Course Name: Business Statistics

Course Code: T2216

Number of Credits: 2
Course No: QS&A P 3
Faculty: Shuchita Vaidya
• Pre-learning: Foundation course in Statistics
• Suggested Evaluation Methods: Written tests
& evaluation using statistical software
 Learning Objective(s):

• To enable students to present, analyze and interpret data.

• To enable students to use concepts of probability in business situations.
• To enable students to make inferences from samples drawn from large
datasets.
• To enable students to apply univariate and multivariate statistical
techniques.
 Books Recommended

• Anderson, Sweeney and Williams, “Statistics for

Business and Economics”, Cengage Learning,
2001(11e)
• Levin and Rubin, “Statistics for Management”,
Prentice-Hall, 2007
 Examples
• The average one-way travel time to work is 25.3
minutes (U.S. Census Bureau, March 2009).
• A record high 11% of U.S. homes are vacant, a glut
created by the housing boom and subsequent
collapse (USA Today, February 13, 2009).
• The New York Yankees have the highest salaries in
major league baseball. The total payroll is
$201,449,289 with a median salary of $5,000,000
(USA Today Salary Data Base, April 2009)
• In this usage, the term statistics refers to
numerical facts such as averages, medians,
percents, and index numbers that help us
understand a variety of business and
economic situations.
• In a broader sense, statistics is defined as the art
and science of collecting, analyzing, presenting,
and interpreting data.
• Particularly in business and economics, the
information provided by collecting, analyzing,
presenting, and interpreting data gives managers
and decision makers a better understanding of the
business and economic environment and thus
enables them to make more informed and better
decisions.
 Statistics??

• Statistics is a branch of applied mathematics

concerned with collecting, organizing, and
interpreting data. The data are represented by means
of graphs.
• Statistics, thus attempts to infer the properties of a
large collection of data from inspection of a sample of
the collection thereby allowing educated guesses to
be made with a minimum of expense.
 Statistics is….

• Statistics is the study and manipulation of data,

including ways to gather, review, analyze, and draw
conclusions from data.
• The two major areas of statistics are descriptive and
inferential statistics.
• Statistics can be used to make better-informed
business and investing decisions.
 Scope of Statistics

• Statistics is used in many sectors such as psychology,

geology, sociology, weather forecasting, probability
and much more.
• The goal of statistics is to gain understanding from
the data, it focuses on applications, and hence, it is
distinctively considered as a mathematical science.
 Applications

• Applied statistics, theoretical statistics and

mathematical statistics
• Machine learning and data mining
• Statistics in society
• Statistical computing
• Statistics applied to mathematics or the arts
 Applications in Business and Economics

• Accounting : Public accounting firms use statistical

sampling procedures when conducting audits for their
clients.
• Finance : Financial analysts use a variety of statistical
information to guide their investment recommendations.
In the case of stocks, the analysts review a variety of
financial data including price/earnings ratios and dividend
yields. By comparing the information for an individual
stock with information about the stock market averages,
a financial analyst can begin to draw a conclusion as to
whether an individual stock is over- or underpriced.
 Data

• Data are the facts and figures collected, analyzed, and

summarized for presentation and interpretation.
• The measurements obtained in a research study are
called the data.
• All the data collected in a particular study are referred
to as the data set for the study
• The goal of statistics is to help researchers organize
and interpret the data.
 Elements, Variables, Observation

• Elements are the entities on which data are collected.

