Chapter 1 – Statistics and Data 1-1

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Chapter 1 Learning Objectives (LOs)

LO 1.1 Describe the importance of statistics.

Statistics and Data LO 1.2 Differentiate between descriptive statistics
and inferential statistics.

LO 1.3 Explain the need for sampling and discuss

Business Statistics: various data types.
Communicating with Numbers, 2e
LO 1.4 Describe variables and various types of
By Sanjiv Jaggia and Alison Kelly measurement scales.

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1.1 The Relevance of Statistics

Why Study Statistics?
LO 1.1 Describe the importance of statistics.
1. Numerical information is everywhere
• With knowledge of statistics: 2. Statistical techniques are used to make decisions that
affect our daily lives
- Avoid risk of making uninformed 3. The knowledge of statistical methods will help you
decisions and costly mistakes understand how decisions are made and give you a
better understanding of how they affect you.
- Differentiate between sound statistical
4. No matter what line of work you select, you will find
conclusions and questionable yourself faced with decisions where an understanding
conclusions. of data analysis is helpful.

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1.2 What Is Statistics?

Who Uses Statistics?
LO 1.2 Differentiate between descriptive statistics and inferential statistics.

Statistical techniques are used • Statistics is the methodology of extracting

extensively by marketing, accounting, useful information from a data set.
quality control, consumers, professional
• To do good statistical analysis, you must
sports people, hospital administrators,
educators, politicians, physicians, etc... – Find the right data.
– Use the appropriate statistical tools.
– Clearly communicate the numerical
information into written language.

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Chapter 1 – Statistics and Data 1-2

1.2 What Is Statistics? 1.2 What Is Statistics?

• Two branches of statistics • Population
– Descriptive Statistics – Consists of all items of interest.
• collecting, organizing, and presenting the • Sample
data. – A subset of the population.
– Inferential Statistics
• A sample statistic is calculated from the
• drawing conclusions about a population
sample data and is used to make
based on sample data from that population.
inferences about the population parameter.

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Why take a sample instead of studying Types of Data

every member of the population?
• Cross-sectional data
– Data collected by recording a characteristic of
1. Prohibitive cost of census many subjects at the same point in time, or without
2. Time constraint regard to differences in time.
3. Not possible to test or inspect all members – Subjects might include individuals, households,
of a population being studied firms, industries, regions, and countries.
4. Destruction of item being studied may be – The survey data from the Introductory Case is an
example of cross-sectional data.
required

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Types of Data 1.3 Variables and Scales of

Measurement
• Time series data LO 1.4 Describe variables and various types of measurement scales.
– Data collected by recording a characteristic of a
subject over several time periods. • A variable is the general characteristic
– Data can include daily, weekly, monthly, quarterly, or being observed on an object of interest.
annual observations.
• Types of Variables
– This graph plots the
U.S. GDP growth rate – Qualitative – gender, race, political affiliation
from 1980 to 2010 - it – Quantitative – test scores, age, weight
is an example of time • Discrete
series data. • Continuous

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Chapter 1 – Statistics and Data 1-3

1.3 Variables and Scales of 1.3 Variables and Scales of

Measurement Measurement
• Types of Quantitative Variables • Types of Quantitative Variables
– Discrete – Continuous
• A discrete variable assumes a • A continuous variable can assume an
countable number of distinct values. infinite number of values within some
• Examples: Number of children in a interval.
family, number of points scored in a • Examples: Weight, height, investment
basketball game. return.

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1.3 Variables and Scales of 1.3 Variables and Scales of Measurement

Measurement • The Nominal Scale
• Scales of Measure – The least sophisticated level of measurement.
– Data are simply categories for grouping the data.
‐ Nominal
Qualitative Variables
‐ Ordinal

‐ Interval Qualitative values may be converted

Quantitative Variables to quantitative values for
‐ Ratio analysis purposes.

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1.3 Variables and Scales of 1.3 Variables and Scales of

Measurement Measurement
• The Ordinal Scale Example: Tweens Survey
– Ordinal data may be categorized and ranked • What is the scale of measurement of the radio station data?
with respect to some characteristic or trait.
• For example, instructors are often evaluated on an
ordinal scale (excellent, good, fair, poor).

– Differences between categories are

meaningless because the actual numbers used
may be arbitrary. Solution: These are nominal data—the values in the
• There is no objective way to interpret the difference data differ merely in name or label.
between instructor quality.
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Chapter 1 – Statistics and Data 1-4

1.3 Variables and Scales of 1.3 Variables and Scales of

Measurement Measurement
Example: Tweens Survey • The Interval Scale
• How are the data based on the ratings of the food quality – Data may be categorized and ranked with
similar to or different from the radio station data? respect to some characteristic or trait.
– Differences between interval values are equal
and meaningful. Thus the arithmetic
operations of addition and subtraction are
meaningful.
– No “absolute 0” or starting point defined.
Solution: These are ordinal since they can be both
categorized and ranked. Meaningful ratios may not be obtained.

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1.3 Variables and Scales of 1.3 Variables and Scales of

Measurement Measurement
• The Interval Scale • The Ratio Scale
– For example, consider the Fahrenheit – The strongest level of measurement.
scale of temperature.
– This scale is interval because the data
– Ratio data may be categorized and ranked
are ranked and differences (+ or -) with respect to some characteristic or trait.
may be obtained. – Differences between interval values are equal
– But there is no “absolute 0” (What and meaningful.
does mean?)
– There is an “absolute 0” or defined starting
point. “0” does mean “the absence of …”
Thus, meaningful ratios may be obtained.

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1.3 Variables and Scales of 1.3 Variables and Scales of Measurement

Measurement Example: Tweens Survey
• How are the time data classified? In what ways do the time
• The Ratio Scale data differ from ordinal data? What is a potential weakness
– The following variables are measured on a of this measurement scale?
ratio scale:
• General Examples: Weight, Time, and Distance
• Business Examples: Sales, Profits, and Inventory
Levels

• Solution: Clock time responses are on an interval scale.

With this type of data we can calculate meaningful
differences, however, there is no apparent zero point.
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1.3 Variables and Scales of Measurement

Example: Tweens Survey
• What is the measurement scale of the money data? Why is
it considered the most sophisticated form of data?

End of Chapter 1

• Solution: Since the tweens’ responses are in dollar amounts,

this is ratio-scaled data; ratio-scaled data has a natural zero
point which allows the calculation of ratios.
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