Chapter 1

Introduction to Statistics
Meaning of statistics
As a science dealing with the collection, analysis,
interpretation, and presentation of numerical
data. (Webster ‘s Third New International)
• The subject of statistics involves the study of how
to collect, summarize, and interpret data.
• Data are numerical facts and figures from which
conclusions can be drawn. Such conclusions are
important to the decision-making processes of
many professions and organizations.
• For example:
a) Government officials use conclusions drawn
from the latest data on unemployment and
inflation to make policy decisions.
b) Financial planners use recent trends in stock
market prices to make investment decisions.
c) Businesses decide which products to develop
and market by using data that reveal consumer
preferences.
d) Production supervisors use manufacturing data
to evaluate, control, and improve product
quality.
e) Politicians rely on data from public opinion polls
to formulate legislation and to devise campaign
strategies.
f) Physicians and hospitals use data on the
effectiveness of drugs and surgical procedures to
provide patients with the best possible
treatment.
Population: A collection of persons, objects, or
items of interest.
The researcher defines the population to be
whatever he or she is studying.
Examples: all automobiles, all Ford Mustang cars
produced from 2002 to 2005, all workers
presently employed by Microsoft etc..
Sample: A portion of the whole and if properly
taken, is representative of the whole.
Examples:
1. In conducting quality control experiments to
determine the average life of lightbulbs, a
lightbulb manufacturer might randomly sample
only 75 lightbulbs during a production run.
2. Because of time and money limitations, a
human resources manager might take a random
sample of 40 employees instead of using a
census (all employees) to measure company
morale.
• If a business analyst is using data gathered on a group to
describe or reach conclusions about the same group, the
statistics are called descriptive statistics.
• Example: Number of employees on vacation during June,
average salary at the Denver office corporate.
• If a researcher gathers data from a sample and uses the
statistics generated to reach conclusions about the
population from which the sample was taken, the statistics
are inferential statistics.
• Example: One application of inferential statistics is in
pharmaceutical research. Some new drugs are expensive to
produce, and therefore tests must be limited to small
sample of patients. Utilizing inferential statistics,
researchers can design experiments with small randomly
selected samples of patients and attempt to reach
conclusions and make inferences about the population.
Types of Variables
A variable measures the characteristics of the
population that the researcher wants to study.
For example, variable of interest may be the
monthly income of respondents, respondents’
age, gender, level of education, number of
children and type of house owned by
respondents.
Quantitative or Numerical
Quantitative or Numerical
• Millions of numerical data are gathered in
businesses every day, representing myriad items.
• For example, numbers represent dollar costs of
items produced, geographical locations of retail
outlets, weights of shipments, and rankings of
subordinates at yearly reviews.
• All such data should not be analyzed the same
way statistically because the entities represented
by the numbers are different.
• For this reason, the business researcher needs to
know the level of data measurement represented
by the numbers being analyzed.
 Example
• Which of the following statements indicate a
a) qualitative variable, and
b) quantitative variable?
i. Time taken to finish a test
ii. Brand of shirt bought by customers
iii. Mass of football used by students in a school
iv. Quantity of petrol sold by petrol stations in Bukit Tinggi, Klang
v. Number of houses in Shah Alam
vi. Number of students who scored 10 As in the SPM examination in 2005
vii. Types of car driven by students in a college
viii. Gender of students who sang in a concert

Solution:
Brand of shirt bought by customers
Qualitative
Types of car driven by students in a college
variable
Gender of students who sang in a concert
Time taken to finish a test
Mass of football used by students in a school
Quantitative
variable Quantity of petrol sold by petrol stations in Bukit Tinggi, Klang
Number of houses in Shah Alam
Number of students who scored 10 As in the SPM examination in 2005
Four common levels of data measurement:
1. Nominal
• lowest level of measurement
• can be used only to classify or categorize.
Ex: a) Employee identification numbers. The numbers are used
only to differentiate employees and not to make a value
statement about them. b) Gender (0 = female, 1 = male).

2. Ordinal – can be used to rank or order objects.

Ex: a) A supervisor can evaluate three employees by ranking
their productivity with the numbers 1 through 3. b) Size (small,
medium, large).
3. Interval
• Is ordered like ordinal data but the intervals between each value are
known and equal.
• The zero point is arbitrary. Zero simply represents an additional
point of measurement.
Ex: For example, tests in school are interval level measurements of
student knowledge. If you scored a zero on a math test it does not
mean you have no knowledge. Yet, the difference between a 79 and 80
on the test is measurable and equal to the difference between an 80
and an 81.
4. Ratio
• Is the highest level possible for data
• Have the same properties as interval data, but have an absolute
zero and the ratio of two numbers is meaningful.
• Any statistical tests can be used with ratio level data as long as it fits
with the study question and design.
Ex: Typically this level of measurement is only possible with physical
measurements like height, weight and length.
 Example
• State whether the data from the following statements is nominal, ordinal, interval or ratio.
a) The normal operating temperature of a car engine.
b) Classification of students using an academic program.
c) Speakers of a seminar rated as excellent, good, average or poor.
d) Number of hours parents spend with their children per day.
e) The number of As scored by SPM students in a particular school.
f) The monthly salary of school teachers.
g) The number of papaya fruits harvested per day by a farmer in Sekinchang.

