Chap 1 - 2

Business Statistics
Chapter 1: Introduction to Statistics
Statistical method can be described as:
• The selection, collection and organization
of basic facts into meaningful data.
• The summarizing, presentation and
analysis of data into useful information.
 Why a manager needs
to know about statistics?
To know how to
• present information in table and graph
• analyse the data
• draw conclusions about populations based on
information obtained from sample
• Do forecasting based on data available (eg. By
using regression).
3
 Important Definitions
• Data consists of information coming from observations,
counts, measurements, or responses.
• A population consists of all items of interest while a
sample is a part of the population or subset of a
population.
• A descriptive value for a population is called a
parameter and a descriptive value for a sample is
called a statistics.
• We analyse sample data and calculate sample
statistics to make inferences (or prediction) about the
unknown population parameter. 4
 Population vs Sample
Population Sample
collection of all possible individuals, a portion, or part, of the
objects, or measurements of interest. population of interest

Measures used to describe the Measures computed from sample

population are called parameters data are called statistics
 StatisticalofMethods
Branches Statistics
The study of statistics has two major branches:
descriptive statistics and inferential statistics.

Statistics

Descriptive Inferential
statistics statistics
Involves the Involves using a
organization, sample to draw
summarization, and conclusions about
display of data. a population.
 Descriptive Statistics
• Collect Data
– E.g., Survey
• Present Data
– E.g., Tables and graphs
• Characterize Data
– E.g., Sample Mean = X i

n
 Inferential Statistics
Drawing conclusions and/or making decisions
concerning a population based on sample results.
• 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 value
is 120 pounds
 Types of Data

Data

Qualitative Quantitative
(Categorical) (Numerical)

Discrete Continuous
Qualitative and Quantitative Data
• Qualitative data yield categorical responses
– E.g. Are you married? Yes or No
• Quantitative data yield numerical responses
– Discrete random variables yield numerical
response that arise from a counting process
• E.g. How many cars do you own? 3 cars
– Continuous random variables yield numerical
responses that arise from a measuring process
• E.g. What is your weight? 130 pounds
 Qualitative and Quantitative Data
(continued)
• Question :
• The grade point averages of five students are
listed in the table. Which data are qualitative
data and which are quantitative data?
Student GPA
Sally 3.22
Bob 3.98
Cindy 2.75
Mark 2.24
Kathy 3.84
Qualitative data Quantitative data
 Levels of Measurement
• Determines which statistical calculations are
meaningful. The four levels of measurement
are: nominal, ordinal, interval, and ratio

Nominal
Levels Lowest
Ordinal
of to
Measurement Interval highest
Ratio
 Types of Measurement Scales
• Nominal Scale >qualitative only
• – distinct categories in which no ordering is implied (No mathematical
computations )
– E.g.: Type of stocks invested: growth, income, other
Textbooks you are using this semester

• Ordinal Scale >qualitative or quantitative

• – distinct categories in which ordering is implied (but differences
between data entries are not meaningful)
– E.g. :Student grades: A, B, C, D or F
Top 50 songs played on the radio
 Types of Measurement Scales
• Interval Scale >quantitative
• – an ordered scale in which the difference between the
measurements does not involve a true zero point
– E.g. :Temperature in degrees Celsius
Years on a timeline

• Ratio Scale >quantitative

• – an ordered scale in which the difference between the
measurements involves a true zero point
– E.g.: Weight in pounds
Age
 Summary of the Characteristics for
Levels of Measurement

15
Chapter 2
Describing Data:
Frequency Tables, Frequency Distribution,
and Graphic Presentation
 Descriptive Statistics:
Tabular and Graphical Presentations
• Summarizing Qualitative Data
• Summarizing Quantitative Data
 Summarizing Qualitative Data
• Frequency distributions
• Relative Frequency
• Percent Frequency Distribution
• Bar Graph
• Pie Chart
 FrequencyQualitative
Summarizing DistributionData
• A frequency distribution: a tabular summary of
data showing the frequency (or number) of
items in each of several nonoverlapping
classes.
• The objective is to provide insights about the
data that cannot be quickly obtained by
looking only at the original data.
 Example: Swiss Inn
Guests staying at Swiss Inn were asked
to rate the quality of their accommodations
as being excellent, above average, average, below average,
or poor. The ratings provided by a sample of 20 guests are

Above average Below average Below average Below average

Average Poor Poor Above average
Above average Excellent Above average Above average
Average Above average Above average Average
Above average Average Above average Average
At issue:
How do we summarize the information in the above box?
Frequency Distribution
Frequency Distribution

Rating Frequency (f)

Poor 2
Below Average 3
Average 5
Above Average 9
Excellent 1
Total 20
 Relative Frequency Distribution
• The relative frequency of a class is the
fraction or proportion of the total number of
data items belonging to the class.

• A relative frequency distribution is a tabular

summary of a set of data showing the
relative frequency for each class.
 Percent Frequency Distribution
• The percent frequency of a class is the relative
frequency multiplied by 100.

