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Contents
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Meaning and Scope Collection of Data Classification and tabulation Diagrammatic and Graphic Representation Averages Dispersion Skewness and Kurtosis Correlation Linear Regression Analysis Index Numbers Time series Analysis Theory of Probability Random Variable, Probability Distribution and Mathematical expectation Theoretical Distributions Sampling Theory and Design of sample Surveys Interpolation and Extrapolation
Learning Objectives
Basic Statistics and its application in dayto-day life of a Manager
Various aspects of quantitative techniques and their application in Decision making Also frequently used models of Statistical analysis
Understand: Complexity of Managerial decisions Quantitative Techniques Need of using Quantitative approach in decisions Role of statistical methods in data analysis Brief idea of various statistical methods Know the areas of applications of quantitative approach in business and management.
Introduction
Individual business prior to Industrial revolution and need for info----Decisions based on past experience and intuition.
Marketing of products Test marketing of products The manager (also the owner) Progress of work Any other fact the owner needed to know
Also in:
Statistical Methods
Collect, organize /classify, present, analyze and interpret
Inductive statistics
Statistical inference Estimation
Descriptive Statistics
Used for re-arranging, grouping, and summarizing sets of data
Changes in price index, Yield by wheat using different charts and graphs
having large quantities of numerical data for easy understanding Various types of averages, central tendency and dispersion, trends, index numbers.
Inductive Statistics
The development of some criteria which can be used to derive info about the nature of entire population or universe from the nature of the small sample.
Include :
probability, probability distribution, sampling and sampling distribution, various methods of testing hypothesis :correlation, regression, factor analysis, time series analysis.
Models in OR
Based on Purpose:
Descriptive: behavior of a system ( Behavior of demand of an inventory item) Explanatory, : Explain behavior with relationships( wages, promotion policy,) Predictive: predict stock prices for given any level of earning per share. Prescriptive (normative): norms for comparison of alternate solutions (Allocation).
Ref:
Regression analysis:
Time Series Analysis
Index Numbers
Sampling and Statistical Inference
Median:
Item lies exactly half way between the lowest and highest values when they are arranged in ascending/descending order. Not affected by value of observation
Divides the number of households into two equal parts. (50% of all households have income below median income)
Mode:
Category that has max number of observation, (that occurs more frequently)
Measure of Dispersion:
spread away from central tendency (mean/mode/median) :
Range, mean deviation, Standard deviation. The data spread in symmetrical or asymmetrical pattern: skewness
Correlation
Dependent variable associated with changes in other independent variable.
Sales as depended variable and advertising budget as an independent.
Could be casual or causal relationships
Index Numbers: a relative number representing net result of change in a group of variables
Stated in percentages given or current year, and base year
production, sales price, volume of employment,
Advantages to Management
Definiteness Condensation Comparison Formulation of policies Formulating and testing hypothesis Prediction
Marketing
Marketing research info Building and maintaining an extensive market Sales forecasting
Production
PPC and analysis Machine performance evaluation QC Inventory control
Personnel
Labour turnover rate Employment trends Performance appraisal Wage rates and incentive plans
Economics
Measurement of Gross National Product and inputoutput analysis Determination of business cycles, seasonal fluctuations Comparison of market price, cost and profit of individual firm Analysis of population, Operational studies of Public utilities Formulation of appropriate economic policies and evaluation of their effects
Natural science
Diagnosing based on inputs Efficacy of certain drugs Study of plant life
Exercise/ Assignments
1. Comment on the statement: Statistics are numerical statements of facts, but all facts numerically stated are not statistics 2. Explain the distinction between : Descriptive and Prescriptive models
1. Presentation topic:
1. Formulate a business problem and analyze it by applying the major phases of statistics
Learning Objectives:
Insight into different aspects of the types of functional relationships among business variables Their applications in various fields of management
Need to Identify/define relationships among business variables Define functional relationships Various types of functional relationships Use of graph to depict functional relationships Managerial applicability Progression and application..
Introduction
For decision problems which use mathematical tools, the first requirement is to identify or formally define all significant interactions or relationships among primary factors (also called variables). The relationships usually are stated in the form of an equation or inequation.
Study mathematical problems in the context of managerial problem
Definitions
Variables: A variable is something whose magnitude can vary or which can assume various values. Represented by symbols (first letter of the name)
Discrete variable: suspect to counting (houses, machines) Continuous Variables: suspect to measurements (temp, height)
An Arbitrary (or parametric) constant or parameter retains same value throughout any particular problem, but may assume different values in different problems
P21 (ex1)
Types of Function
Linear Functions:
The power of independent variable is 1 A function with only one independent variable is called a Single variable function.
