applications in Business and Economics (2 of 2)
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.
Information Systems
• A variety of statistical information helps administrators assess the performance of
computer networks.
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Statistics for Business and Economics (14e, Metric Version)
Data and Data Sets
• Data are the facts and figures collected, analyzed, and summarized for
presentation and interpretation.
• All the data collected in a particular study are referred to as the data set for the
study.
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Statistics for Business and Economics (14e, Metric Version)
Elements, Variables, and Observations
• Elements are the entities on which data are collected.
• A variable is a characteristic of interest for the elements.
• The set of measurements obtained for a particular element is called an
observation.
• A data set with n elements contains n observations.
• The total number of data values in a complete data set is the number of elements
multiplied by the number of variables.
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Statistics for Business and Economics (14e, Metric Version)
Data, Data Sets, Elements, Variables, and Observations
Company Stock Exchange Annual Sales in Earnings per share
millions of dollars in dollars
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
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Statistics for Business and Economics (14e, Metric Version)
Practice: Exercise 2 – Comparing Tablet Computers (p.22)
Tablet PC Comparison: The company’s website
enables consumers to easily compare different tablets
using factors such as cost, type of operating system,
display size, battery life, and CPU manufacturer. A
sample of 10 tablet computers is shown in Table 1.6.
Required:
a. How many elements are in this data set?
b. How many variables are in this data set?
c. Which variables are categorical and which variables
are quantitative?
d. What type of measurement scale is used for each of
the variables?
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Statistics for Business and Economics (14e, Metric Version)
Scales of Measurement (1 of 6)
• Scales of measurement include
• Nominal
• Ordinal
• Interval
• Ratio
• The scale determines the amount of information contained in the data.
• The scale indicates the data summarization and statistical analyses that are most
appropriate.
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Statistics for Business and Economics (14e, Metric Version)
Scales of Measurement (2 of 6)
Nominal scale
• Data are labels or names used to identify an attribute of the element.
• A nonnumeric label or numeric code may be used.
Example
Students of a university are classified by the school in which they are enrolled using
a nonnumeric label such as Business, Humanities, Education, and so on.
Alternatively, a numeric code could be used for the school variable (e.g., 1 denotes
Business, 2 denotes Humanities, 3 denotes Education, and so on).
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Statistics for Business and Economics (14e, Metric Version)
Scales of Measurement (3 of 6)
Ordinal scale
• The data have the properties of nominal data and the order or rank of the data is
meaningful.
• A nonnumeric label or numeric code may be used.
Example
Students of a university are classified by their class standing using a nonnumeric
label such as Freshman, Sophomore, Junior, or Senior.
Alternatively, a numeric code could be used for the class standing variable (e.g., 1
denotes Freshman, 2 denotes Sophomore, and so on).
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Statistics for Business and Economics (14e, Metric Version)
Scales of Measurement (4 of 6)
Interval scale
• The data have the properties of ordinal data, and the interval between
observations is expressed in terms of a fixed unit of measure.
• Interval data are always numeric.
Example
Melissa has an SAT score of 1985, while Kevin has an SAT score of 1880. Melissa
scored 105 points more than Kevin.
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Statistics for Business and Economics (14e, Metric Version)
Scales of Measurement (5 of 6)
Ratio scale
• Data have all the properties of interval data and the ratio of two values is
meaningful.
• Ratio data are always numerical.
• Zero value is included in the scale.
Example:
Price of a book at a retail store is $200, while the price of the same book sold
online is $100. The ratio property shows that retail stores charge twice the
online price.
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Statistics for Business and Economics (14e, Metric Version)
Categorical and Quantitative Data
• Data can be further classified as being categorical or quantitative.
• The statistical analysis that is appropriate depends on whether the data for the
variable are categorical or quantitative.
• In general, there are more alternatives for statistical analysis when the data are
quantitative.
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Statistics for Business and Economics (14e, Metric Version)
Categorical Data
• Labels or names are used to identify an attribute of each element
• Often referred to as qualitative data
• Use either the nominal or ordinal scale of measurement
• Can be either numeric or nonnumeric
• Appropriate statistical analyses are rather limited
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Statistics for Business and Economics (14e, Metric Version)
Quantitative Data
• Quantitative data indicate how many or how much.
• Quantitative data are always numeric.
• Ordinary arithmetic operations are meaningful for quantitative data.
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Statistics for Business and Economics (14e, Metric Version)
Scales of Measurement (6 of 6)
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Statistics for Business and Economics (14e, Metric Version)
Cross-Sectional Data
Cross-sectional data are collected at the same or approximately the same point in
time.
Example
Data detailing the number of building permits issued in November 2013 in each of
the counties of Ohio.
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Statistics for Business and Economics (14e, Metric Version)
Time Series Data (1 of 2)
Time series data are collected over several time periods.
