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Chapter

One

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Chapter One
What is Statistics?
GOALS
When you have completed this chapter, you will be able to:
ONE
Understand why we study statistics.
TWO
Explain what is meant by descriptive statistics and inferential statistics.
THREE
Distinguish between a qualitative variable and a quantitative variable.
FOUR
Distinguish between a discrete variable and a continuous variable.

Goals
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Introduction
Decision theory in statistics is concerned with identifying the
uncertainties and other issues relevant in a given decision and
the resulting optimal decision.
Statistical analysis is a tool to describe objectively the decision
problem based on facts in a transparent and understandable
language for the decision maker. Today's good decisions are
driven by data. In all aspects of our lives, and importantly in the
business context, an amazing diversity of data is available for
inspection and analytical insight. Business managers and
professionals are increasingly required to justify decisions on the
basis of data.
The aim of statistical tools is to provide some useful insights to the
decision maker.
It is never a substitute for the human-side of the decision making
process. Therefore, it must help the decision maker who is
responsible and accountable for his/her decision.


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Statistics is the science

of collecting, organizing,
presenting, analyzing,
and interpreting
numerical data to assist
in making more
effective decisions.

What is Meant by Statistics?
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Statistical techniques are

used extensively by
operations, marketing,
accounting, quality
control, consumers,
professional sports
people, hospital
administrators,
educators, politicians,
physicians, and many
others.
Who Uses Statistics?5
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Examples
A sales manager may use statistical techniques to
forecast sales for the coming year.
An auditor can use random sampling techniques to audit
the accounts receivable for clients.
A plant manager can use statistical quality control
techniques to assure the quality of his production with a
minimum of testing or inspection.
A financial analyst may use regression and correlation to
help understand the relationship of a financial ratio to a
set of other variables in business.
A market researcher may use test of significance to
accept or reject the hypotheses about a group of buyers
to which the firm wishes to sell a particular product.

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Objective of Statistics
To study the population characteristics by
using a representative sample
observations
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Descriptive Statistics: Methods of organizing,

summarizing, and presenting data in an informative
way. It concerned with summary calculations, graphs,
charts and tables.

EXAMPLE 1: A Gallup poll EXAMPLE 2: According to

found that 49% of the
people in a survey knew the
name of the first book of the
Bible. The statistic 49
describes the number out of
every 100 persons who knew
the answer.
Consumer Reports, General
Electric washing machine
owners reported 9 problems
per 100 machines during
2001. The statistic 9
describes the number of
problems out of every 100
machines.

Types of Statistics 8
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Inferential Statistics: A decision, estimate, prediction, or

generalization about a population, based on a sample. For example,
the average income of all families (the population) in Dhaka can be
estimated from figures obtained from a few hundred (the sample)
families.

A Population is a
Collection of all A Sample is a
possible individuals, portion, or part, of the
objects, or population of interest
measurements of
interest.

Types of Statistics 9
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Example 1: TV Example 2: Wine

networks constantly tasters sip a few drops
monitor the of wine to make a
popularity of their decision with respect
programs by hiring to all the wine waiting
Nielsen and other to be released for sale.
organizations to
sample the Example 3: The accounting
preferences of TV department of a large firm will
viewers. select a sample of the invoices to
check for accuracy for all the
invoices of the company.
#1
Types of Statistics 10
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3- 11
A Parameter is a measurable characteristic of a
population.

The Kiers 56,000

family owns 42,000
four cars. The
23,000
following is the
current mileage 73,000
on each of the
four cars.
The mean mileage for the cars.

Example 1
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A statistic is a measurable characteristic of a sample.

A sample of
five 14.0,
executives
15.0,
received the
following 17.0,
bonus last 16.0,
year ($000): 15.0

Mean bonus received by the executives

Example 2
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Parameter and Statistic

Statistic = Estimated value of a parameter.
Notation: If a is a statistic and A is a
parameter then
a A
Example: AIUB students, Lion populations,
whale, flying birds and human
13 blood cases.
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Types and Resources of Data

Types and Resources of Data:

secondary data
primary data and
internal data

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Secondary Data
Secondary Data: The data, which has already been
collected by others.
Sources:
Journals and different reports,
Government publications (BBS for example),
Trade and professional bodies etc.
However, secondary data must be used with utmost care.
Such data may be bias, inadequate size of the sample/not
representative of the population.

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Primary and Internal Data

Primary data:
Part of the original study
Sampling methods are vital consideration for primary data
Factors considered are: time, cost and manpower
Internal data: The internal record of the enterprise (by products
of routine business record keeping, personnel, finance, sales
etc.)

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Variable
Variable: A characteristic that varies with
an individual or an object is called a
variable.
Example: age (as it varies from person to
person).

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Types of variable
Quantitative variable
Qualitative variable
Discrete variable
Continuous variable
Dependent variable
Independent variable

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For a Qualitative or Attribute Variable the

characteristic being studied is nonnumeric.
Gender

Type of car Eye

Color

Types of Variables
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In a Quantitative Variable information is

reported numerically.

Balance in your checking account

Minutes remaining in class

Number of children in a family

Types of Variables
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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).

Types of Variables
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A Continuous Variable can assume any

value within a specified range.

The pressure in a tire

The weight of a pork chop

The height of students in a class.

Types of Variables
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The Dependent Variable

is the variable being
predicted or estimated.

The Independent
Variable provides the
basis for estimation. It
is the predictor variable.

Examples: Relationship between sales and

revenue, sales and price and price and
quality of products cases
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Limitations of Statistics:
Single and isolated figures are not statistics
Statistics deals only with quantitative characteristics
Statistical analysis are true only under certain conditions
Statistics can be misused
Statistics are affected to a marked extent by multiplicity of
causes

Limitations of Statistics

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Questioning and Observations

Questioning
Data are collected by asking questions from people who
are thought to have the desired information
Formal list of such questions is called a questionnaire
Observations
When data are collected by observation, the investigator
asks no questions. Instead, s/he observes the objects or
actions in which he is interested.

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Greek Letters Commonly Used as Statistical Notations

alpha beta ki-sqre delta mu nu pi rho sigma tau theta

a c2 d n p r t q

Note: ki-square (ki-sqre, Chi-square), is not the square of

anything, its name implies Chi-square (read, ki-square).

For details please see text

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