STATISTICS FOR MANAGEMENT II

COURSE OBJECTIVE

• The course enables students to have an understanding on:

 To familiarize students about the use & application of various
statistical tools in the field of managerial decision making
 To enable students make valid inference from data
 To enable students to construct and test different types of
hypothesis
 How to apply the statistical tests in the preparation of
Research report.
 The application of statistics in every areas of activities in
business and industry such as production, financial analysis,
distribution, market research, manpower planning.
COURSE OUTLINE

Unit1. SAMPLING AND SAMPLING

DISTRIBUTIONS
1.1.SAM PLING THEORY
• 1.1.1. Basic Definitions
• 1.1.1. The need for samples
• 1.1.1. Designing and conducting a sampling study
• 1.1.1. Bias and errors in sampling, non-sampling errors
• 1.1.1. Types of samples- random and non-random samples
1.2. SAMPLING DISTRIBUTIONS
• 1.2.1. Definitions
• 1.2.2. Sampling distributions of the mean and proportion
 Cont…

• UNIT 2 -STATISTICAL ESTIMATIONS

• 2.1. Basic concepts
• 2.2 Point estimators of the mean and proportion
• 2.3 Interval estimators of the mean and proportion
• 2.4. Interval estimation of the difference between two
independent means (concept and formula)
• 2.5. Student's t-distribution
• 2.6. Determining the sample size
 Cont…
• UNIT 3 - HYPOTHESIS TESTING
• 3.1. Basic concepts
• 3.2. Steps in Hypothesis testing
• 3.3. Type I and type II errors (concepts)
• 3.4. One tailed and two tailed hypothesis tests
• 3.5. Hypothesis testing of:
• 3.5.1. Population mean, proportion
 Cont…
• UNIT 4 - CHI-SQUAREDISTRIBUTIONS
• 4.1. Areas of application
• 4.1.1 Tests for independence between two variables
• 4.1.2. Tests for the equality of several proportions
• 4.1.1.Goodness- of fit tests (Binomial, normal,
Poisson)
 Cont…
• UNIT 5 - ANALYSIS OF VARIANCE
• 5.1. Areas of application
• 5.1.1. Comparison of the mean of more than two
populations
• 5.1.2. Variance test
 Chapter One

SAMPLING AND SAMPLING DISTRIBUTIONS

8
 SAMPLING THEORY
• Examining (studying) the entire group (population,
which may be difficult or even impossible to
examine), we may examine (study) only a small
part (portion) of the population (entire group of
objects or people).
• The process of obtaining samples is called
sampling.
• In general, Sampling is a technique of
collecting data only on a part of the
population to reveal the characteristics of the
entire population.
• Draw valid inferences about certain facts for
the population from results found in the
sample; a process known as statistical
inferences. 9
Basic concepts
 Population :- is the total group of people
which you want to draw conclusions.
 Sampling element :- are the individual cases
in the population (usually, persons).
 Sample frame :- is the actual list of sampling
units from which the sample or some stage of
sample is selected.
 Sample size :- it is a representative size of
the population. There are calculations to help
you determine this.
 Bias:- Systematic errors produced by your
sampling procedure.
10
 REASONS / NEED FOR SAMPLING
 Time: as it is difficult to contact each and every
individual of the whole population.
 Cost: The cost or expenses of studying all the
items (objects or individual) in a population may be
prohibitive.
 Physically Impossible: Some population are
infinite, so it will be physically impossible to check
the all items in the population, such as populations of
fish, birds, snakes, mosquitoes.
 Destructive Nature of items: to test the quality of
some products or items it may be necessary to
consume or destroy it. Under such circumstances a
census would consume everything or destroying it.
 Reliability: Using a scientific sampling technique
the sampling error and the non-sampling error can 11 be
 Sampling Methods
12

Two broad divisions:

A. Probability sampling methods

B. Non-probability sampling methods

 A. Probability sampling
13
 Involves random selection of a sample
 Every sampling unit has a known and non-zero probability of
selection into the sample.
 Involves the selection of a sample from a population, based on
chance.

