Week 1 - 2

BT10403
Statistik Perniagaan dan Ekonomi

(Statistics for Business and Economics)
Week 1, Semester II, 2016/2017
Faculty of Business, Economics &
Accountancy,
Universiti Malaysia Sabah
Dr. Qaiser Munir
Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 1

Chapter 1
Defining and Collecting
Data

Learning Objectives
In this chapter you learn to:
What are the uses of statistics?

Why study statistics?
Understand the types of variables used in
statistics
Know the different measurement scales
Know how to collect data
Know the different ways to collect a sample
Understand the types of survey errors

Uses of Statistics
One of the tools used to make decisions in business.
Examples of how business use statistics:
Marketing Research (Focus group data, customer surveys)
Advertising (Household surveys, TV viewing habits)
Operations (Quality control, reliability)
Finance and Economics (Data on income, credit risk,
unemployment)
We apply statistical concepts in our lives.
As a student of business or economics, basic knowledge and

skills to organize, analyze, and transform data and to present
the information.
Why Study Statistics?
Statistics is required for many college programs. Why?

1. Numerical information is everywhere.
2. Statistical techniques are used to make decisions that affect
our daily lives.
3. Knowledge of statistical methods will help you understand
how decisions are made and give you a better
understanding of how they affect you.
No matter what line of work you select, you will find yourself
faced with decisions where an understanding of data
analysis is helpful.

What Is Meant by Statistics?
STATISTICS The science of collecting, organizing,
presenting, analyzing, and interpreting data to assist in
making more effective decisions.
In the more common usage, statistics
refers to numerical information:
Collect
Examples: the average starting salary of
college graduates, the number of deaths
due to alcoholism last year, the change in Organize
the KL Composite Index Average from
yesterday to today, and the number of
goal scored by the Malaysian Football Present
team against international teams during
the 2011.
Interpret
Who Uses Statistics?
Accounting:
Public accounting firms use statistical
sampling procedures when conducting audits
for their clients
Economics:
Economists use statistical information in
making forecasts about the future of the
economy or some aspect of it.
Finance:
Financial advisors use price-earnings ratios
and dividend yields to guide their investment
advice.

Who Uses Statistics?
Marketing:
Electronic point-of-sale scanners at retail
checkout counters are used to collect data for
a variety of marketing research applications.
Production:
A variety of statistical quality control charts are
used to monitor the output of a production
process.
Sports:
Individual & Team Performance

Types of Statistics Descriptive Statistics and
Inferential Statistics
Descriptive Statistics - methods of organizing,
summarizing, and presenting data in an informative
way.
EXAMPLE 1: The United States government reports the population of the

US was 179,323,000 in 1960; 203,302,000 in 1970; 226,542,000 in 1980;
248,709,000 in 1990; 265,000,000 in 2000; and 308,400,000 in 2010.
EXAMPLE 2: There are a total of 46,837 miles of interstate highways in the
United States. The interstate system represents only 1% of the nations
total roads but carries more than 20% of the traffic.
EXAMPLE 3: The average person spent $103.00 on traditional Valentines
Day merchandise in 2010. This is an increase of $0.50 from 2009.

Types of Statistics Descriptive
Statistics and Inferential Statistics
Inferential Statistics: A decision, estimate,
prediction, or generalization about a population,
based on a sample.
Or in other words:
Using data collected from a small group to
draw conclusions about a larger group
Note: In statistics, the word population and sample have a broader

meaning. A population or sample may consist of individuals or
objects.

