Statistics for
Business and Economics
6th Edition
Chapter 1
Why Study Statistics?
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-1
Chapter Goals
After completing this chapter, you should be
able to:
Explain how decisions are often based on incomplete
information
Explain key definitions:
Population vs. Sample
Parameter vs. Statistic
Descriptive vs. Inferential Statistics
Describe random sampling
Explain the difference between Descriptive and
Inferential statistics
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-2
Dealing with Uncertainty
Everyday decisions are based on incomplete
information
Consider:
The price of IBM stock will be higher in six months
than it is now.
If the federal budget deficit is as high as predicted,
interest rates will remain high for the rest of the year.
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-3
Dealing with Uncertainty
(continued)
Because of uncertainty, the statements
should be modified:
The price of IBM stock is likely to be higher in six
months than it is now.
If the federal budget deficit is as high as predicted, it
is probable that interest rates will remain high for the
rest of the year.
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-4
Key Definitions
A population is the collection of all items of interest or
under investigation
N represents the population size
A sample is an observed subset of the population
n represents the sample size
A parameter is a specific characteristic of a population
A statistic is a specific characteristic of a sample
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-5
Population vs. Sample
Population Sample
a b cd b c
ef gh i jk l m n gi n
o p q rs t u v w o r u
x y z y
Values calculated using Values computed from
population data are called sample data are called
parameters statistics
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-6
Examples of Populations
Names of all registered voters in the United
States
Incomes of all families living in Daytona Beach
Annual returns of all stocks traded on the New
York Stock Exchange
Grade point averages of all the students in
your university
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-7
Random Sampling
Simple random sampling is a procedure in which
each member of the population is chosen strictly by
chance,
each member of the population is equally likely to be
chosen,
and
every possible sample of n objects is equally likely to
be chosen
The resulting sample is called a random sample
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-8
Descriptive and Inferential Statistics
Two branches of statistics:
Descriptive statistics
Collecting, summarizing, and processing data to
transform data into information
Inferential statistics
provide the bases for predictions, forecasts, and
estimates that are used to transform information into
knowledge
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-9
Descriptive Statistics
Collect data
e.g., Survey
Present data
e.g., Tables and graphs
Summarize data
X i
e.g., Sample mean = n
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-10
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
Inference is the process of drawing conclusions or
making decisions about a population based on
sample results
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-11
The Decision Making Process
Decision
Knowledge
Experience, Theory,
Literature, Inferential
Statistics, Computers
Information
Descriptive Statistics,
Begin Here: Probability, Computers
Data
Identify the
Problem
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-12
Chapter Summary
Reviewed incomplete information in decision
making
Introduced key definitions:
Population vs. Sample
Parameter vs. Statistic
Descriptive vs. Inferential statistics
Described random sampling
Examined the decision making process
Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-13