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Chapter One
An Introduction to
Business Statistics

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McGraw-Hill/Irwin

Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

An Introduction to Business Statistics

1.1
1.2
1.3
1.4

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Populations and Samples

Sampling a Population of Existing Units
Sampling a Process
Ratio, Interval, Ordinal, and Nominative
Scales of Measurement

Populations and Samples

Population
A set of existing units (people, objects, or events)
Variable
A measurable characteristic of the population
Quantitative (real-valued)/
Qualitative (categorical)
Census
An examination of the entire population of
measurements
Sample
A selected subset of the units of a population
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Populations and Samples

Population
Sample

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Descriptive Statistics and

Statistical Inference
Descriptive Statistics
The science of describing important aspects of a set of
measurements
Statistical Inference
The science of using a sample of measurements to
make generalizations about important aspects of a
population

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Sampling a Population of Existing

Units
Random Sampling
A procedure for selecting a subset of the
population units in such a way that every unit in
the population has an equal chance of selection
Sampling with replacement
When a unit is selected as part of the sample, its
value is recorded and placed back into the
population for possible reselection
Sampling without replacement
Units are not placed back into the population
after selection
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Approximate Random Samples

Frame
A list of all population units. Required for random sampling, but not
for approximate random sampling methods like systematic and
voluntary response sampling.
Systematic Sample
Every k-th element of the population is selected for the sample
Voluntary Response Sample
Sample units are self-selected (as in radio/TV surveys)

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Sampling a Process
Process
A sequence of operations that takes inputs (labor, raw materials, methods,
machines, and so on) and turns them into outputs (products, services, and
the like.)

Inputs

Process

Outputs

A process is in statistical control if it displays constant level and constant

variation.
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Runs Plot
A runs plot is a graph of individual process
measurements over time.

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Runs Plot Payment Time

Example

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Scales of Measurement
Ratio
Quantitative scale, ratios are meaningful, inherently
defined zero. (e.g. salary, height, distance.)
Interval
Quantitative scale, but ratios not meaningful nor is there
an inherently defined zero. (e.g. temperature)
Ordinal
Qualitative or categorical scale with meaningful ordering or
ranking of categories. (e.g. income classification)
Nominative
Qualitative scale without meaningful ordering among
categories (e.g. gender, ethnic classification)
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An Introduction to Business Statistics

Summary:
1.1
1.2
1.3
1.4

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Populations and Samples

Sampling a Population of Existing Units
Sampling a Process
Ratio, Interval, Ordinal, and Nominative
Scales of Measurement