• A variable is a characteristic of interest for the elements.
• The set of measurements obtained for a particular element is
called an observation
 Scales of measurements

• The scale of measurement determines the amount of

information contained in the data and indicates the
most appropriate data summarization and statistical
analyses.
• Data collection requires one of the following scales of
measurement: nominal, ordinal, interval, or ratio.
 Nominal Data
• A Nominal scale is the most basic level of
measurement. The variable is divided into categories
and objects are ‘measured’ by assigning them to a
category.
• When the data for a variable consist of labels or
names used to identify an attribute of the element, the
scale of measurement is considered a nominal scale.
• Nominal scales are used for labelling variables,
without any quantitative value.
 Nominal Scale Examples:

• In this scale numbers are used to identify objects. For

example University Registration numbers assigned to
students.
• Have you visited Bangalore?
Yes-1, No-2
Yes is coded as one and No is coded as Two. The numeric
attached to the answers has no meaning and is a mere
identification.
If the numbers are interchanged it wont affect the answer.
 Nominal Scale Examples:

• Colors of objects (red, yellow, blue, green)

• Types of transport (plane, car, boat)There is no order
of magnitude to the categories i.e. blue is no more or
less of a color than red.
• What is your gender – Male or Female
• Where do you live – North India, South India, East
India, West India.
• What is your hair colour? Black, Brown, other.
 Nominal Scale and its limitations

• There is no rank ordering.

• No mathematical operation is possible.
• Statistical implication- calculation of standard
deviation and the mean is not possible.
 Key Note

• The scale of measurement for a variable

when the data are labels or names used to
identify an attribute of an element. Nominal
data may be nonnumeric or numeric.
 Ordinal Scale

• The scale of measurement for a variable is called an ordinal

scale if the data exhibit the properties of nominal data and the
order or rank of the data is meaningful.
• This scale has the ability to rank the individual attributes of to
items in same group but unit of measurement is not available
in this scale, like student A is taller than student B but their
actual heights are not available.
• Designates an ordering: greater than, less than.
• Does not assume that the intervals between numbers are equal.
• Ordinal data may be nonnumeric or numeric.
 Ordinal scale with EXAMPLES
• Rank your food preference where 1 = favorite food and 4 =
least favorite:
____ sushi
____ chocolate
____ hamburger
____ papaya
• Final position of horses in a thoroughbred race is an ordinal
variable. The horses finish first, second, third, fourth, and so
on. The difference between first and second is not necessarily
equivalent to the difference between second and third, or
between third and fourth.
• Rank: 1st place, 2nd place,……last place
 Interval scale

• Interval scale is more powerful than the nominal and ordinal scale.
• Interval scales are numerical scales in which intervals have the
same interpretation throughout.
• Interval scale provide information about order, and also possess
equal interval.
• The zero point is located arbitrarily on an interval scale.
• The distance given on the scale represents equal distance on the
property being measured.
• Interval scale may tell us “How far object are apart with respect to
an attribute?”
This means that the difference can be compared. The difference
between 1 and 2 is equal to the difference between 2 and 3.
 Interval Scale with Examples

• An example of an interval scale is temperature, either

measured on a Fahrenheit or Celsius scale. A degree represents
the same underlying amount of heat, regardless of where it
occurs on the scale. Measured in Fahrenheit units, the
difference between a temperature of 46 and 42 is the same as
the difference between 72 and 68.
• TIME OF DAY on a 12-hour clock
• Interval time of day - equal intervals; analog (12-hr.) clock,
difference between 1 and 2 pm is same as difference between
11 and 12 am.
 Key Note

• The scale of measurement for a variable if the data

demonstrate the properties of ordinal data and the
interval between values is expressed in terms of a
fixed unit of measure. Interval data are always
numeric.
 Ratio Scale

• The scale of measurement for a variable if the data

demonstrate all the properties of interval data and the
ratio of two values is meaningful. Ratio data are
always numeric.
• Variables such as distance, height, weight, and time
use the ratio scale of measurement. This scale
requires that a zero value be included to indicate that
nothing exists for the variable at the zero point.
 Ratio Scale with Example

• Consider the cost of an automobile. A zero value for

the cost would indicate that the automobile has no
cost and is free. In addition, if we compare the cost of
$30,000 for one automobile to the cost of $15,000 for
a second automobile, the ratio property shows that the
first automobile is $30,000/$15,000 = 2 times, or
twice, the cost of the second automobile.
Examples
 Examples

