Basic Business

Statistics
Chapter 1
Introduction to Business Statistics

1
Chapter Topics

 Some Important Definitions

 Descriptive Versus Inferential Statistics
 Types of Data and Their Sources
 Census and Sampling
 Types of Sampling Methods
 Data Collection Methods

2
In Business, Statistics Helps

 Transform numbers into useful information for

decision makers

 Quantify & identify the risks in a business decision

 You understand and reduce the variation in a

decision making process

3
 Some Important Definitions
 Variable is a characteristic of an item or individual
 Data is the set of individual values associated with a variable
 Population (Universe) is the Whole Collection of Things
Under Consideration
 Sample is a Portion of the Population Selected for Analysis
 Parameter is a Summary Measure Computed to Describe a
Characteristic of the Population
 Statistic is a Summary Measure Computed to Describe a
Characteristic of the Sample
 Operational definitions is the Universally accepted
meanings that are clear to all associated with an analysis

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Population and Sample

Population Sample
Use statistics to
summarize features
Use parameters to
summarize features

Inference on the population from the sample

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Statistical Methods

Two Different Branches Of Statistics Are Used In Business

 Descriptive Statistics
 Collecting, presenting, and characterizing data

 Inferential Statistics
 Drawing conclusions and/or making decisions concerning a
population based only on sample data

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Descriptive Statistics

 Collect Data
 E.g., Survey

 Present Data
 E.g., Tables and graphs

 Characterize Data
 E.g., Sample Mean = X i

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 Inferential Statistics
Drawing conclusions and/or making decisions
concerning a population based on sample results.
 Estimation-statistic sample that use to
estimate the population
 E.g.Estimate the population mean
weight using the sample mean
weight
 Hypothesis Testing-claim or assertion
about a particular parameter of
population
 E.g.Test the claim that the
population mean weight value is 120 8

pounds
Types of Data

Variables

Categorical Numerical

Discrete Continuous

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 Type of Data (continued)

 Categorical random variables yield categorical responses

 E.g. Are you married? Yes or No
 Numerical random variables yield numerical responses
 Discrete random variables yield numerical response that arise from a
counting process (finite number)
 E.g. How many cars do you own? 3 cars
 Continuous random variables yield numerical responses that arise from a
measuring process
 E.g. The time you wait for counter service at a bank
1.20 minutes or 2.31 minutes depend on precision.

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Levels of Data Measurement
 Nominal Scale – distinct categories in which no ordering is implied
 E.g. Gender, Colours, car brands, races.
 Ordinal Scale – distinct categories in which ordering is implied
 E.g. Student grades: A, B, C, D or F, Social-economic status.
 Interval Scale – an ordered scale in which the difference between the
measurements does not involve a true zero point (not absolute zero)
 is a measurement where the difference between two values is
meaningful. E.g. Temperature in degrees Celsius
 The difference between a temperature of 100 degrees and 90 degrees
is the same difference as between 90 degrees and 80 degrees.
 A temperature of 0.0 on either of those scales does not mean 'no
temperature
 Likert-scale
 Ratio Scale – has all the properties of an interval variable, and also has a
clear definition of 0.0 (True zero point).
 E.g. Weight in pounds
 E.g . Money-having zero ringgit means ‘you have none’
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Data Sources: Primer & Secondary

Data Sources

Print or Electronic
Observation Survey

Experimentation
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 Census & Sampling
 Census- A census is the complete enumeration of a population
or groups at a point in time with respect to
well defined characteristics
 Sampling- the process of selecting units (e.g., people,
organizations) from a population of interest -must generalize
the population
 How to determine the sample size?
 Reasons for Drawing a Sample
 Less Time Consuming Than a Census
 Less Costly to Administer Than a Census
 Less Cumbersome (complicated) and More Practical to
Administer Than a Census of the Population
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 Types of Sampling Methods

Samples

Non-Probability Probability Samples

Samples

Simple
Random Stratified
Judgement Snowball
Cluster
Quota Systematic
Convenience 14
 A Sampling Process Begins
With A Sampling Frame
 The sampling frame is a listing of items that make up the
population
 Frames are data sources such as population lists,
directories, or maps
 Inaccurate or biased results can result if a frame
excludes certain portions of the population
 Using different frames to generate data can lead to
dissimilar conclusions

Chap 7-15
Probability Sampling
 Subjects of the Sample are Chosen Based on Known
Probabilities
 Sampling Frame-the list of elements from which the
sample is actually drawn and closely related to the
population. Probability Samples

Simple
Systematic Stratified Cluster
Random
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Simple Random Samples
 Every Individual or Item from the Frame Has an Equal
Chance of Being Selected
 Selection May Be With Replacement or Without
Replacement
 One May Use Table of Random Numbers or Computer
Random Number Generators to Obtain Samples
http://stattrek.com/statistics/random-number-
generator.aspx

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Systematic Samples

 Decide on Sample Size: n

 Divide Frame of N individuals into Groups of k Individuals: k =
N/n
 Randomly Select One Individual from the 1st Group
 Select Every k-th Individual Thereafter

N = 64
n=8
First Group 18
k=8
Stratified Samples

 Population Divided into 2 or More Groups According to Some

Common Characteristic
 Simple Random Sample Selected from Each Group
 The Two or More Samples are Combined into One

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 Cluster Samples
 Useful when it is difficult or costly to develop a complete list of
the population
 Useful whenever the population elements are widely dispersed
geographically.
 Population Divided into Several “Clusters,” Each Representative
of the Population
 A Random Sampling of Clusters is Taken
 All Items in the Selected Clusters are Studied

Randomly Population
selected 2 divided
clusters into 4
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clusters
Advantages and Disadvantages

 Simple Random Sample & Systematic Sample

 Simple to use
 May not be a good representation of the population’s
underlying characteristics
 Stratified Sample
 Ensures representation of individuals across the entire
population
 Cluster Sample
 More cost effective
 Less efficient (need larger sample to acquire the same
level of precision) 21
Data Collection Methods
 Reliable primary modes
 Personal interview
 Telephone interview
 Survey (questionnaire)
 Lessreliable self-selection modes (not appropriate for
making inferences about the population)
 Television survey
 Internet survey
 Printed survey in newspapers and magazines
 Product or service questionnaires
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Evaluating Survey Worthiness

 What is the purpose of the survey?

 Is the survey based on a probability
sample?
 Coverage error – appropriate frame?
 Nonresponse error – follow up
 Measurement error – good questions elicit
good responses
 Sampling error – always exists
Types of Survey Errors
 Coverage error or selection bias
 Exists if some groups are excluded from the frame and have
no chance of being selected
 Nonresponse error or bias
 People who do not respond may be different from those who
do respond
 Sampling error
 Variation from sample to sample will always exist
 Measurement error
 Due to weaknesses in question design, respondent error, and
interviewer’s effects on the respondent (“Hawthorne
effect”)