Most common probability sampling methods

1. Simple random sampling
2. Systematic random sampling
3. Stratified random sampling
4. Cluster sampling
5. Multi-stage sampling
1. Simple random
sampling
14

 The required number

of individuals are
selected at random
from the sampling
frame, a list individuals
in the population
 Each member of a
population has an
equal chance of being
included in the sample.
 2. Systematic random
15 sampling
 Sometimes called interval
sampling
 Selection of individuals from the
sampling frame systematically
rather than randomly
 Individuals are taken at regular
intervals down the list
 The starting point is chosen at
random
 Taking individuals at fixed
intervals (every kth) based on
the sampling fraction.
 3. Stratified random sampling

16
 It is done when the population is known to be have heterogeneity with
regard to some factors and those factors are used for stratification
 Using stratified sampling, the population is divided into homogeneous,
mutually exclusive groups called strata.
 Among strata there is heterogeneity and within each strata units are
homogeneous
 A population can be stratified by any variable that is available for all units
prior to sampling (e.g., age, sex, province of residence, income, etc.).
 4. Cluster sampling
17

 Sometimes it is too expensive to carry out

SRS
 Population may be large and scattered.
 Complete list of the study population unavailable

 Cluster sampling is the most widely used to

reduce the cost
 The clusters should be homogeneous, unlike

stratified sampling where the strata are

heterogeneous
 Example
In a school based study, we assume students of the
same school are homogeneous.
18We can select randomly sections and include all
students of the selected sections only
 5. Multi-stage sampling
In multistage sampling, draw a
sample from a population using
smaller and smaller groups at each
stage. This method is often used to
collect data from a large,
geographically spread group of people
in national surveys.

19
 B. Non-probability
sampling
20

 In non-probability sampling, every item has

an unknown chance of being selected.
 Non-probability sampling is a method of

selecting units from a population using a

subjective (i.e. non-random) method.
 They are quick, inexpensive and
convenient.
The most common types of non-
probability sampling
1. Convenience or haphazard
sampling
2. Volunteer sampling
3. Judgment sampling
4. Quota sampling
5. Snowball sampling technique

21
 1. Convenience or haphazard
sampling
22

 Convenience sampling is sometimes

referred to as haphazard or accidental
sampling.
 It is not normally representative of the
target population because sample units are
only selected if they can be accessed easily
and conveniently.
 The obvious advantage is that the
method is easy to use, but that
advantage is greatly offset by the
presence of bias.
 Although useful applications of the
technique are limited, it can
deliver accurate results when the
 2. Judgment sampling
23
 This approach is used when a sample is
taken based on certain judgments about
the overall population.
 The underlying assumption is that the
investigator will select units that are
characteristic of the population.
 The critical issue here is objectivity:
how much can judgment be relied upon
to arrive at a typical sample?
 Judgment sampling is subject to the
researcher's biases and is perhaps even
more biased than haphazard sampling.
 Since any preconceptions the
researcher may have reflected in the
sample, large biases can be introduced
if these preconceptions are inaccurate.
 3. Quota sampling
24

 This is one of the most common forms of

non-probability sampling.

 Sampling is done until a specific number of

units (quotas) for various sub-populations
have been selected.

 Since there are no rules as to how these

quotas are to be filled, quota sampling is
really a means for satisfying sample size
objectives for certain sub-populations.
 4. Snowball sampling
25

 In such case, Once the initial person is

selected and then this respondents are
asked to identify the other who belongs to
the target population. Thus the sample
group appears to grow like a rolling
snowball.
 This sampling technique is often used
in hidden populations which are
difficult for researchers to access;
example populations would be drug
users or commercial sex workers.
 Because sample members are not
selected from a sampling frame,
snowball samples are subject to
numerous biases.
 5. Voluntary sampling
26

 Voluntary sampling occurs when researchers

seek volunteers to participate in studies.
Volunteers can be solicited in person, over
the internet, via public postings, and a
variety of other methods. A researcher using
voluntary sampling typically makes little
effort to control sample composition.
SAMPLING, NON-SAMPLING ERRORS
27

 Sampling error: is the error that arises in a data

collection process as a result of taking a sample
from a population rather than using the whole
population.
 Difference between an estimate of a population
parameter.
 Sampling errors then estimates from different random
samples (of the same size) will vary from sample to
sample, and each estimate is likely to be different
from the true value of the population parameter.
28

 Non-sampling error: is error caused by factors other than those

related to sample selection.
 Coverage error: this occurs when a unit in the sample is incorrectly
excluded or included, or is duplicated in the sample
 Non-response error: this refers to the failure to obtain a response
from some unit because of absence, non-contact, refusal, or some
other reason.
 Response error: this refers to a type of error caused by respondents
intentionally or accidentally providing inaccurate responses.
 Interviewer error: this occurs when interviewers incorrectly record
information; influence the respondent to answer;
 Processing error: this refers to errors that occur in the process of
data collection, data entry, coding, editing and output.
 SAMPLING DISTRIBUTIONS
29

 Definitions
A sampling distribution is a probability distribution for the
possible values of a sample statistic, such as a sample mean,
sample proportion, the difference between two sample mean
and the difference between two sample proportions.

