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Chapter 1

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1.1 Business Statistics and Their Uses
• Statistics
the mathematical science that deals with the collection,
analysis, and presentation of data, which can then be
used as a basis for inference and induction

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Examples of how business use statistics:

• Marketing Research
– Focus group data, customer surveys
– Household surveys, TV viewing habits
• Operations
– Quality control, reliability
• Finance and Economics
– Data on income, credit risk, unemployment

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1.2 Data
• Data
values assigned to observations or measurements

• Information
data that are transformed into useful facts that can be
used for a specific purpose, such as making a
decision

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Data

Table 1.1 | Golf-Score Data

Date Score
6/13 94
6/20 96
6/27 93
Each individual value is
7/10 89 considered a data point
7/16 86
7/24 89

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Information
Analyzing the data can provide information
for decision making
Table 1.1 | Golf-Score Data
Date Score
6/13 94
6/20 96
6/27 93 Did a new driver after 7/1
7/10 89 change the average golf score?
7/16 86
7/24 89

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The Sources of Data

• Primary data
data that you have collected for your own use

• Secondary data
data collected by someone else

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The Sources of Data

Primary data Secondary data

• collected by the person or • Readily available
organization who uses the • Less expensive to collect
data

• Can be expensive and time- • No control over how the data
consuming to gather was collected
• Less reliable unless
collected and recorded
accurately

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Primary Data

Direct Observation or Experiments Surveys or

Focus Group Questionnaires

Observing subjects in Treatments are Subjects are asked to

their natural applied in controlled respond to questions
environment conditions or discuss attitudes

Example: Watching to Example: Crop Example: E-mail

see if drivers stop at growth from different surveys to customers
a stop sign plots using different to assess service
fertilizers quality
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Figure 1.2 | An Example of a Survey

To encourage
respondents to
participate, an
effective survey
will state its
purpose in the
beginning

Personal
demographic
questions are
often last, when
respondents feel
more comfortable
with the process

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Bias

The manner in which survey questions are asked

can affect responses

• Bias can occur when a question is stated in a

way that encourages or leads a respondent to a
– Example: “Do you agree that the current overly
complex tax code should be simplified and made
more fair?”

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The Two Main Types of Data

Qualitative Quantitative
Data Data
Classified by descriptive terms
Counted Measured
Examples:
• Marital Status Described by numerical values
• Political Party
Examples: Examples:
• Eye Color
(Defined categories) • Number of • Weight
Children • Voltage
• Defects per hour (Measured
(Counted items) characteristics)

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Classifying Data
by Level of Measurement

|
Figure 1.4 Two Main Types of Data and their
Corresponding Levels

Types of Data

Qualitative Quantitative

Nominal Ordinal Interval Ratio

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Classifying Data
by Level of Measurement
Table 1.2 | The Four Levels of Data Measurement: A Summary

Level Description Example

Nominal Arbitrary labels for data Zip Codes
No ranking allowed (19808, 76137)

Ordinal Ranking allowed Education level

No measurable meaning (Master’s degree,
to the number differences doctorate degree)

Interval Meaningful differences Calendar year

No true zero point (2009, 2010)

Ratio Meaningful differences Income

True zero point (\$48,000, \$0)
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Time Series vs. Cross-Sectional Data

• Time Series Data

– values that correspond to specific measurements
taken over a range of time periods

• Cross Section Data

– values collected from a number of subjects
during a single time period

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Time Series vs. Cross-Sectional Data
Table 1.3 | Unemployment Rate Data, 2006–2010

Unemployment Rate
Year USA CA DE MI TX
Cross-
2006 4.6% 4.9% 3.5% 6.9% 4.9% Sectional
Data
2007 4.6 5.3 3.5 7.2 4.4
2008 5.8 7.2 4.9 8.3 4.9
2009 9.3 11.3 8.0 13.3 7.6
2010 9.6 12.4 8.5 12.5 8.2
Time Series Data

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Time Series vs. Cross-Sectional Data

Figure 1.5 | A Time Series Graph

of U.S. Unemployment Rates,
2006–2010

Figure 1.6 | A Cross-Sectional Graph

of 2010 Unemployment Rates

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1.3 Descriptive and Inferential Statistics
• Descriptive statistics
– Collecting, summarizing, and displaying data

• Inferential statistics
– making claims or conclusions about the data based
on a sample

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Population vs. Sample

• Population
– represents all possible subjects that are of interest in
a particular study
• Sample
– refers to a portion of the
population that is
representative of the
population from which
it was selected

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Parameter vs. Statistic
• Parameter – a described characteristic about a population
• Statistic – a described characteristic about a sample
Population Sample

Values calculated using Values computed from

population data are sample data are called
called parameters statistics

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Inferential Statistics

• Making statements about a population by

examining sample results
• Example:

Observed Estimated population

sample parameter (unknown, but
statistic Inference can be estimated from
(known) sample evidence)

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Inferential Statistics

Figure 1.5 | Using Inferential

Statistics for Quality Control
Purposes: An Example

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1.4 Ethics and Statistics – It’s a
Dangerous World of Data Out There

• Biased sample – a sample that does not

represent the intended population
– can lead to distorted findings
– biased sampling can occur intentionally or
unintentionally
– results can be manipulated by how we ask questions
and who is responding to them

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Ways to Misuse Statistics
• Changing the graph scale
– Should avoid distortion that might convey the wrong
message

Vs.

• Choosing a sample that is not representative of the

population
– Avoid bias by randomly sampling from the population