Introduction to Statistics

Lecture 1

Why Study Statistics?

 Chapter Goals
After completing this chapter, you should be
able to:
 Explain how decisions are often based on incomplete
information
 Explain key definitions:
 Population vs. Sample
 Parameter vs. Statistic
 Descriptive vs. Inferential Statistics
 Describe random sampling
 Explain the difference between Descriptive and
Inferential statistics
 Uncertainty and decision making

 I have 1000 AZN and I am changing this money

to euro. This is my decision.
Task
 The task is for you to discuss my decision as a
group.

Did I make the right decision or the wrong

decision?

Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-3
 The Decision Making Process
Decision

Knowledge
Experience, Theory,
Literature, Inferential
Statistics, Computers
Information
Descriptive Statistics,
Begin Here: Probability, Computers
Data
Identify the
Problem
 Dealing with Uncertainty

Everyday decisions are based on incomplete

information

Consider:
 The price of IBM stock will be higher in six months
than it is now.

 If the federal budget deficit is as high as predicted,

interest rates will remain high for the rest of the year.
 Dealing with Uncertainty
(continued)

Because of uncertainty, the statements

should be modified:

 The price of IBM stock is likely to be higher in six

months than it is now.

 If the federal budget deficit is as high as predicted, it

is probable that interest rates will remain high for the
rest of the year.
 Statistics we learn many tools to help us process, summarize,
analyze, and interpret data for the purpose of making better
decisions in an uncertain environment.
 Statistics are used to predict or forecast sales of a new product,
construction costs, customer-satisfaction levels, the weather,
election results, university enrollment figures, grade point
averages, interest rates, currency exchange rates, and many other
variables that affect our daily lives.
 We need to absorb and interpret substantial amounts of data.
  we must carefully define the problem,
determine what data are needed, collect the
data, and use statistics to summarize the data
and make inferences and decisions based on
the data obtained

Task:
Identify the factors that affect the level of wage
What data are needed?

Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-8
 Key Definitions

 A population is the collection of all items of interest or

under investigation
 N represents the population size
 A sample is an observed subset of the population
 n represents the sample size

 A parameter is a specific characteristic of a population

 A statistic is a specific characteristic of a sample
 Examples of populations include the following:

• All potential buyers of a new product

• All students in ADA university
• All registered voters in a particular city or
country
• All banks in the country
 Population vs. Sample

Population Sample

a b cd b c
ef gh i jk l m n gi n
o p q rs t u v w o r u
x y z y

Values calculated using Values computed from

population data are called sample data are called
parameters statistics
 Examples of Populations

 Names of all registered voters in the United

States
 Incomes of all families living in Daytona Beach
 Annual returns of all stocks traded on the New
York Stock Exchange
 Grade point averages of all the students in
your university

Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-12
 Random Sampling

Simple random sampling is a procedure in which

 each member of the population is chosen strictly by

chance,
 each member of the population is equally likely to be

chosen,
and
 every possible sample of n objects is equally likely to

be chosen

The resulting sample is called a random sample

Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-13
 Systematic Sampling

 Suppose that the population list is arranged in

some fashion unconnected with the subject of
interest.
 Systematic sampling involves the selection of
every j th item in the population, where j is the
ratio of the population size N to the desired
sample size, n; that is, j = N>n. Randomly
select a number from 1 to j to obtain the first
item to be included in your systematic sample.
Stratified Sampling
 Cluster Sampling

 We divide population to clusters and then

choosing some of those clusters for sample.
 Each selected cluster should be representative
of population.
 Sampling Variability and
Potential bias
 The sampling error of a statistic equals the error that occurs when
we use a statistic based on a sample to predict the value of a
population parameter. For instance, the actual percentage of
students of ADA who give Instructor a favourable rating is 76%. But
estimated percentage from sample is 73%. The 3% difference is
sampling error.
 Non-sampling error is a statistical error caused by human error.
Examples:
data entry errors,

biased survey questions,

biased decision making,

false information provided by respondents

 Descriptive and Inferential Statistics

Two branches of statistics:

 Descriptive statistics
 Collecting, summarizing, and processing data to
transform data into information
 Inferential statistics
 provide the bases for predictions, forecasts, and
estimates that are used to transform information
into knowledge
 Descriptive Statistics

 Collect data
 e.g., Survey
 Present data
 e.g., Tables and graphs
 Summarize data
X i
 e.g., Sample mean = n
 Introduction

The main data collection procedures:

-Surveys
-In-depth interviews

-Observations (experiments)

-External sources
 Surveys

- Surveys are a very popular form of data collection, especially when gathering
information from large groups, where standardization is important.

Surveys can be constructed in many ways, but they always consist of two
-

components: questions and responses.

-While sometimes evaluators choose to keep responses “open ended” i.e., allow
respondents to answer in a free flowing narrative form, most often the “close-ended”
approach in which respondents are asked to select from a range of predetermined
answers is adopted.
 Surveys

-Open-ended responses may be difficult to code and require more time

and resources to handle than close-ended choices. Responses may take
the form of a rating on some scale (e.g., rate a given statement from 1 to
4 on a scale from “agree” to
“disagree”).

- Thus, surveys may be administered via computer-assisted

calling, as e-mail attachments, and as web-based online data collection
systems.
-
Advantages and disadvantages of surveys

Advantages:

· Good for gathering descriptive data

· Can cover a wide range of topics

· Are relatively inexpensive to use

· Can be analyzed using a variety of existing software

Disadvantages:

· Self-report may lead to biased reporting

· Data may provide a general picture but lack depth

 Interviews

-The use of interviews as a data collection method begins with the

assumption that the participants’ perspectives are meaningful, knowable,
and can be made explicit, and that their perspectives affect the success of
the project.
- An in-person or telephone interview, rather than a paper-and pencil
survey, is selected when interpersonal contact is important and
when opportunities for follow up of interesting comments are desired.

- Two types of interviews are used in evaluation research: structured

interviews, in which a carefully worded questionnaire is administered, and
in-depth interviews, in which the interviewer does not follow a rigid form.
Advantages and disadvantages of interviews

Advantages:

· Usually yield richest data, details, new insights

· Permit face-to-face contact with respondents
· Provide opportunity to explore topics in depth
· Allow interviewer to experience the affective as well as
cognitive aspects of responses
· Allow interviewer to explain or help clarify questions,
increasing the likelihood of useful responses

· Allow interviewer to be flexible in administering interview to

particular individuals or in particular circumstances
Disadvantages:

· Expensive and time-consuming

· Need well-qualified, highly trained interviewers

· Interviewee may distort information through recall error,

selective perceptions, desire to please interviewer

· Flexibility can result in inconsistencies across interviews

 Inferential Statistics
 Estimation
 e.g., Estimate the population
mean weight using the sample
mean weight
 Hypothesis testing
 e.g., Test the claim that the
population mean weight is 120
pounds

Inference is the process of drawing conclusions or

making decisions about a population based on
sample results
 Chapter Summary

 Reviewed incomplete information in decision

making
 Examined the decision making process
 Introduced key definitions:
 Population vs. Sample
 Parameter vs. Statistic
 Descriptive vs. Inferential statistics
 Described random sampling

Statistics for Business and Economics, 6e © 2007 Pearson Education, Inc. Chap 1-28