Sampling Distribution of the Mean

 The sampling distribution of the mean is the probability

distributions of the means, X of all simple random samples

of a given sample size n that can be drawn from the
population.
30

 The sampling distribution of the mean is

described by two parameters: the expected
value(X)= X or mean of the sampling
distribution of the mean, and the standard
deviation of the mean , the standard error of
the mean.
31

 Properties of the Sampling Distribution of

Means
 1. The mean of the sampling
distribution of the means is equal to the
population mean.
µ=x .
 2. The standard deviation of the
sampling distribution of the means
(standard error) is equal to the population
standard deviation divided by the square
root of the sample size: = δ/√n.
 Example:
Hourly earnings of the production employees of xyz industries

32

Employe Dani Sami Sol Bini John Alex Tedi

e
Hourly 7 7 8 8 7 8 9
earning

1.What is the population mean?

2.What is the sampling distribution of the sample mean for sample size 2?
3.What is the mean of the sampling distribution of the mean?
4.What observation can be made about the population and the sampling
distribution?
 Number of samples=21
33

Sample Employee earnin su mea Sam employee Earnin su Mea

g m n ple g m n
1 Dani,Sami 7,7 14 7 12 Sol,Bini 8,8 16 8
2 Dani,sol 7,8 15 7.5 13 Sol,John 8,7 15 7.5
3 Dani,Bini 7,8 15 7.5 14 Sol,Alex 8,8 16 8
4 Dani,John 7,7 14 7 15 Sol,Tedi 8,9 17 8.5
5 Dani,Alex 7,8 15 7.5 16 Bini,John 8,7 15 7.5
6 Dani,Tedi 7,9 16 8 17 Bini,Alex 8,8 16 8
7 Sami,sol 7,8 15 7.5 18 Bini,Tedi 8,9 17 8.5
8 Sami,Bini 7,8 15 7.5 19 John,Alex 7,8 15 7.5
9 Sami,John 7,7 14 7 20 John,Tedi 7,9 16 8
10 Sami,Alex 7,8 15 7.5 21 Alex,Tedi 8,9 17 8.5
11 Sami,Tedi 7,9 16 8
 Therefore, Sampling distribution of sample mean is
34

Sample mean Number of means Probability

7 3 0.1429

7.5 9 0.4285

8 6 0.2857

8.5 3 0.1429

Total 21 1.0000

The mean of sampling distribution of the sample mean is

𝑠𝑢𝑚 𝑜𝑓 𝑎𝑙𝑙 𝑠𝑎𝑚𝑝𝑙𝑒 𝑚𝑒𝑎𝑛𝑠 7+7.5+⋯+8.5

𝑡𝑜𝑡𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑠𝑎𝑚𝑝𝑙𝑒𝑠 21
μ x¯ = = = 7.71
 Central Limit Theorem and the Sampling Distribution of the Mean

35

 The Central Limit Theorem (CLT) states that:

1. If the population is normally distributed, the distribution of sample means is

normal regardless of the sample size.

2. If the population from which samples are taken is not normal, the
distribution of sample means will be approximately normal if the sample
size (n) is sufficiently large (n ≥ 30). The larger the sample size is used, the
closer the sampling distribution is to the normal curve.
 The significance of the Central Limit Theorem is that it permits us to use
sample statistics to make inference about population parameters without
knowing anything about the shape of the frequency distribution of that
population other than XX X
Z X  whatwe can get from the sample.
X X
36

 Example 1:
 The distribution of annual earnings of all bank tellers
with five years of experience is skewed negatively.
This distribution has a mean of Birr 15,000 and a
standard deviation of Birr 2000. If we draw a random
sample of 30 tellers, what is the probability that their
earnings will average more than Birr 15,750 annually?
37

 Example 2:
 Suppose that during any hour in a large department
store, the average number of shoppers is 448, with a
standard deviation of 21 shoppers. What is the
probability of randomly selecting 49 different shopping
hours, counting the shoppers, and having the sample
mean fall between 441 and 446 shoppers, inclusive?
 Sampling Distribution of Proportions ( P)

38

 Some times in statistics it is important to know

the proportion of a certain characteristic in a
population. That is, there are numerous
problems in business where we want to know
the proportion of items in a population that
possess a certain characteristic.
39

Properties of Sampling distribution of P

1. As the sampling distribution of the mean does, the population proportion, P, is always
equal to the mean of the sample proportion, i.e., P = E ( P ).

