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Module Objectives:
1. Understand why we study statistics.
2. Explain what is meant by descriptive and inferential statistics.
3. Distinguish between a qualitative variable and a quantitative variable; a discrete
variable and a continuous variable.
4. Distinguish among the nominal, ordinal, interval, and ratio levels of
measurement.
5. Define the terms exclusive and exhaustive.
6. Organize data into a frequency distribution.
7. Portray a frequency distribution in a histogram, frequency polygon, and
cumulative frequency polygon.
Why Study Statistics?
1. Numerical information is everywhere.
 The National Coffee Association found 50 percent of the adult population drinks
coffee every day. Men drink an average of 1.9 cups per day and women 1.4.
Americans spend $9.2 billion in the retail sector of the economy and $8.7 billion in
the food service sector each year on coffee.
2. Statistical techniques are used to make decisions that affect our daily lives.
 Medical researchers study the cure rates for diseases using drugs and different
forms of treatment. For example. What is the effect of treating a certain type of
knee injury surgically or with physical therapy? If you take an aspirin each day,
does that reduce your risk of a heart attack?
3. The knowledge of statistical methods will make you understand how decisions are
made and give you better understanding on how they affect you.
 No matter what line of work you select, you will find yourself faced with decisions
where an understanding of data analysis is helpful.
In order to make an informed decision, you will need to be able to:
1. Determine whether the existing information is adequate or additional
information is required.
2. Gather additional information, if it is needed, in such a way that it does not
provide misleading results.
3. Summarize the information in a useful and informative manner.
4. Analyze the available information.
5. Draw conclusions and make inferences while assessing the risk of an incorrect
conclusion.

What Is Meant by Statistics?

 Statistics refers to numerical information.

 Statistics is the science of collecting, organizing, presenting, analyzing, and interpreting
data to assist in making more effective decisions.
Types of Statistics
1. Descriptive Statistics
 Methods of organizing, summarizing, and presenting data in an informative way.
2. Inferential Statistics
 Also known as statistical inference and inductive statistics.
 The method used to determine something about a population on the basis of
samples.
 Population is the entire set of individuals or objects of interest or the
measurements obtained from all individuals or objects of interest. Sample is a
portion, or part, of the population of interest.

Why Take Samples Instead of Population?

 A sample of registered voters is necessary because of the prohibitive cost of
contracting millions of voters before an election.
 Testing wheat for moist content destroys the wheat, thus making a sample
imperative.
 If the wine testers tested all the wine, none would be available for sale.
Self Review 1.1
Chicago-based Market Facts asked a sample of 1 960 consumers to try a newly developed
chicken dinner by Boston Market. Of the 1 960 sampled, 1 176 said they would purchase
the dinner if its marketed.
a) What would Market Facts report to Boston Market regarding acceptance of the
chicken dinner in the population?
b) Is this an example of descriptive statistics or inferential statistics? Explain.

Types of Variables
1. Qualitative Variables
 When the characteristics being studied is nonnumeric, it is called a qualitative
variable or attribute.
2. Quantitative Variables
 When the variable studied can be reported numerically, the variable is called a
quantitative variable.
 Discrete variables can assume only certain values, and there are usually “gaps”
between the values. Observation of a continuous variable can assume any value
within a specific range.
Levels of Measurement
1. Nominal-Level Data
 For the nominal level of measurement observations of a qualitative variable can
only be classified and counted.
 There is no particular order to the labels.

2. Ordinal-Level Data
 The next higher level of data is the ordinal level.
 Data classification are ranked or ordered according to particular trait they
possess.
3. Interval-Level Data
 The interval level is the next highest level.
 It includes all the characteristics of the ordinal level, but in addition, the
difference between values is a constant size .
4. Ratio-Level Data
 The ratio level is the “highest” level of measurement.
 It has all the characteristics of the interval level, but in addition, the 0 is
meaningful and the ratio between two numbers is meaningful.
 The zero point is the absence of the characteristics.

