2/28/2021

Key Ideas of the Topic

Week 1
1.1 Key statistical concepts
Introduction to Statistics 1.2 Statistical applications in business
1.3 How managers use statistics
1.4 Statistics and the computer
Dr Janesh Sami (Ph.D., Australia)
School of Accounting, Finance and Economics
Email : [email protected]

1.4

Learning objectives Introduction to statistics

In today’s world we have access to more data than ever.
LO1 describe the two major branches of statistics – For example, data are collected for business applications
descriptive statistics and inferential statistics from:
LO2 understand the key statistical concepts – population,
• Direct observation or measurement
sample, parameter, statistic and census
• Customer surveys
LO3 provide examples of practical applications in which • Political polls (to help predict election outcomes or preferred
statistics have a major role to play President or Prime Minister)
LO4 understand how statistics are used by business managers • Economic surveys (for example, Household and Income Expenditure
Survey by Bureau of Statistics)
LO5 understand the basics of the computer spreadsheet
• Marketing surveys (done by firms to understand consumers, their
package Microsoft excel and its capabilities in aiding with
expectation and requirements)
statistical data analysis for large amounts of data.
• Scanner data (transaction data recorded by retailers)

1.5 1.6

In today’s world… What is statistics?

• How can we make use of the collected data to
help make informed business decisions?
‘Statistics is a body of principles and
methods concerned with extracting
• By learning statistics, which is a collection of
various techniques and tools, we can help make useful information from a set of data
such decisions. to help people make informed
business decisions.’

1
 2/28/2021

1.7 1.8

What is statistics? Example 1: EC203 Stats anxiety

‘Statistics is a way to get information • A student enrolled in Bcom program is attending his first
from data to make informed decisions.’ lecture of the compulsory economics statistics course. The
student is somewhat apprehensive because he believes
the myth that the course is difficult.
Statistics • Assume, to alleviate his anxiety, the student asks the
lecturer about last year’s exam marks of the business
Information statistics course.
Data
• Lets assume, the lecturer provides a list of the final marks.
The marks are composed of all the within-semester
Information: Knowledge communicated
Data: Mostly numerical facts collected from assessment items plus the end-of-semester final exam.
concerning some particular fact, which
direct observations, measurements or can be used for decision making. • What information can the student obtain from the list?
surveys.

1.9 1.10

Example 1: Stats anxiety… Example 1: Stats anxiety…

List of data provided by the lecturer to the student.
Statistics

Data Information
List of last year’s Summary information
statistics marks derived about the statistics
65 class.
71
e.g., Class average,
66
proportion of class receiving
79
F’s, most frequent mark,
65
Highest and lowest marks,
82
spread of the marks, grade
:
(A,B+,B,C+) distribution, etc.

1.11 1.12

Example 1: Stats anxiety… Example : Stats anxiety…

• ‘Typical mark’ • Are there many marks below 60 or above 80?

Mean (average mark)
Median (mark such that 50% above and 50% below)
Mean = 72.67
• What proportion are A,B+,B, and C+ grades (distribution
Median = 72
of grades)?
• Is this enough information?
• Are most of the marks clustered around the mean or are they • A graphical technique – histogram – can provide us with
more spread out? this and other information.
Range = Maximum – minimum = 92 – 53 = 39
Variance
Standard deviation

2
 2/28/2021

1.13 1.14

Example : Stats anxiety… Two major branches of Statistics

1. Descriptive Statistics

2. Inferential Statistics

A majority of students received marks between 60 and 90.

No student received marks below 50.
A significant number of students received marks above 80.

1.15 1.16

Descriptive Statistics Descriptive Statistics

• Descriptive statistics deals with methods of • Another form of descriptive statistics uses
organising, summarising, and presenting data in a numerical measures to summarise data.
convenient and informative way.
• The mean and median are popular numerical
measures to describe the location of the data.
• One form of descriptive statistics uses graphical
techniques, which allow statistics practitioners to • The range, variance and standard deviation measure
present data in ways that make it easy for the reader to the variability of the data
extract useful information. • Chapter 5 introduces several numerical statistical
measures that describe different features of the data.
• Chapters 3 and 4 introduce several graphical methods. We will cover this in Week 4.
We will cover them in Week 3.
16

1.17 1.18

Inferential Statistics 1.1 Key statistical concepts

• Descriptive statistics describe the data set that is Population
being analyzed, but does not provide any tools for us
A population is the group of all items (data) of interest.
to draw any conclusions or make any inferences
about the data. Hence we need another branch of Population is frequently very large; sometimes infinite.
statistics: inferential statistics.
Examples:
• Inferential statistics is also a set of methods, but it is • All current 2 million or so members of an automobile club.
used to draw conclusions or inferences about • All prawns available at the freshwater prawn in Queensland.
characteristics of populations based on sample • All students of USP.
statistics calculated from sample data. • All eligible voters in Fiji.
• Chapters 9-21 introduce several techniques in
inferential statistics.

3
 2/28/2021

1.19 1.20

Key statistical concepts Key statistical concepts

Sample
A sample is a set of items (data) drawn from the Parameter
population of interest.
A descriptive measure of a population.
Sample could potentially be very large, but much less than
the population.
Examples:
Statistic
• A sample of 500 members of the automobile club selected.
• A sample of 1000 prawns selected from different sections of the
A descriptive measure of a sample.
freshwater prawn.
• A sample of 2500 students selected from different schools.
• A sample of 5000 voters selected from all divisions in Fiji.