Example
Data detailing the number of building permits issued in Lucas County, Ohio in each
of the last 36 months.
Graphs of time series data help analysts understand
• what happened in the past
• identify any trends over time, and
• project future levels for the time series
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Statistics for Business and Economics (14e, Metric Version)
Time Series Data (2 of 2)
Graph of Time Series Data
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Statistics for Business and Economics (14e, Metric Version)
Data Sources
Existing Sources
• Internal company records – almost any department
• Business database services – Dow Jones & Co.
• Government agencies – U.S. Department of Labor
• Industry associations – Travel Industry Association of America
• Special-interest organizations – Graduate Management Admission Council
(GMAT)
• Internet – more and more firms
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Statistics for Business and Economics (14e, Metric Version)
Descriptive Statistics
• Most of the statistical information in newspapers, magazines, company reports,
and other publications consists of data that are summarized and presented in a
form that is easy to understand.
• Such summaries of data, which may be tabular, graphical, or numerical, are
referred to as descriptive statistics.
Example
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 her 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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Statistics for Business and Economics (14e, Metric Version)
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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Statistics for Business and Economics (14e, Metric Version)
Tabular Summary: Frequency and Percent Frequency
Parts Cost ($) Frequency Percent Frequency
50-59 2 4%
60-69 13 26%
70-79 16 32%
80-89 7 14%
90-99 7 14%
100-109 5 10%
TOTAL 50 100%
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Statistics for Business and Economics (14e, Metric Version)
Graphical Summary: Histogram
Example: Hudson Auto
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Statistics for Business and Economics (14e, Metric Version)
Numerical Descriptive Statistics
• The most common numerical descriptive statistic is the mean (or average).
• The mean demonstrates a measure of the central tendency, or central location of
the data for a variable.
• Hudson’s mean cost of parts, based on the 50 tune-ups studied is $79 (found by
summing up the 50 cost values and then dividing by 50).
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Statistics for Business and Economics (14e, Metric Version)
Statistical Inference
Population: The set of all elements of interest in a particular study.
Sample: A subset of the population.
Statistical inference: The process of using data obtained from a sample to make
estimates and test hypotheses about the characteristics of a population.
Census: Collecting data for the entire population.
Sample survey: Collecting data for a sample.
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Statistics for Business and Economics (14e, Metric Version)
Process of Statistical Inference
Example: Hudson Auto
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Statistics for Business and Economics (14e, Metric Version)
What is Business Analytics?
[Link]
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Statistics for Business and Economics (14e, Metric Version)
Analytics
Analytics is the scientific process of transforming data into insight for making better
decisions.
Techniques:
• Descriptive analytics: This describes what has happened in the past.
• Predictive analytics: Use models constructed from past data to predict the future
or to assess the impact of one variable on another.
• Prescriptive analytics: The set of analytical techniques that yield a best course of
action.
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Statistics for Business and Economics (14e, Metric Version)
Big Data and Data Mining
Big data: Large and complex data set.
Three V’s of Big data:
Volume: Amount of available data
Velocity: Speed at which data is collected and processed
Variety: Different data types
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Statistics for Business and Economics (14e, Metric Version)
Data Warehousing
Data warehousing is the process of capturing, storing, and maintaining the data.
• Organizations obtain large amounts of data on a daily basis by means of magnetic
card readers, bar code scanners, point of sale terminals, and touch screen
monitors.
• Wal-Mart captures data on 20-30 million transactions per day.
• Visa processes 6,800 payment transactions per second.
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Statistics for Business and Economics (14e, Metric Version)
Data Mining
• Methods for developing useful decision-making information from large
databases.
• Using a combination of procedures from statistics, mathematics, and computer
science, analysts “mine the data” to convert it into useful information.
• The most effective data mining systems use automated procedures to discover
relationships in the data and predict future outcomes prompted by general and
even vague queries by the user.
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Statistics for Business and Economics (14e, Metric Version)
Data Mining Applications
• The major applications of data mining have been made by companies with a
strong consumer focus such as retail, financial, and communication firms.
• Data mining is used to identify related products that customers who have already
purchased a specific product are also likely to purchase (and then pop-ups are
used to draw attention to those related products).
• Data mining is also used to identify customers who should receive special
discount offers based on their past purchasing volumes.
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Statistics for Business and Economics (14e, Metric Version)
Ethical Guidelines for Statistical Practice
• In a statistical study, unethical behavior can take a variety of forms including:
• Improper sampling
• Inappropriate analysis of the data
• Development of misleading graphs
• Use of inappropriate summary statistics
• Biased interpretation of the statistical results
• One should strive to be fair, thorough, objective, and neutral as you collect,
analyze, and present data.
• As a consumer of statistics, one should also be aware of the possibility of
unethical behavior by others.
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Statistics for Business and Economics (14e, Metric Version)
End of Chapter 1
Exercises:
E8-E10, E21, E25
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