• A percent frequency distribution is a tabular

summary of a set of data showing the percent
frequency for each class.
Relative Frequency and
Percent Frequency Distributions

Relative Percent
Rating Frequency(f) Frequency Frequency
Poor 2 0.10 10 .10(100)

Below average 3 0.15 15

Average 5 0.25 25
Above average 9 0.45 45
1/20
Excellent 1 0.05 5
Total 20 1.00 100
Bar Graph
•The classes are reported on the horizontal axis
•The class frequencies on the vertical axis
•The class frequencies are proportional to the heights of the bars
Swiss Inn Quality Ratings
10
9
8
7
Frequency

6
5
4
3
2
1
Rating
Poor Below Average Above Excellent
Average Average
Pie Chart
• Shows the proportion or percent that each class
represents of the total number of frequencies
Swiss Inn Quality Ratings
Excellent
5%
Poor
10%
Below
Average
Above 15%
Average
45%
Average
25%
 Summarizing Quantitative Data
• Ordered Array
• Frequency distributions
• Relative Frequency and Percent Frequency
Distribution
• Histograms
• Cumulative distributions
• Polygon
 x f
Ungrouped 52 1
57 1
Frequency Distribution 62
67
4
3
68 3
69 3
72 4
52 62 68 72 74 77 79 82 97 101 74 3
57 67 68 72 74 77 80 88 97 105 75 3
77 3
62 67 69 72 75 77 80 89 97 105 79 3
80 2
62 67 69 72 75 79 82 93 98 105
82 3
62 68 69 74 75 79 82 93 99 109 88 1
89 1
93 2
97 3
98 1
We said ungrouped because each value 99 1
of x in the distribution stands alone 101 1
105 3
109 1
 Grouped Frequency Distribution
• Guidelines for Selecting Number of Classes
Use between 5 and 15 classes.
2k > n, where k = number of classes,
n = number of observation
2k > 50, k log 2 > log 50, k > 5.64 ≈ 6
• Guidelines for Selecting Width of Classes
Use classes of equal width.
Approximate Class Width (i) ≥
Largest Data Value (H) - Smallest Data Value (L)
Number of Classes (k)
 Grouped Frequency Distribution
• Class interval is the difference between the upper
and lower class boundaries of any class. E.g. 59.5-
69.5 = 10
• Class limits are the smallest and largest
observations (data, events etc) in each class.
Therefore, each class has two limits: a lower and
upper. E.g. 60 – 69
• Class Boundaries (true class limits) are numbers
that do not occur in the sample data but are halfway
between the upper limit of one class and the lower
limit of the next class. Therefore, each class has an
upper and lower class boundary. E.g. 59.5 – 69.5
 Grouped Frequency Distribution
• Determine Class Boundaries (Limit)
 Class limits are the lower and upper values of the classes.
 Class Boundaries are the lower and upper values of a class that
mark common points between classes.
Class
Lower Limit=60 50-59 Upper Limit=69

Lower boundary =59.5

60-69 Upper boundary =69.5
70-79
Lower Limit=90
80-89 Upper Limit=99
90-99
Lower boundary =89.5 Upper boundary =99.5
100-109
 Grouped Frequency Distribution
• Compute Class Midpoints:
 Class Mid-points are situated in the centre of the classes.
They can be identified as being mid-way between the upper
and lower boundaries (or limits)
Class
50-59 Mid-point= (60+69)/2=64.5 (NOT 65)

60-69
Class width= 10 (69.5-59.5)
70-79
80-89 Mid-point= (90+99)/2=94.5 (NOT 95)

90-99
Class width= 10 (99.5-89.5)
100-109
• Count observations and assign to classes
 Grouped Frequency Distribution
For William Auto Repair, if we choose six
classes:
Approximate Class Width = (109 - 52)/6 = 9.5  10

Boundary
Parts Cost ($) Class Mid point (x) Tally Frequency(f)

50-59 49.5-59.5 54.5 II 2

60-69 59.5-69.5 64.5 IIII IIII III 13
70-79 69.5-79.5 74.5 IIII IIII IIII I 16
80-89 79.5-89.5 84.5 IIII II 7
90-99 89.5-99.5 94.5 IIII II 7
100-109 99.5-109.5 104.5 IIII 5
Total 50
 Relative Frequency and
Percent Frequency Distributions
Parts Cost Frequency Relative Percent Insights Gained from the
($) (f) Frequency Frequency Percent Frequency
Distribution
50-59 2 0.04 4
 Only 4% of the parts
60-69 13 2/50 0.26 .04(100) 26 costs are in the $50-
59 class.
70-79 16 0.32 32
 30% of the parts costs
80-89 7 0.14 14 are under $70.
90-99 7 7/50 0.14 .14(100) 14  The greatest
percentage (32% or
100-109 5 0.10 10 almost one-third) of
Total 50 1.00 100 the parts costs are in
the $70-79 class.
 10% of the parts costs
are $100 or more.
 Histogram
•The classes are marked on the horizontal axis
•The class frequencies on the vertical axis
•The class frequencies are represented by the heights of the bars and
the bars are adjacent to each other.
• No Gaps Between
Tune-up Parts Cost Bars
18
16 • Can use mid-
14
points or class
boundaries.
Frequency

12
• But, can’t use
10 class limits.
8
6
4

Class 2 Class Midpoints

Boundaries Parts Cost ($)
(49.5-59.5) 44.5 54.5 64.5 74.5 84.5 94.5 104.5 114.5
 Frequency Polygon
•The shape of a distribution
•Similar to a histogram
Tune-up Parts Cost
18
16
14
Frequency

12
10
8
6
4
2
Parts Cost ($)
44.5 54.5 64.5 74.5 84.5 94.5 104.5 114.5
Class Midpoints
 Cumulative Distributions
• Cumulative frequency distribution -- shows the
number of items with values less than or equal to the
upper limit of each class.
• Cumulative relative frequency distribution -- shows
the proportion of items with values less than or equal
to the upper limit of each class.
• Cumulative percent frequency distribution -- shows
the percentage of items with values less than or
equal to the upper limit of each class.
 Cumulative Distributions
• William Auto Repair

Upper Cumulative Cumulative

Boundary Cumulative Relative Percent
(Less than) Frequency Frequency Frequency (%)
 49.5 0 0 0
 59.5 2 0.04 4
 69.5 15 0.3 30
 79.5 31 2 + 13 0.62 15/50 62 0.3(100)
 89.5 38 0.76 76
 99.5 45 0.9 90
 109.5 50 1 100