1.21 1.22

Key statistical concepts Statistical inference

Population Sample Statistical inference is the process of making an
estimate, prediction, or decision about a population
based on a sample.
Subset
Population Sample

Statistic
Parameter Inference

• A descriptive measure of a population is called a parameter Statistic

(e.g. Population mean) Parameter

• A descriptive measure of a sample is called a statistic (e.g.

Sample mean)

1.23 1.24

Statistical inference Statistical inference

Rationale:
• We use sample statistics to make inferences about • Large populations make investigating each member
population parameters. impractical and expensive.
• Therefore, we can produce an estimate, prediction, • Easier and cheaper to take a sample and make
estimates about the population from the sample.
or decision about a population based on sample
data. However:
• Such conclusions and estimates are not always going to
• Thus, we can apply what we know about a sample to be correct.
the larger population from which it was drawn! • For this reason, we build into the statistical inference
‘measures of reliability’, namely confidence level and
significance level.

4
 2/28/2021

1.25 1.26

What you need to know about What you need to know about confidence
significance level ? level ?
• When the purpose of the statistical inference is to • The confidence level is the proportion of times
draw a conclusion about a population, the that an estimating procedure will be correct.
significance level measures how frequently the
conclusion will be wrong in the long run. • For example, a confidence level of 95% means that,
estimates based on this form of statistical inference will be
• For example, a 5% significance level means that, in correct 95% of the time.
the long run, this type of conclusion will be wrong
5% of the time.

1.27 1.28

Confidence and Significance Levels 1.2 Statistical applications in business

• Consider a statement from polling data you may hear Example : Pepsi’s Exclusivity Agreement
about in the news: A large university with a total enrolment of about 50 000
students has offered Pepsi-Cola an exclusivity agreement
‘This poll is considered accurate within that would give Pepsi exclusive rights to sell its products at
3.4 percentage points, 19 times out of 20.’ all university facilities for the next year with an option for
future years. In return, the university would receive 35% of
the on-campus revenues and an additional lump sum of
• In this case, our confidence level is 95% (19/20 = $200 000 per year.
0.95), while our significance level is 5%.

Pepsi has been given 2 weeks to respond.

1.29 1.30

Example Example

• The market for soft drinks is measured in terms of 375 ml A quick analysis reveals that if its current market share
cans. were 25%, then, with an exclusivity agreement, Pepsi
would sell 40 000 (10 000 is 25% of 40 000) cans per
• Pepsi currently sells an average of 10 000 cans per week week or 1 200 000 cans per year.
(over the 30 weeks of the year during two teaching
semesters that the university operates). The profit or loss can be calculated.
• The cans sell for an average of $2.00 each. The costs The only problem is that we do not know how
include a labour amount of 50 cents per can. many soft drinks (all types including Pepsi) are
• Pepsi is unsure of its market share but suspects it is sold weekly at the university.
considerably less than 50%.

5
 2/28/2021

1.31 1.32

Example
• The population in the Example is the soft drink • Pepsi assigned a recent university graduate to survey
consumption of the university’s 50 000 students. the university’s students to supply the required
• The cost of interviewing each student would be information.
prohibitive and extremely time consuming. Statistical
techniques make such endeavours unnecessary. • Accordingly, she organises a survey that asks 500
students to keep track of the number of soft drinks by
• Instead, we can sample a much smaller number of
type of drink (Pepsi, Coke, Lemonade etc.) they
students (the sample size is 500) and infer from the
purchase during the next 7 days.
sample data the number of soft drinks consumed by
all 50 000 students.
• We can then estimate annual profits for Pepsi. • The information we would like to acquire in the
Example is an estimate of annual profits from the
exclusivity agreement.

1.33 1.34

• The sample data to be used for this purpose are the

number of cans of the various types of soft drinks
consumed during the 7-day survey period by the 500 • To make an informed decision about signing-up for the
students in the sample. Exclusivity agreement, we want to estimate the mean
number of the various soft drinks consumed by all
• To summarize the data collected from the 500 sampled 50 000 students on campus.
students, we could use the graphical descriptive statistics
methods (to show the distribution of purchase by drink • To accomplish this goal we use another branch of
type) and numerical descriptive measures (to calculate the statistics – inferential statistics, which is a collection
mean number of soft drinks purchased per day by the of techniques used to make inferences about the
students).
population using sample data.

1.35 1.36

1.3 How managers use statistics 1.4 Statistics and the computer
• Statistical analysis plays an important role in virtually • In this course, you will learn various statistical methods
all aspects of business and economics. by
• Throughout this course, we will see applications of – Manual calculations (lectures and tutorials)
statistics in accounting, economics, finance, human – Computer applications using Microsoft Excel (lab)
resources management, marketing, and operations
management. Therefore, to do well in this course, you must attend all
lectures, tutorials and lab sessions.

6
 2/28/2021

• What to do next :
– Purchase a copy of textbook from the Bookshop
– Register for tutorial and lab sessions as soon as
possible.
– Read the textbook chapter, lectures notes and
attempt the tutorial questions.
– Tutorials start from Week 2.