(P21(1)
A linear function with one variable can always be graphed in two dimensional plane (or space). The graph of such functions is always a straight line. (P22ex2
Polynomial functions:
Polynomial function of degree 1 is called a linear function Polynomial function of degree 2 is called a Quadratic function (p23-ab
Absolute Value Functions : ( p23(3 Inverse Function: (P 23 Step function: For different values of an independent variable x in an interval the depended variable y=f(x) takes a constant value, but takes different values in diff intervals. (p24-5) Algebraic and Transcendental functions
Activity
P 25 activity B -1a&b assignment
Business Application
Linear Function ( P27-ex3 assignment Quadratic function ( P27-ex4 assignment
Activity D (Page 28-b_assignment
Descriptive Statistics
Contents
Collection of data:
Need and significance of data collection Primary and secondary data Different methods of collecting primary data Edit primary data and know sources of secondary data and its use Census versus sample
Introduction
The need for data collection
Statistical data is a set of facts expressed in quantitative form. The use of facts expressed as measurable quantities can help a decision maker to arrive at better decisions.
Exercises/Assignments
1. Distinguish between Primary and Secondary data. Indicate the situations in which each of these----? 2. Distinguish between census and sampling methods of data collection. Compare merits/demerits. Why sampling unavoidable in certain situations.
Presentation of Data
Presentation of Data
Learning objectives
Understand the need and significance of presentation of data Necessity of classifying data and various types of classification Construct frequency distribution of discrete and continuous data Frequency distribution in the form of :bar diagrams, histograms, frequency polygon, and ogives
Classification Discrete frequency Distribution Continuous frequency distribution Choosing the classes Cumulative and Relative frequencies Charting data
Introduction
After the understanding various ways of data collection:
The successful use of Data collected depends on:
The manner in which it is arranged, displayed and summarized.
Classification of data
After the data has been systematically collected and edited, The first step in presentation of data is Classification
Classification is the process of arranging the data according to points of similarities and dissimilarities
Chronological Classification
Sales figures of a company for last six years
Qualitative Classification
Dichotomous Classification
An attribute divided into two classes, one possessing and the other not possessing it (basis of employment)
Quantitative Classification : according to characteristics that can be measured (employees as per monthly salaries)
Discrete : limited to certain numerical value of a variable Continuous: Take all values of the variable
Examples
Chronological classification Discrete frequency distribution Continuous frequency distribution
P14,15
The frequency column refers to numbers of tally marks, a particular class will contain
p15
Assignments
1. What do you understand by classification of data? 2. Why classification of data is required? 3. Illustrate the difference between qualitative and quantitative data.
Activity
Distinguish between:
1. Discrete and continuous frequency distribution 2. Class limits and class intervals 3. Inclusive and exclusive methods
Activity
Explain the concept of relative frequency
Charting of Data
Bar diagram
Most popular Example: Population, per capita income, sales and profits A bar is a thick line whose width is shown to attract the viewer. A bar diagram may be either vertical or horizontal.
DRAWING A BAR DIAGRAM:
Take characteristic (or attributes) under consideration on X-axis and the corresponding value on the Y-axis. It is desirable to mention the value depicted by the bar on the top of the bar. The gap between one bar and the other is kept equal. Also width of bars are same. The only difference is in length of the bars.
That is why this type of diagrams are known as one dimensional. (P20)
Histograms
One of the most commonly used and easily understood methods of graphic representation of frequency distribution. A histogram is a series of rectangles having areas that are in the same proportion as the frequencies of a frequency distribution
CONSTRUCTING HISTOGRAM:
On horizontal axis or X-axis, we take class limits of variables, and on vertical axis or Y-axis, we take frequencies of class intervals shown on horizontal axis If class intervals are of equal width, then the vertical bars of equal widths.(P20-21) On the other hand if the class intervals are unequal , the frequencies have to be adjusted according to width of class interval (P 21-22)
Activity
Draw a sketch of a histogram and a bar diagram and explain the difference between the two.
Frequency Polygon
A graphical presentation of frequency distribution A polygon is a many sided closed figure,
A frequency polygon is constructed by:
taking the mid points of upper horizontal points of each rectangle on the histogram and connecting these mid-points by straight lines. In order to close the polygon, an additional class is assumed at each end, having zero frequency. (p22-23)
The histogram is usually associated with discrete data and a frequency polygon is appropriate for continuous data. (But the distinction is not always followed) The frequency polygon and frequency curve have a special advantage over histogram particularly when to compare two or more frequency distributions
Activity
What is the procedure for making a frequency polygon? Illustrate.
The shape of less than ogive curve will be a rising one, Whereas the shape of more than ogive curve wood be a falling one
Activity
With the help of an example , explain the concept of less than ogive and more than ogive.