Types of Variables
Categorical (qualitative) variables have values that can
only be placed into categories, such as yes and no.
Examples: gender, religious affiliation, type of automobile
owned and eye color are examples.
Numerical (quantitative) variables have values that
represent a counted or measured quantity.
Examples: balance in your checking account, minutes
remaining in class, or number of children in a family.
Quantitative variables can be classified as either discrete or
continuous.
Discrete variables arise from a counting process
Continuous variables arise from a measuring process

Quantitative Variables - Classifications
A. Discrete variables can only assume certain values, and there are usually
gaps between values. Discrete variables arise from a counting process
EXAMPLE: Examples of discrete variables are the number of bedrooms

in a house (1, 2, 3, 4, etc.), the number of students in each section of a
statistics course (25 in section A, 42 in section B, and 18 in section C).
Notice that a home can have 3 or 4 bedrooms, but it cannot have 3.56
bedrooms. Thus, there is a gap between possible values. Typically,
discrete variables result from counting.
B. Continuous variable can assume any value within a specified range.

Continuous variables arise from a measuring process or A continuous
variable is one that can take infinite number of values in an interval.
Examples are weight, height. A person's weight can be 150.2 lbs, 150.456
pounds and so on.
EXAMPLE: Examples of continuous variables are the air pressure in a
tire and the weight of a shipment of tomatoes. Other Examples are
weight, height. A person's weight can be 150.2 lbs, 150.456 pounds and
so on. Typically, continuous variables result from measuring.

Developing Operational Definitions Is
Crucial To Avoid Confusion / Errors
DCOVA
An operational definition is a clear and precise
statement that provides a common
understanding of meaning
In the absence of an operational definition
miscommunications and errors are likely to
occur.
Arriving at operational definition(s) is a key part.

Operational Definitions Of Terms
DCOVA
VARIABLE
A characteristic of an item or individual.
DATA
The set of individual values associated with a variable.
STATISTICS
The methods that help transform data into useful
information for decision makers.
Types of Variables
DCOVA
Variables
Categorical Numerical
Examples:
Marital Status
Political Party Discrete Continuous
Eye Color
(Defined categories) Examples: Examples:
Number of Children Weight
Defects per hour Voltage
(Counted items) (Measured characteristics)

Four Levels of Measurement
We can classify data into 1 of 4 levels of measurement. These levels of
measurement will be important, because certain calculations can be done with only
certain kinds of data.
Nominal level data that is classified Interval level similar to the ordinal
into categories and cannot be level, with the additional property that
arranged in any particular order. meaningful amounts of differences
between data values can be
determined. There is no natural zero
EXAMPLES: eye color, gender, point.
religious affiliation. EXAMPLE: Temperature on the
Fahrenheit scale.
Ordinal level data arranged in some Ratio level the interval level with
order, but the differences between an inherent zero starting point.
data values cannot be determined Differences and ratios are meaningful
or are meaningless. for this level of measurement.
EXAMPLE: During a taste test of 4 soft EXAMPLES: Monthly income of
drinks, Mellow Yellow was ranked surgeons, or distance traveled by
number 1, Sprite number 2, Seven- manufacturers representatives per
up number 3, and Orange Crush month.
number 4.
Levels of Measurement
DCOVA
A nominal scale classifies data into distinct
categories in which no ranking is implied.
Categorical Variables Categories
Do you have a Facebook Yes, No

profile?
Type of investment Growth , Value , Other
Cellular Provider AT&T, Sprint, Verizon, Other, None

Levels of Measurement (cont.)
DCOVA
An ordinal scale classifies data into distinct
categories in which ranking is implied
Categorical Variable Ordered Categories
Student class designation Freshman, Sophomore, Junior,

Senior
Product satisfaction Very unsatisfied, Fairly unsatisfied,
Neutral, Fairly satisfied, Very
satisfied
Faculty rank Professor, Associate Professor,
Assistant Professor, Instructor
Standard & Poors bond ratings AAA, AA, A, BBB, BB, B, CCC, CC,
C, DDD, DD, D
Student Grades A, B, C, D, F

Levels of Measurement (cont.)
DCOVA
An interval scale is an ordered scale in which the
difference between measurements is a meaningful
quantity but the measurements do not have a true
zero point.
A ratio scale is an ordered scale in which the

difference between the measurements is a
meaningful quantity and the measurements have a
true zero point.