Self Review 1.2

What is the level of measurement reflected by the following data?
a) The age of each person in a sample of 50 adults who listen to one of the 1 230 talk
radio stations in the United States is

35 29 41 34 44 46 42 42 37 47
37 36 41 39 44 39 43 43 44 40
40 37 41 27 33 33 39 38 43 22
44 39 35 35 41 42 37 42 38 43
35 37 38 43 40 48 42 31 51 34

b) In a survey of 200 luxury-car owners, 100 were from California, 50 from New York, 30
from Illinois, and 20 from Ohio.
Several Examples of the Abuses of Statistical Analysis
1. Misleading Statistics
 “Two out of three dentists surveyed indicated that they would recommend Brand
X toothpaste to their patients. What if they surveyed only three dentists?
 If a real estate developer tells a client that the average home in a particular
subdivision sold sold for $150 000, we assume that $ 150 000 is a representative
selling price for all the homes. But suppose there are only five homes in the
subdivision and they sold for $ 50 000, $ 50 000, $60 000, $90 000 and $500 000?
 Sometimes numbers can be deceptive.

2. Association dos not necessarily imply causation

3. Graphs can be misleading
 In business, graphics are used as visual aid for an easy interpretation. However, if
they are not drawn carefully, they can lead to misinterpretation of information

4. Ethics
Self Review 1.3
1. What is the level of measurement for each of the following variables?
a) Student IQ ratings
b) Distance students travel to class
c) Student scores on the first statistics quiz
d) A classification of students by state of birth
e) A ranking of students by freshman, sophomore, junior and senior
f) Number of hours students study per week
2. Define suitable populations from which the following samples are selected:
a) Persons in 200 homes are called by telephone in the city of Richmond and asked
to name the candidate they favor for election to the school board.
b) A coin is tossed 100 times and 34 tails are recorded.
c) Two hundred pairs of a new type of tennis shoe were tested on the professional
tour, and on the average, lasted 4 months.
d) On the five different occasions it took a lawyer 21, 26, 24, 22 and 21 minutes to
drive from her suburban home to her midtown office.
Frequency Distribution
Frequency distribution is a grouping of data into mutually exclusive classes showing the
number of observations in each.

Constructing a Frequency Distribution

1. Decide on the number of classes.
 The goal is to use just enough groupings or classes to reveal the shape of the
distribution.
 A useful recipe is to determine the number of classes (k) is the 2k rule. This guide
suggests you to select the smallest number for the number of classes such the 2k is
greater than the number of observations (n).
 Another recipe is to use the Sturgis’ formula k = 3.3 log n.
2. Determine the class interval or width.
 The classes all taken together must cover at least the distance from the lowest
value in the raw data up to the highest value.
 Expressing these words in a formula
i = (Highest – Lowest)/k
where i is the class interval and k is the number of classes
3. Set the individual class limits.
 State clear class limits so you can put each observation into only one category.
 This means you must avoid overlapping or unclear class limits.
4. Tally the individual scores into the classes.
5. Count the number of items in each class.
 The number of observations in each class is called class frequency.

Graphic Presentation of a Frequency Distribution

1. Histogram.
 A graph in which the classes are marked on the horizontal axis and the class
frequencies on the vertical axis.
 The class frequencies are represented by the heights of the bars, and the bars are
drawn adjacent to each other.
2. Frequency Polygon.
 A frequency polygon is similar to histogram. It consists of line segments
connecting the points formed by the intersections of the class midpoints and the
class frequencies
Illustrative Example 1
Ms. Kathryn Baltazar of AutoUSA wanted to develop some tables, charts, and graphs to
show the typical selling price on various dealer lots. The table below reports only the
price of 80 vehicles sold last month at Whitner Complex.
a) What is the typical selling price?
b) What is the highest selling price?
c) Around what value do the selling prices tend to cluster?

Table 1 Prices ($) of Vehicles Sold Last Month at Whitner Complex

23 197 23 372 20 454 23 591 26 651 27 453 17 266 18 021
20 047 21 556 22 374 26 285 18 263 32 277 26 613 19 889
19 873 28 683 30 655 24 571 19 331 35 925 20 642 20 895
20 004 24 285 21 639 22 442 27 896 22 817 17 399 21 981
20 203 25 521 30 872 24 296 25 449 29 076 19 766 17 968
24 052 17 357 24 324 19 587 17 891 28 337 32 492 20 633
20 356 23 765 25 277 24 609 23 169 20 818 20 642 18 890
20 962 25 799 20 155 28 034 28 670 35 851 26 337 23 613
21 740 21 422 25 783 19 688 24 533 15 546 19 251 20 445
24 220 22 845 15 794 26 661 23 657 27 443 15 935 21 722
Solution
 In the Whitner Autoplex example, there were 80 vehicles sold. So n = 80. If we try k =
6, then 26 = 64, somewhat less than 80. Hence 6 is not enough classes. If we let k = 7,
then 27 = 128 which is greater than 80. So the recommended number of classes is 7.
 Alternately, when Sturgis’ formula will be used to determine the number of classes:

