Basic Business Statistics Chapter 1 Introduction Dr. Ahmet Demir Ishik University, Sulaimani Chap 1-1

Learning Objectives In this chapter you learn: How businesses use statistics The basic vocabulary of statistics The types of data used in business Chap 1-2

Why Learn Statistics Make better sense of the world Make better business decisions Internet articles / reports Magazine articles Newspaper articles Television & radio reports Business memos Business research Technical journals Technical reports Chap 1-3

In Business, Statistics Has Many Important Uses To summarize business data To draw conclusions from business data To make reliable forecasts about business activities To improve business processes Chap 1-4

Two Different Branches Of Statistics Are Used In Business The branch of mathematics that transforms data into useful information for decision makers. Descriptive Statistics Collecting, summarizing, presenting and analyzing data Inferential Statistics Using data collected from a small group to draw conclusions about a larger group Chap 1-5

These Two Branches Are Used In The Important Activities To summarize business data Descriptive methods used to create charts & tables To draw conclusions from business data Inferential methods used to reach conclusions about a large group based on data from a smaller group To make reliable forecasts about business activities Inferential methods used to develop, quantify, and improve the accuracy of predictive models To improve business processes Involves managerial approaches like Six Sigma Chap 1-6

Descriptive Statistics Collect data e.g., Survey Present data e.g., Tables and graphs Characterize data e.g., The sample mean Chap 1-7

Inferential Statistics 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 is 120 pounds Drawing conclusions about a large group of individuals based on a smaller group. Chap 1-8

Basic Vocabulary of Statistics VARIABLES Variables are characteristics of an item or individual and are what you analyze when you use a statistical method. DATA Data are the different values associated with a variable. OPERATIONAL DEFINITIONS Data values are meaningless unless their variables have operational definitions, universally accepted meanings that are clear to all associated with an analysis. Chap 1-9

Basic Vocabulary of Statistics 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.” PARAMETER A parameter is a numerical measure that describes a characteristic of a population. STATISTIC A statistic is a numerical measure that describes a characteristic of a sample. Chap 1-10

Population vs. Sample Population Sample Measures used to describe the population are called parameters Measures used to describe the sample are called statistics Chap 1-11

Types of Variables Categorical (qualitative) variables have values that can only be placed into categories, such as “yes” and “no.” Numerical (quantitative) variables have values that represent quantities. Discrete variables arise from a counting process Continuous variables arise from a measuring process Chap 1-12

Types of Variables Variables Categorical Numerical Discrete Continuous Examples: Marital Status Political Party Eye Color (Defined categories) Examples: Number of Children Defects per hour (Counted items) Examples: Weight Voltage (Measured characteristics) Chap 1-13

Levels of Measurement A nominal scale classifies data into distinct categories in which no ranking is implied. Categorical Variables Categories Personal Computer Ownership Type of Stocks Owned Internet Provider Yes / No Growth / Value / Other Microsoft Network / AOL/ Other Chap 1-14

Levels of Measurement (con’t.) 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 Satisfied, Neutral, Unsatisfied Faculty rank Professor, Associate Professor, Assistant Professor, Instructor Standard & Poor’s bond ratings AAA, AA, A, BBB, BB, B, CCC, CC, C, DDD, DD, D Student Grades A, B, C, D, F Chap 1-15

Levels of Measurement (con’t.) 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. Chap 1-16

Interval and Ratio Scales Temperature Interval Height Ratio Age Ratio Chap 1-17

Chapter Summary In this chapter, we have Introduced the basic vocabulary and definitions of statistics, and the role of statistics in turning data into information to facilitate decision making Examined the use of statistics to: Summarize data Draw conclusions from data Make reliable forecasts Improve business processes Examined descriptive vs. inferential statistics Reviewed data types and measurement level Chap 1-18