Interval and Ratio Scales
DCOVA

Summary of the Characteristics for Levels of
Measurement

Your Turn!
Examples: Types of Variables
For each of the following, indicate whether the

appropriate variable would be qualitative or
quantitative. If the variable is quantitative,
indicate whether it would be discrete or
continuous.

Your Turn!
Example Problems:
a) Whether you own a Panasonic television set
b) Your status as a full-time or a part-time student
c) Number of people who attended your schools
graduation last year
d) The price of your most recent haircut
e) Sams travel time from his dorm to the student
union
f) The number of students on campus who belong to
a HE05 or HE07

Example Problems:
a) Whether you own Qualitative Variable

a Panasonic two levels: yes/no
television set no measurement
b) Your status as a Qualitative Variable
full-time or a part-time two levels: full/part
student no measurement
c) Number of people Quantitative, Discrete
who attended your Variable
schools graduation a countable number
last year only whole numbers
Example Problem, continued
d) The price of Quantitative, Discrete

your most recent Variable
a countable number
haircut
only whole numbers
e) Sams travel Quantitative, Continuous
time from his Variable
dorm to the any number
student union time is measured
can take on any value greater
than zero

Example Problem, continued
f) The number of Quantitative, Discrete

students on Variable
campus who a countable number
belong to a social only whole numbers
fraternity or
sorority

Establishing A Business Objective
Focuses Data Collection
DCOVA
Examples Of Business Objectives:
A marketing research analyst needs to assess the effectiveness
of a new television advertisement.
A pharmaceutical manufacturer needs to determine whether a

new drug is more effective than those currently in use.
An operations manager wants to monitor a manufacturing

process to find out whether the quality of the product being
manufactured is conforming to company standards.
An auditor wants to review the financial transactions of a

company in order to determine whether the company is in
compliance with generally accepted accounting principles.
Collecting Data Correctly Is A Critical
Task
DCOVA
Need to avoid data flawed by biases,
ambiguities, or other types of errors.
Results from flawed data will be suspect or in

error.
Even the most sophisticated statistical

methods are not very useful when the data is
flawed.

Sources of Data
DCOVA
Primary Sources: The data collector is the one using the data
for analysis
Data from a political survey
Data collected from an experiment
Observed data
Secondary Sources: The person performing data analysis is
not the data collector
Analyzing census data
Examining data from print journals or data published on the internet.

Sources of data fall into five
categories
DCOVA
Data distributed by an organization or an
individual
The outcomes of a designed experiment
The responses from a survey
The results of conducting an observational
study
Data collected by ongoing business activities

Examples Of Data Distributed
By Organizations or Individuals
DCOVA
Financial data on a company provided by
investment services.
Industry or market data from market research

firms and trade associations.
Stock prices, weather conditions, and sports

statistics in daily newspapers.

Examples of Data From A
Designed Experiment
DCOVA
Consumer testing of different versions of a
product to help determine which product should
be pursued further.
Material testing to determine which suppliers

material should be used in a product.
Market testing on alternative product

promotions to determine which promotion to
use more broadly.
Examples of Survey Data
DCOVA
A survey asking people which laundry detergent
has the best stain-removing abilities
Political polls of registered voters during political

campaigns.
People being surveyed to determine their

satisfaction with a recent product or service
experience.

Examples of Data Collected
From Observational Studies
DCOVA
Market researchers utilizing focus groups to
elicit unstructured responses to open-ended
questions.
Measuring the time it takes for customers to be

served in a fast food establishment.
Measuring the volume of traffic through an

intersection to determine if some form of
advertising at the intersection is justified.
Examples of Data Collected From
Ongoing Business Activities
DCOVA
A bank studies years of financial transactions to
help them identify patterns of fraud.
Economists utilize data on searches done via

Google to help forecast future economic
conditions.
Marketing companies use tracking data to

evaluate the effectiveness of a web site.