Pq
2. The standard error of the proportion is equal to:  P  , where P= population
n
proportion
q=1–P
n = sample size.
40

 Example :

Suppose that 60% of the electrical contractors in

a region use a particular brand of wire. What is
the probability of taking a random sample of
size 120 from these electrical contractors and
finding that 0.5 or less use that brand of wire?
 Z value table
41
Z 0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09
0.0 0.0000 0.0040 0.0080 0.0120 0.0160 0.0199 0.0239 0.0279 0.0319 0.0359
0.1 0.0398 0.0438 0.0478 0.0517 0.0557 0.0596 0.0636 0.0675 0.0714 0.0753
0.2 0.0793 0.0832 0.0871 0.0910 0.0948 0.0987 0.1026 0.1064 0.1103 0.1141
0.3 0.1179 0.1217 0.1255 0.1293 0.1331 0.1368 0.1406 0.1443 0.1480 0.1517
0.4 0.1554 0.1591 0.1628 0.1664 0.1700 0.1736 0.1772 0.1808 0.1844 0.1879
0.5 0.1915 0.1950 0.1985 0.2019 0.2054 0.2088 0.2123 0.2157 0.2190 0.2224
0.6 0.2257 0.2291 0.2324 0.2357 0.2389 0.2422 0.2454 0.2486 0.2517 0.2549
0.7 0.2580 0.2611 0.2642 0.2673 0.2704 0.2734 0.2764 0.2794 0.2823 0.2852
0.8 0.2881 0.2910 0.2939 0.2967 0.2995 0.3023 0.3051 0.3078 0.3106 0.3133
0.9 0.3159 0.3186 0.3212 0.3238 0.3264 0.3289 0.3315 0.3340 0.3365 0.3389
1.0 0.3413 0.3438 0.3461 0.3485 0.3508 0.3531 0.3554 0.3577 0.3599 0.3621
1.1 0.3643 0.3665 0.3686 0.3708 0.3729 0.3749 0.3770 0.3790 0.3810 0.3830
1.2 0.3849 0.3869 0.3888 0.3907 0.3925 0.3944 0.3962 0.3980 0.3997 0.4015
1.3 0.4032 0.4049 0.4066 0.4082 0.4099 0.4115 0.4131 0.4147 0.4162 0.4177
1.4 0.4192 0.4207 0.4222 0.4236 0.4251 0.4265 0.4279 0.4292 0.4306 0.4319
1.5 0.4332 0.4345 0.4357 0.4370 0.4382 0.4394 0.4406 0.4418 0.4429 0.4441
1.6 0.4452 0.4463 0.4474 0.4484 0.4495 0.4505 0.4515 0.4525 0.4535 0.4545
1.7 0.4554 0.4564 0.4573 0.4582 0.4591 0.4599 0.4608 0.4616 0.4625 0.4633
 Z value table
42

0.00 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

1.8 0.4641 0.4649 0.4656 0.4664 0.4671 0.4678 0.4686 0.4693 0.4699 0.4706
1.9 0.4713 0.4719 0.4726 0.4732 0.4738 0.4744 0.4750 0.4756 0.4761 0.4767
2.0 0.4772 0.4778 0.4783 0.4788 0.4793 0.4798 0.4803 0.4808 0.4812 0.4817
2.1 0.4821 0.4826 0.4830 0.4834 0.4838 0.4842 0.4846 0.4850 0.4854 0.4857
2.2 0.4861 0.4864 0.4868 0.4871 0.4875 0.4878 0.4881 0.4884 0.4887 0.4890
2.3 0.4893 0.4896 0.4898 0.4901 0.4904 0.4906 0.4909 0.4911 0.4913 0.4916
2.4 0.4918 0.4920 0.4922 0.4925 0.4927 0.4929 0.4931 0.4932 0.4934 0.4936
2.5 0.4938 0.4940 0.4941 0.4943 0.4945 0.4946 0.4948 0.4949 0.4951 0.4952
2.6 0.4953 0.4955 0.4956 0.4957 0.4959 0.4960 0.4961 0.4962 0.4963 0.4964
2.7 0.4965 0.4966 0.4967 0.4968 0.4969 0.4970 0.4971 0.4972 0.4973 0.4974
2.8 0.4974 0.4975 0.4976 0.4977 0.4977 0.4978 0.4979 0.4979 0.4980 0.4981
2.9 0.4981 0.4982 0.4982 0.4983 0.4984 0.4984 0.4985 0.4985 0.4986 0.4986
3.0 0.4987 0.4987 0.4987 0.4988 0.4988 0.4989 0.4989 0.4989 0.4990 0.4990