Chap 001

What is Statistics?
Chapter 1
McGraw-Hill/Irwin
Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
Learning Objectives
LO1 List ways statistics is used.
LO2 Know the differences between descriptive and inferential
statistics.
LO3 Understand the differences between a sample and a
population.
LO4 Explain the difference between qualitative and quantitative
variables.
LO5 Compare the differences between discrete and continuous
variables.
LO6 Recognize the levels of measurement in data.
1-2
LO1 List ways statistics is used.
Why Study Statistics?

Why Study Statistics?
1. Numerical information is everywhere
2. Statistical techniques are used to make decisions that affect our daily lives
3. The knowledge of statistical methods will help you understand how decisions are made and give you a
better understanding of how they affect you.
4. No matter what line of work you select, you will find yourself faced with decisions where an
understanding of data analysis is helpful.
Some examples of the need for data collection.

1.
2.
3.
4.
Research analysts for Merrill Lynch evaluate many facets of a particular stock before making a buy or sell
recommendation.
The marketing department at Colgate-Palmolive Co., a manufacturer of soap products, has the responsibility of
making recommendations regarding the potential profitability of a newly developed group of face soaps having fruit
smells.
The United States government is concerned with the present condition of our economy and with predicting future
economic trends.
Managers must make decisions about the quality of their product or service.
1-3
LO1
What is Meant by Statistics?

In the more common usage, statistics refers
to numerical information
Examples: the average starting salary of college graduates, the number of

deaths due to alcoholism last year, the change in the Dow Jones Industrial
Average from yesterday to today, and the number of home runs hit by the
Chicago Cubs during the 2007 season.
We often present statistical information in a

graphical form for capturing reader attention and
to portray a large amount of information.
1-4
Types of Statistics
Descriptive Statistics and
Inferential Statistics
LO2 Know the differences

between descriptive and
inferential statistics.
Descriptive Statistics - methods of organizing, summarizing,

and presenting data in an informative way.
Inferential Statistics: A decision, estimate, prediction, or
generalization about a population, based on a sample.
Note: In statistics the word population and sample have a
broader meaning. A population or sample may consist of
individuals or objects
1-5
LO3 Understand the differences

between a sample and a population.
Population versus Sample

A population is a collection of all possible individuals, objects, or
measurements of interest.
A sample is a portion, or part, of the population of interest
1-6
LO3
Why take a sample instead of studying every

member of the population?
1.
2.
3.
Prohibitive cost of census

Destruction of item being studied may be required
Not possible to test or inspect all members of a
population being studied
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 Nielsen and other organizations to sample the
preferences of TV viewers.
1-7
Types of Variables
LO4 Explain the difference

between qualitative and
quantitative variables.
Qualitative or Attribute variable - the

characteristic being studied is nonnumeric.
EXAMPLES: Gender, religious affiliation, type of automobile
owned, state of birth, eye color are examples.
Quantitative variable - information is

reported numerically.
EXAMPLES: balance in your checking account, minutes
remaining in class, or number of children in a family.
1-8
LO5 Compare the differences between

discrete and continuous variables.
Quantitative Variables - Classifications

Quantitative variables can be classified as either
discrete or continuous.
Discrete variables: can only assume certain values
and there are usually gaps between values.
EXAMPLE: the number of bedrooms in a house, or the number of hammers sold at the local
Home Depot (1,2,3,,etc).
Continuous variable can assume any value within a

specified range.
EXAMPLE: The pressure in a tire, the weight of a pork chop, or the height of students in a
class.
1-9
LO4 and LO5
Summary of Types of Variables
1-10
LO6 Recognize the levels of

measurement in data.
Four Levels of Measurement

Nominal level - data that is
classified into categories and
cannot be arranged in any
particular order.
Interval level - similar to the
EXAMPLES:: eye color, gender,
EXAMPLES: Temperature on the

Fahrenheit scale.
religious affiliation.
Ordinal level data arranged in

some order, but the differences
between data values cannot be
determined or are meaningless.
EXAMPLE: During a taste test of 4 soft
drinks, Mellow Yellow was ranked
number 1, Sprite number 2, Seven-up
number 3, and Orange Crush number 4.
ordinal level, with the additional

property that meaningful amounts of
differences between data values can
be determined. There is no natural
zero point.
Ratio level - the interval level with

an inherent zero starting point.
Differences and ratios are
meaningful for this level of
measurement.
EXAMPLES: Monthly income of surgeons,

or distance traveled by manufacturers
representatives per month.
1-11
LO6
Nominal and Ordinal Level Data

NOMINAL LEVEL DATA
Properties:
1.
2.
Observations of a qualitative
variable can only be
classified and counted.
There is no particular
order to the labels.
ORDINAL LEVEL DATA

Properties:
1.
2.
Data classifications are represented

by sets of labels or names (high,
medium, low) that have relative
values.
Because of the relative values, the
data classified can be ranked or
ordered.
1-12
LO6
Interval and Ratio Level Data

INTERVAL LEVEL DATA
Properties:
1.
2.
Data classifications are ordered

according to the amount of the
characteristic they possess.
Equal differences in the
characteristic are represented
by equal differences in the
measurements.
RATIO LEVEL DATA

Properties:
1.
2.
3.
Data classifications are ordered

according to the amount of the
characteristics they possess.
Equal differences in the characteristic
are represented by equal differences in
the numbers assigned to the
classifications.
The zero point is the absence of the
characteristic and the ratio between two
numbers is meaningful.
Practically all quantitative data is
recorded on the ratio level of
measurement. Ratio level is the
highest level of measurement.
1-13
LO6
Summary of the Characteristics for Levels

of Measurement
Why Know the Level of Measurement of a Data?

The level of measurement of the data dictates the calculations that can be
done to summarize and present the data.
To determine the statistical tests that should be performed on the data
1-14

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What is Statistics?

Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

LO1 List ways statistics is used.

Why Study Statistics?

Some examples of the need for data collection.

What is Meant by Statistics?

Examples: the average starting salary of college graduates, the number of

We often present statistical information in a

LO2 Know the differences

Descriptive Statistics - methods of organizing, summarizing,

LO3 Understand the differences

Population versus Sample

Why take a sample instead of studying every

Prohibitive cost of census

LO4 Explain the difference

Qualitative or Attribute variable - the

Quantitative variable - information is

LO5 Compare the differences between

Quantitative Variables - Classifications

Continuous variable can assume any value within a

LO4 and LO5

Summary of Types of Variables

LO6 Recognize the levels of

Four Levels of Measurement

Interval level - similar to the

EXAMPLES:: eye color, gender,

EXAMPLES: Temperature on the

Ordinal level data arranged in

ordinal level, with the additional

Ratio level - the interval level with

EXAMPLES: Monthly income of surgeons,

Nominal and Ordinal Level Data

ORDINAL LEVEL DATA

Data classifications are represented

Interval and Ratio Level Data

Data classifications are ordered

RATIO LEVEL DATA

Data classifications are ordered

Summary of the Characteristics for Levels

Why Know the Level of Measurement of a Data?

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