Statistics for Business

MIS-304

Introduction and Data Collection

Chap 1-1
 Learning Objectives

In this chapter you learn:

 How Statistics is used in business

 The sources of data used in business
 The types of data used in business

Chap 1-2
 Why Learn Statistics?

So you are able to make better sense of the

global use of numbers:
 Business documents

 Business research

 Technical reports

 Technical journals

 Newspaper articles

 Magazine articles

Chap 1-3
 What is statistics?

 A branch of mathematics taking and

transforming numbers into useful information for
decision makers

 Methods for processing & analyzing numbers

 Methods for helping reduce the uncertainty

inherent in decision making

Chap 1-4
 Why Study Statistics?

Decision Makers Use Statistics To:

 Present and describe business data and information properly
 Draw conclusions about large groups of individuals or items,
using information collected from subsets of the individuals or
items.
 Make reliable forecasts about a business activity
 Improve business processes

Chap 1-5
 Types of Statistics

 Statistics
 The branch of mathematics that transforms data into
useful information for decision makers.

Descriptive Statistics Inferential Statistics

Collecting, summarizing, and Drawing conclusions and/or

describing data making decisions concerning a
population based only on sample
data

Chap 1-6
 Descriptive Statistics

 Collect data
 e.g., Survey

 Present data
 e.g., Tables and graphs

 Characterize data
 e.g., Sample mean =

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 subset of the large group.

Chap 1-8
 Basic Vocabulary of Statistics

VARIABLE
A variable is any characteristic, number, or quantity that can change
(vary) from one individual, object, or observation to another.
In other words, it is something that can take on different values.
Types of Variables (with Examples)
[Link] (Numerical) Variable → can be measured with numbers.
1. Example:
1. Height of students (in cm)
2. Age of employees (in years)
3. Number of cars owned
[Link] (Categorical) Variable → describes categories or qualities.
1. Example:
1. Gender (Male, Female, Other)
2. Blood group (A, B, AB, O)
3. Marital status (Single, Married, Divorced)

Chap 1-9
 Basic Vocabulary of Statistics
DATA
Data are the different values associated with a variable.

POPULATION
A population consists of all the items or individuals about which you want
to draw a conclusion.

SAMPLE
A sample is the portion of a population selected for analysis.

Chap 1-10
 Basic Vocabulary of Statistics

PARAMETER
A parameter is a numerical measure that describes a characteristic of a
population.
A parameter is a number describing a whole population (e.g., population
mean), while a statistic is a number describing a sample (e.g., sample mean).

Since it refers to the entire population, it is usually fixed but unknown

(because we rarely can measure the whole population).

STATISTIC
A statistic is a numerical measure that describes a characteristic of a sample.

Chap 1-11
 Basic Vocabulary of Statistics
Example
•Suppose we want to know the average height of all students at Dhaka
University.

[Link] = All students at Dhaka University.

1. Parameter = The true average height of all students. (We don’t know
this exact number unless we measure everyone.)

[Link] = A group of 200 students selected randomly.

1. Statistic = The average height of those 200 students (say, 167 cm).
2. This sample mean is used to estimate the population mean
(parameter).

Chap 1-12
 Population vs. Sample

Population Sample

Measures used to describe the Measures computed from

population are called parameters sample data are called statistic

Chap 1-13
 Why Collect Data?
 A marketing research analyst needs to assess the effectiveness of a
new television advertisement.

 A pharmaceutical manufacturer needs to determine whether a new

drug is more effective than those currently in use.

 An operations manager wants to monitor a manufacturing process to

find out whether the quality of the product being manufactured is
conforming to company standards.

 An auditor wants to review the financial transactions of a company

in order to determine whether the company is in compliance with
generally accepted accounting principles.

Chap 1-14
 Sources of Data

 Primary Sources: The data collector is the one using the data
for analysis
 Data from a survey
 Data collected from an experiment
 Observed data
 Secondary Sources: The person performing data analysis is
not the data collector
 Analyzing census data
 Examining data from print journals or data published on the internet.