k = 3.3
 The log (80)
lowest value= is3.3 (1.90309)
$15 546 and=the
6.28020.
highestThe recommended
value is $35 925. Ifnumber of 7classes
we need is 7.
classes, the
interval should be at least ($35 925 – 15 546)/7 = $2 911. The value $ 3 000 might be
readily be used in this case.

Selling Price ($000) Midpoint Frequency Cumulative Relative

Frequency Frequency
15 – 18 16.5 8 8 0.1000
18 – 21 19.5 23 31 0.2875
21 – 24 22.5 17 48 0.2125
24 – 27 25.5 18 66 0.2225
27 – 30 28.5 8 74 0.1000
30– 33 31.5 4 78 0.0500
33 – 36 34.5 2 80 0.0250
 Number of Vehicles
Selling Price of 80 Vehicles Sold at the Whitner Autoplex
Lot
25

20

15

10

0
1 2 3 4 5 6 7
Selling Price ($000)

Selling Price of 80 Vehicles Sold at the Whitner Autoplex

Lot
25

20
Number of Vehicles

15

10

0
1 2 3 4 5 6 7 8 9
Selling Price ($000)
Summary and Conclusion
Now that we have organized the data into frequency distribution, we can summarize the
pattern in the selling prices of the vehicles for the AutoUSA lot of Whitner Autoplex in
Raytown, Missouri. Observe the following:
1. The selling prices ranged from about $15 000 up to about $36 000.
2. The selling prices are concentrated between $18 000 and $27 000. A total of 58,
or 72.5 percent of the vehicles sold within this range.
3. The largest concentration, or highest frequency, is in the $18 000 up to $21 000
class. The middle of this class is $ 19 500. So we say that a typical selling price is
$19 500.
4. Two of the vehicles sold for $33 000 or more, and 8 sold for less than $18 000.

From the histogram, we conclude that:

1. The lowest selling is about $15 000, and the highest price is about $36 000.
2. The largest class frequency is the $18 000 up to $21 000. A total of 23 of the 80
vehicles sold are within this price range.
3. Fifty-eight of the vehicles, or 72.5 percent, had a selling price between $18 000
and $27 000.
Self Review 1.4
The relative strength of 150 silver solder welds are tested, and the results are given in the
table below. Tally these figures and arrange them in a frequency distribution. Determine
the cell interval and the approximate number of cells. Make a table showing cell
midpoints, cell boundaries, and observed frequencies. Plot a frequency histogram and
polygon.

1.5 1.2 3.1 1.3 0.7 1.3 0.1 2.9 1.0 1.3
0.1 2.9 1.8 3.3 3.4 3.0 0.9 2.1 2.3 1.8
0.3 2.2 2.1 1.3 1.2 3.0 2.6 1.4 2.9 1.4
3.5 0.6 2.9 3.5 1.5 3.1 3.3 2.2 2.7 3.8
1.7 1.6 1.3 2.0 0.5 3.3 2.1 2.9 2.2 1.8
1.8 1.9 1.5 1.5 1.7 2.0 1.2 2.5 2.1 2.4
2.2 1.8 2.5 1.4 3.1 1.5 1.1 2.8 2.9 1.6
3.1 0.7 1.0 1.6 1.4 3.7 2.0 3.1 2.8 1.3
1.5 1.1 2.0 2.5 1.4 2.6 1.5 1.0 2.1 1.1
1.9 3.2 2.3 1.7 3.0 0.7 2.7 2.4 2.0 2.3
2.9 2.3 2.1 2.2 3.0 1.6 2.2 1.5 3.0 2.4
1.8 1.2 2.4 2.0 1.4 2.8 1.6 2.4 1.8 1.0
0.9 2.1 2.4 1.7 0.9 3.3 0.8 0.8 1.2 1.4
3.4 1.9 0.7 1.4 1.6 2.3 1.3 1.8 1.1 2.2
1.0 1.7 3.0 3.3 2.6 2.8 1.7 1.3 2.1 2.1