Data Is Collected From Either A
Population or A Sample
DCOVA
POPULATION
A population consists of all the items or
individuals about which you want to draw a
conclusion. The population is the large
group
SAMPLE
A sample is the portion of a population
selected for analysis. The sample is the small
group
Population vs. Sample
DCOVA
Population Sample
All the items or individuals about A portion of the population of

which you want to draw conclusion(s) items or individuals

Population vs. Sample
A population is the entire set of individuals or objects of interest, or the
measurements obtained from all individuals or objects of interest.
A sample is a portion, or part, of the population of interest.

Usefulness of a Sample in Learning
about a Population
Using a sample to learn something about a

population is done extensively in business,
agriculture, politics, and government.
EXAMPLE: Television networks constantly

monitor the popularity of their programs by
hiring organizations to sample the preferences
of TV viewers.

Collecting Data Via Sampling Is Used
When Selecting A Sample Is
DCOVA
Less time consuming than selecting every item
in the population.
Less costly than selecting every item in the

population.
Less cumbersome and more practical than

analyzing the entire population.

Things To Consider / Deal With In
Potential Sources Of Data
DCOVA
Is the source of data structured or unstructured?
How is electronic data formatted?
How is data encoded?

Structured Data Follows An Organizing
Principle & Unstructured Data Does Not
DCOVA
A Stock Ticker Provides Structured Data:
The stock ticker repeatedly reports a company name, the
number of shares last traded, the bid price, and the percent
change in the stock price.
Due to their inherent structure, data from tables and
forms are structured data.
E-mails from five people concerning stock trades is an
example of unstructured data.
In these e-mails you cannot count on the information being
shared in a specific order or format.
This book will deal almost exclusively with structured
data

Almost All Of The Methods In This Book
Deal With Structured Data
DCOVA
Some of the methods in Chapter 17 involve
unstructured data.
For many of the questions you might want to

answer, the starting point will be tabular data.
To deal with unstructured data, you will

probably need to seek out help with more
advanced methods / techniques.

Data Can Be Formatted and / or
Encoded In More Than One Way
DCOVA
Some electronic formats are more readily
usable than others.
Different encodings can impact the precision of

numerical variables and can also impact data
compatibility.
As you identify and choose sources of data you

need to consider / deal with these issues

Data Cleaning Is Often A Necessary
Activity When Collecting Data
DCOVA
Often find irregularities in the data
Typographical or data entry errors
Values that are impossible or undefined
Missing values
Outliers
When found these irregularities should be
reviewed / addressed
Both Excel & Minitab can be used to address
irregularities

After Collection It Is Often Helpful To
Recode Some Variables
DCOVA
Recoding a variable can either supplement or replace
the original variable.
Recoding a categorical variable involves redefining
categories.
Recoding a quantitative variable involves changing this
variable into a categorical variable.
When recoding be sure that the new categories are
mutually exclusive (categories do not overlap) and
collectively exhaustive (categories cover all possible
values).

A Sampling Process Begins With A
Sampling Frame DCOVA
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

Types of Samples DCOVA
Samples
Non-Probability Probability Samples

Samples
Simple Stratified
Random
Judgment Convenience
Systematic Cluster

Types of Samples:
Nonprobability Sample DCOVA
In a nonprobability sample, items included are

chosen without regard to their probability of
occurrence.
In convenience sampling, items are selected based
only on the fact that they are easy, inexpensive, or
convenient to sample.
In a judgment sample, you get the opinions of pre-
selected experts in the subject matter.