Types of Data
Data refers to known facts or things used as basis for inference or reckoning. Types of Data:
Qualitative: concerned with qualities and non-numerical characteristics. Quantitative: concerned with numerical characteristics.
Discrete: take only one of a range of distinct values (no of employees). Continuous: take any value within a given range (time, length) (P160-161BR)
Nominal level (Classificatory/ named) Data: And Implications for Data handling Methodologies
Classification of data: Statements of equality or differences (according to variable occupation) Although mode could be used, very few statistics can be applied to data collected in this form
Ordinal level (Ranking/ordered) data: And Implications for Data handling Methodologies
Can be Classified in terms of of equality or differences Permit you to order individual data and make decisions such as this score is greater or lesser than another. (employee grades or choices ranked) Since arithmetic mean cannot be calculated , the use of many other statistics are also excluded.
Interval level (Numerical) data And Implications for Data handling Methodologies
Have characteristics of both Nominal and Ordinal scales, but also provides additional info regarding the degree of difference between individual data items within a set of group. Most measures of human characteristics have interval properties. (Interval between IQ Scores/ assignment marks) However precision in interval scale is limited. Also some statistics such as geometric mean are excluded from use with data collected in this form.
Ratio level (Numerical) data: represent highest level of precision. And Implications for Data handling Methodologies
A Mathematical number system (height, weight, time) Ratio Scale allow ratio as well as interval decision (allowing us to say something is so many times big/bright/heavy) Any statistics can be used on data collected in this form. (Some scales such as temp may appear to have ratio properties, but in fact are only interval scales) (Centigrade)
(P-31 .)
AM
Advantages:
Easily computed Readily understood Almost all properties of a good measure of central tendency.
Disadvantages
Distorted by Extreme values Open end distribution and assigning mid point value.
Median
Divides the distribution into two equal parts. 50% of the observations in distribution are above the value of median ------ The median is the value of the middle observation when the series is arranged in
P34,,35
Quantiles
Related positional measures of central tendency The most familiar quantiles are
Quartiles:
Values which divide the total data into 4 equal parts Since 3 points divide the distribution into 4 equal parts, we have 3 quartile. Q1(25% of observations are smaller and ----), Q2,Q3
Deciles
Values which divide the total data into ten equal parts. Since 9 points divide the distribution into 10 equal parts, we have 9 Deciles denoted as D1, D2---D9
Percentiles:
Values which divide the total data into 100 equal parts. Since 9 9points divide the distribution into 100 equal parts, we have 99 percentiles denoted as P1, P2----P99 P36,37
p38
MODE
Most commonly observed value in a set of data----P39
Geometric Mean
Geometric mean like arithmetic mean is a calculated average. Very useful in averaging ratios and percentages. Also in determining the rate of increase or decrease Also capable of further algebraic treatment
GM is more difficult to compute and interpret Cannot be computed if any observation has either a value zero or negative observations
Harmonic Mean
A measure of central tendency for data expressed as rates (km/hr, tonnes/day , Km/ltre) Defined as the reciprocal of arithmetic mean of reciprocal of individual observations.
Harmonic mean like arithmetic mean and geometric mean is computed from each and every observations It is specially used for averaging rates
Cannot be computed when on or more observations have zero value or when there are both positive and negative observations In dealing with business problems rarely used.
Range
Difference between the highest (numerically large ) value and the lowest value in a set of data. R=H-L Range is very easy to calculate and gives us some idea about the variability of data. However, the range is a crude measure of variation , as it uses only two extreme values.
Concept of range utilized in SQC, in studying variations in prices of shares and debentures and other commodities that are very sensitive to price changes from one period to another. Also a good indicator in weather forecast
For grouped data, the range may be approximated as difference between upper limit of the largest class and the lower limit of the lowest class. The relative measure corresponding to range, called the coefficient of range , is obtained by applying formula P48,49
P49,50
Standard Deviation
Most widely used and important measure of variation. (In computing average deviation , the signs are ignored). The std deviation overcomes this problem, by squaring the deviations, which makes them all positive. The std deviation, also known as root mean square deviation. The square of Std Deviation is called variance
The Std Deviation and variance becomes larger as the variability or spread within the data becomes greater. It is readily comparable with other Std deviations, and greater the Std Deviation, greater the variability. The Std deviation is commonly used to measure variability, While other measures have special uses, It is the only measure possessing the necessary mathematical properties to make it useful for advanced statistical work. p53
Skewness
The measure of central tendency and variation do not reveal all characteristics of a given set of data Two distributions having same mean and Std deviation, may differ widely in the shape of their distribution.
Distribution of data is symmetrical or not (asymmetrical or skewed) Thus the skewness refers to lack of symmetry in distribution
Relative skewness
In order to make comparisons between the skewness in two or more distributions, the coefficient of skewness
(Karl Pearson method, Bowleys methods )