Solution:
Question Answer
The normal operating temperature of a car engine Interval
Classification of students using an academic program Nominal
Speakers of a seminar rated as excellent, good, average or poor Ordinal
Number of hours parents spend with their children per day Ratio
The number of As scored by SPM students in a particular school Ratio
The monthly salary of school teachers Ratio
The number of papaya fruits harvested per day by a farmer in Sekinchang Ratio
Example 1
Many changes continue to occur in the healthcare
industry. Because of increased competition for patients
among providers and the need to determine how
providers can better serve their clientele, hospital
administrators sometimes administer a quality
satisfaction survey to their patients after the patient is
released. The following types of questions are
sometimes asked on such a survey. These questions will
result in what level of data measurement?
1. How long ago were you released from the hospital?
2. Which type of unit were you in for most of your stay?
__Coronary care
__Intensive care
__Maternity care
__Medical unit
__Pediatric/children’s unit
__Surgical unit
3. In choosing a hospital, how important was the hospital’s location?
(circle one)
Very Somewhat Not Very Not at All
Important Important Important Important
4. How serious was your condition when you were first admitted to
the hospital?
__Critical __Serious __Moderate __Minor
5. Rate the skill of your doctor:
__Excellent __Very Good __Good __Fair __Poor
• Question 1 is a time measurement with an absolute
zero and is therefore ratio-level measurement. A
person who has been out of the hospital for two
weeks has been out twice as long as someone who
has been out of the hospital for one week.
• Question 2 yields nominal data because the patient
is asked only to categorize the type of unit he or she
was in. This question does not require a hierarchy or
ranking of the type of unit.
• Questions 3, 4, and 5 are likely to result in ordinal-
level data.
 STATISTICS IN BUSINESS TODAY
Cellular Phone Use in Japan
The Communications and Information Network
Association of Japan (CIAJ) conducts an annual study of
cellular phone use in Japan. A recent survey was taken
as part of this study using a sample of 600 cell phone
users split evenly between men and women and almost
equally distributed over six age brackets. The survey
was administered in the greater Tokyo and Osaka
metropolitan areas. The study produced several
interesting findings. It was determined that 62.2% had
replaced their handsets in the previous 10 months.
A little more than 6% owned a second cell phone. Of these, the
objective of about two thirds was to own one for business use
and a second one for personal use. Of all those surveyed, 18.2%
used their handsets to view videos, and another 17.3% were not
currently using their handsets to view videos but were interested
in doing so. Some of the everyday uses of cell phones included e-
mailing (91.7% of respondents), camera functions (77.7%),
Internet searching (46.7%), and watching TV (28.0%). In the
future, respondents hoped there would be cell phones with
high-speed data transmission that could be used to send and
receive PC files (47.7%), for video services such as You Tube
(46.9%), for downloading music albums (45.3%) and music
videos (40.8%), and for downloading long videos such as movies
(39.2%).
Summary
• Statistics is an important decision-making tool in business and
is used in virtually every area of business. In this course, the
word statistics is defined as the science of gathering,
analyzing, interpreting, and presenting data.
• The study of statistics can be subdivided into two main areas:
descriptive statistics and inferential statistics. Descriptive
statistics result from gathering data from a body, group, or
population and reaching conclusions only about that group.
Inferential statistics are generated from the process of
gathering sample data from a group, body, or population and
reaching conclusions about the larger group from which the
sample was drawn.
• The appropriate type of statistical analysis depends on the level of data
measurement, which can be (1) nominal, (2) ordinal, (3) interval, or (4)
ratio.
• Nominal is the lowest level, representing classification of only such data as
geographic location, sex, or Social Security number.
• The next level is ordinal, which provides rank ordering measurements in
which the intervals between consecutive numbers do not necessarily
represent equal distances.
• Interval is the next to highest level of data measurement in which the
distances represented by consecutive numbers are equal.
• The highest level of data measurement is ratio, which has all the qualities
of interval measurement, but ratio data contain an absolute zero and
ratios between numbers are meaningful.
• Interval and ratio data sometimes are called metric or quantitative data.
Nominal and ordinal data sometimes are called nonmetric or qualitative
data.