Types of Samples:
Probability Sample DCOVA
In a probability sample, items in the

sample are chosen on the basis of known
probabilities.
Probability Samples
Simple
Systematic Stratified Cluster
Random

Probability Sample:
Simple Random Sample DCOVA
Every individual or item from the frame has an

equal chance of being selected
Selection may be with replacement (selected

individual is returned to frame for possible
reselection) or without replacement (selected
individual isnt returned to the frame).
Samples obtained from table of random

numbers or computer random number
generators.
Selecting a Simple Random Sample
Using A Random Number Table DCOVA
Portion Of A Random Number Table

Sampling Frame For 49280 88924 35779 00283 81163 07275
11100 02340 12860 74697 96644 89439
Population With 850 09893 23997 20048 49420 88872 08401
Items
Item Name Item # The First 5 Items in a simple
Bev R. 001 random sample
Item # 492
Ulan X. 002 Item # 808
. . Item # 892 -- does not exist so ignore
Item # 435
. .
Item # 779
. . Item # 002
. .
Joann P. 849
Paul F. 850

Probability Sample:
Systematic Sample DCOVA
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 kth individual thereafter
N = 40 First Group
n=4
k = 10

Probability Sample:
Stratified Sample DCOVA
Divide population into two or more subgroups (called strata) according

to some common characteristic
A simple random sample is selected from each subgroup, with sample
sizes proportional to strata sizes
Samples from subgroups are combined into one
This is a common technique when sampling population of voters,
stratifying across racial or socio-economic lines.
Population
Divided
into 4
strata

Probability Sample
Cluster Sample DCOVA
Population is divided into several clusters, each representative of

the population
A simple random sample of clusters is selected
All items in the selected clusters can be used, or items can be
chosen from a cluster using another probability sampling technique
A common application of cluster sampling involves election exit polls,
where certain election districts are selected and sampled.
Population
divided into
16 clusters. Randomly selected
clusters for sample

Probability Sample:
Comparing Sampling Methods
DCOVA
Simple random sample and Systematic sample

Simple to use
May not be a good representation of the populations
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)

Evaluating Survey Worthiness
DCOVA
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 DCOVA
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 and / or respondent
error

Types of Survey Errors
DCOVA
(continued)
Coverage error Excluded from

frame
Nonresponse error Follow up on

nonresponses
Random
Sampling error differences from
sample to sample
Measurement error Bad or leading

question
End of Chapter 1
THANK YOU!

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BT10403

Statistik Perniagaan dan Ekonomi

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 1

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 2

What are the uses of statistics?

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 3

Advertising (Household surveys, TV viewing habits)

Operations (Quality control, reliability)

Finance and Economics (Data on income, credit risk,

As a student of business or economics, basic knowledge and

Statistics is required for many college programs. Why?

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 5

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 7

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 8

EXAMPLE 1: The United States government reports the population of the

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 9

Note: In statistics, the word population and sample have a broader

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 10

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 11

EXAMPLE: Examples of discrete variables are the number of bedrooms

B. Continuous variable can assume any value within a specified range.

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 12

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 13

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 15

Categorical Variables Categories

Do you have a Facebook Yes, No

Type of investment Growth , Value , Other

Cellular Provider AT&T, Sprint, Verizon, Other, None

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 17

Student class designation Freshman, Sophomore, Junior,

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 18

A ratio scale is an ordered scale in which the

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 19

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 20

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 21

For each of the following, indicate whether the

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 22

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 23

a) Whether you own Qualitative Variable

d) The price of Quantitative, Discrete

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 25

f) The number of Quantitative, Discrete

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 26

A pharmaceutical manufacturer needs to determine whether a

An operations manager wants to monitor a manufacturing

An auditor wants to review the financial transactions of a

Results from flawed data will be suspect or in

Even the most sophisticated statistical

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 28

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 29

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 30

Industry or market data from market research

Stock prices, weather conditions, and sports

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 31

Material testing to determine which suppliers

Market testing on alternative product

Political polls of registered voters during political

People being surveyed to determine their

Copyright 2015, 2012, 2009 Pearson Education, Inc. Chapter 1, Slide 33

Measuring the time it takes for customers to be

Measuring the volume of traffic through an

Economists utilize data on searches done via

Marketing companies use tracking data to