Q6.How many hours a day do you spend on a computer

is an example of which type of scale measurement?
(a)nominal (b)ordinal (c)interval (d)ratio
Q7.Which scale has a true zero?
(a)Nominal (b) ordinal (c) interval (d)ratio
 Quantitative and Qualitative Data

• Data can be classified as either categorical or

quantitative.
• Data that can be grouped by specific categories are
referred to as categorical data. Categorical data use
either the nominal or ordinal scale of measurement.
• Data that use numeric values to indicate how much or
how many are referred to as quantitative data.
Quantitative data are obtained using either the
interval or ratio scale of measurement.
 Discrete Data

• Discrete data is based on counts, for example:

The number of cars parked in a car park
The number of patients seen by a dentist each day.
Only a finite number of values are possible e.g. a
dentist could see 10, 11, 12 people but not 11.4
people.
 Continuous Data

• Continuous data is measured on a scale.

The data can have almost any numeric value and can
be recorded at many different points.
• For example:
Temperature (39.25oC)
Time (2.468 seconds)
Height (1.25m)
Weight (66.34kg)
 Variables
• A variable is a characteristic or condition that
can change or take on different values.
 Variables

• Quantitative Variable
A variable that is counted or measured on a numerical
scale. Can be continuous or discrete (always a whole
number).
• Qualitative Variable
A non-numerical variable that can be classified into
categories, but can’t be measured on a numerical
scale. Can be nominal or ordinal
 Types of Variables

• Variables can be classified as discrete or continuous.

• Discrete variables (such as class size) consist of
indivisible categories, and continuous variables
(such as time or weight) are infinitely divisible into
whatever units a researcher may choose. For
example, time can be measured to the nearest minute,
second, half-second, etc.
 Quantitative and Qualitative Data

• Quantitative data: Numeric values that indicate how much

or how many of something. Quantitative data are obtained
using either the interval or ratio scale of measurement.
• Categorical variable: A variable with categorical data.
• Quantitative variable: A variable with quantitative data.
• Cross-sectional data: Data collected at the same or
approximately the same point in time.
• Time series data Data :collected over several time periods
Example 1
Solution 1
Example 2
Solution 2
Example 3
Solution 3
Example 4
Solution 4
 Different types of Statistics

• The two major areas of statistics are known as

descriptive statistics, which describes the properties
of sample and population data, and inferential
statistics, which uses those properties to test
hypotheses and draw conclusions.
 Descriptive Statistics

• Descriptive statistics are methods for organizing and

summarizing data in a meaningful way.
• For example, tables or graphs are used to organize
data, and descriptive values such as the average score
are used to summarize data.
• A descriptive value for a population is called a
parameter and a descriptive value for a sample is
called a statistic
 Descriptive statistics

• Descriptive statistics mostly focus on the central tendency,

variability, and distribution of sample data.
• Central tendency means the estimate of the characteristics, a
typical element of a sample or population, and includes
descriptive statistics such as mean, median, and mode.
• Variability refers to a set of statistics that show how much
difference there is among the elements of a sample or
population along the characteristics measured, and includes
metrics such as range, variance, and standard deviation.
 Descriptive statistics

• The distribution refers to the overall "shape" of the

data, which can be depicted on a chart such as a
histogram or dot plot, and includes properties such as
the probability distribution function, skewness, and
kurtosis.
• Descriptive statistics can also describe differences
between observed characteristics of the elements of a
data set.
 Descriptive statistics

• Descriptive statistics summarizes or describes the

characteristics of a data set.
• Descriptive statistics consists of two basic categories of
measures: measures of central tendency and measures of
variability (or spread).
• Measures of central tendency describe the center of a data
set.
• Measures of variability or spread describe the dispersion
of data within the set.
A Taxonomy of Statistics