Chap 1-15
 Types of Data

Data

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)

Chap 1-16
 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.

Chap 1-17
 Types of Variables

 Independent Variable (IV)

• Definition: This is the variable that causes or predicts a change
in another variable. It is what the researcher manipulates or
observes to see its effect.
• Example:
• Study hours → Exam score
Here, study hours is the independent variable because how
much a student studies may affect their exam score.
 Another example:
• Amount of fertilizer → Plant growth
Fertilizer amount is the independent variable that might influence
plant growth.

Chap 1-18
 Types of Variables

 Dependent Variable (DV)

• Definition: This is the variable that responds to the independent
variable. It is the outcome or effect that is measured in the study.
• Example:
• Study hours → Exam score
Here, exam score is the dependent variable because it
depends on the number of study hours.
 Another example:
• Amount of fertilizer → Plant growth
Plant growth is the dependent variable because it is affected by the
fertilizer amount.

Chap 1-19
 Types of Variables

 Binary Variable
• Definition: A variable that has only two
possible values. Often used to represent
yes/no, true/false, or two categories.
• Example:
• Gender: Male / Female
• Pass/Fail: A student either passes or fails an exam
• Smoker/Non-smoker: Whether a person smokes or
not

Chap 1-20
 Types of Variables

 Latent Variable
• Definition: A variable that cannot be measured directly, but can
be inferred from other observable variables. Usually used in
psychology, sociology, and social sciences.
• Example:
• Happiness: You can’t directly measure happiness, but you can
estimate it from surveys, smiles, or self-reports.
• Motivation: Can’t measure motivation directly, but can
estimate it from behavior like attendance, effort, or task
completion.

Chap 1-21
 Levels of Measurement

 1. Nominal Scale
• Lowest level of measurement.
• Used for labeling or categorizing data.
• No order, no arithmetic possible.
• Examples:
• Blood group (A, B, AB, O)
• Gender (Male, Female, Other)
• Nationality (Bangladeshi, Indian, American)

Chap 1-22
 Levels of Measurement

 2. An ordinal scale in which numbers are assigned to

the categories or variable values for identification as
well as for ranking is called an ordinal scale.
Categorical Variable Ordered Categories

Student class designation Freshman, Sophomore, Junior,

Senior
Product satisfaction Satisfied, Neutral, Unsatisfied

Faculty rank Professor, Associate Professor,

Assistant Professor, Instructor
Standard & Poor’s bond ratings AAA, AA, A, BBB, BB, B, CCC, CC,
C, DDD, DD, D
Student Grades A, B, C, D, F

Chap 1-23
 Levels of Measurement
3. Interval Scale
• Ordered scale with equal intervals between
values.
• But no true zero (zero doesn’t mean “nothing”).

• Addition and subtraction are meaningful.

• Examples:

• Temperature in Celsius or Fahrenheit (0°C ≠ no

temperature)
• IQ scores

Chap 1-24
 Levels of Measurement
4. Ratio Scale
• Highest level of measurement.

• Has order, equal intervals, and a true zero (zero =

absence).
• All mathematical operations are possible (add, subtract,
multiply, divide).
• Examples:
• Height (170 cm, 180 cm)
• Weight (0 kg = no weight)
• Age (20 years, 40 years)
• Income (0 BDT = no income)

Chap 1-25
 Levels of Measurement
Mathematical
Level of
Description Examples Operations
Measurement
Possible
Blood group (A, B,
Categories without = (equal), ≠ (not
Nominal O, AB), Gender
order equal) only
(Male/Female)
Education level
(SSC < HSC < =, ≠, >, <
Ordered categories,
Ordinal Bachelor < (comparisons,
unequal differences
Masters), Rank order)
(1st, 2nd, 3rd)
=, ≠, >, <, +, −
Ordered with equal
Temperature (°C, (addition,
Interval intervals, but no
°F), Calendar years subtraction
true zero
meaningful)
Ordered with equal =, ≠, >, <, +, −, ×, ÷
Height, Weight,
Ratio intervals and true (all arithmetic
Age, Income
zero operations possible)
Chap 1-26