CHAPTER ONE

AN OVERVIWE STATISTICS

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 learning Goals

Define Statistics
See the Classifications of Statistics
Understand why we study statistics.
Now where to apply Statistics

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 Definition of Statistics
 This is a fair question to ask especially because it is so central
to most scientific disciplines today.

 Statistics is the branch of mathematics that deals with

collection, processing, interpretation ,and presentation of
numerical data.

 It is the science of collecting, organizing, presenting, analyzing,

and interpreting data to assist in making more effective
decision.
 Cond…
 Statistics is a collection of mathematical techniques that helps

to analyze and present data.

 It the collection, summarization, analysis, and reporting of

numerical findings relevant to a business decision or situation.

 Cond…
• “Statistics is a way to get information from data.
”
Statistics

Data Informatio
n
Data: Facts, especially
Information: Knowledge
numerical facts, collected
communicated concerning
together for reference or
some particular fact.
information.
 Cond…
 Statistics is a tool for creating an understanding from a set of
numbers.
• The Science of drawing a precise line between an unwarranted
assumption and a forgone conclusion.
• The Science of stating precisely what you don’t know.
 Key Statistical Concepts. . .
 Population – is the group of all items of interest to a statistics
practitioner.
 frequently very large; sometimes infinite.
• E.g. All BDU students

 Sample- is a set of data drawn from the population.

 Potentially very large, but less than the population.
• E.g. a sample of 1000 BDU students to eat their breakfast.

 Parameter – a descriptive measure of a population.

 Statistic - a descriptive measure of a sample.
 Classification of Statistics
 As we have seen, statistics can refer to a set of individual

numbers or numerical facts, or to general or specific statistical

techniques.

 A further breakdown of the subject is possible, depending on

whether the emphasis is on

Simply describing the characteristics of a set of data or

Proceeding from data characteristics to making

generalizations, estimates, forecasts, or other judgments

based on the data.

 Cond…
 The former is referred to as descriptive statistics, while the
latter is called inferential statistics.
 As you might expect, both approaches are vital in today’s
business world.
 Descriptive Statistics
 It is the presentation of numerical data in a convenient form

through charts, tables, graphs etc for the purpose of

summarizing and describing the data.

 It also includes computations of averages, ratios, projections

and other measures which aid in making decisions.

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 Cond…
 In descriptive statistics, we simply summarize and describe the
data we’ve collected.
• For example, upon looking around your class, you may find that
35% of your fellow students are wearing Casio watches.
• If so, the figure “35%” is a descriptive statistic.
• You are not attempting to suggest that 35% of all college
students at your school wear Casio watches.
• You’re merely describing the data that you’ve recorded.
• Just remember that descriptive statistics are used only to
summarize or describe.
 Cond…
 Descriptive statistics include the techniques that are used to
summarize and describe numerical data for the purpose of
easier interpretation.
 These methods can either be graphical or involve
computational analysis.
 Descriptive Statistics describe the data set that’s being
analyzed, but doesn’t allow us to draw any conclusions or make
any interferences about the data. Hence we need another
branch of statistics: inferential statistics.
 Descriptive Statistics. . .
 are methods of organizing, summarizing, and presenting data in
a convenient and informative way.
 These methods include:
• Graphical Techniques, and Numerical Techniques

 The actual method used depends on what information we

would like to extract.
• Are we interested in. . .
• measure(s) of central location? and/or
• measure(s) of variability (dispersion)?
• Descriptive Statistics helps to answer these questions. . .
 Inferential statistics

 It is a statement about a population based up on information

from a sample selected from the population.

 It Makes generalizations about the larger group or the

population, based on sample evidence.

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 In inferential statistics, sometimes referred to as inductive
statistics, we go beyond mere description of the data and arrive
at inferences regarding the phenomenon or phenomena for
which sample data were obtained.

• Political pollsters are among the heavy users of inferential

statistics, typically questioning between 1000 and 2000 voters
in an effort to predict the voting behavior of millions of citizens
on election day.
 cond…
D
 Inferential statistics is also a set of methods, but it is used to
draw conclusions or inferences about characteristics of
populations based on data from a sample.
 Cond…
• Inferential statistics include those techniques by which

decisions about a statistical population or process are made

based only on a sample having been observed.

 Statistical inference is the process of making an estimate,

prediction, or decision about a population based on a sample.
 What can we infer about a Population’s Parameters is based on
a Sample’s Statistics
 Types of Data (Variable)

 There are two basic types of data:

 Quantitative data and

 Qualitative or categorical data

 This classification is possible using 2 bases:

1. The characteristics of the variable under study
2. The level of measurement

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 Qualitative or Categorical Data
 Data are called as qualitative when the characteristic being
studied is nonnumeric.

 Examples include:
 Gender
 Religious affiliation
 Type of automobile owned
 Place of birth, and eye color …

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 Quantitative data
 Data, on the other hand, are also called as quantitative when
the variable studied can be reported numerically

 Examples include:
 The number of Catholics and Protestants in an X - country
 The percentage of cars sold by the Lifan Motors share Co.
 Etc,

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 Quantitative data are either discrete or continuous

 Discrete Data - can assume only certain values, and there are
usually "gaps" between the values.
 Examples include:
• the number of bedrooms in a house

(1, 2, 3, 4, etc.),

• The number of students in each section of a statistics

course

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 Cond...
 Continuous data - can assume any value with in a specific
range.
 Examples include:
– The height of a person
– The duration of flights from Bahir Dar to Addis
– Etc,

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Figure 1.1 Summary of the Types of
Variables

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 Levels of Measurement
• The LM of the data often dictates the calculations that can be
done to summarize and present the data.

• It also helps to determine the statistical tests that should be

performed.

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 Cond…

 There are actually four levels of measurement:

 Nominal

 Ordinal

 Interval, and

 Ratio

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 Cond…
• The lowest, or the most primitive, measurement
is the nominal level.

• The highest, or the level that gives us the most

information about the observation, is the ratio
level of measurement.

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 Nominal-Level Measurement

 With the nominal level, the data are sorted into categories with

no particular order to the categories.

 Observations of a qualitative variable can only be classified and

counted.

 E.g. color, Sex, religion

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 Ordinal -level of Measurement
 Presumes that one classification is ranked higher than another.

 E.g. - Students score

- Runners point of time

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 Interval - level of Measurement
 Includes all the characteristics of the ordinal level, but in
addition, one can determine the difference between the values.
 Example - temperature.
 Suppose the high temperatures on three consecutive winter
days in Addis are 28, 31, and 20 degrees Fahrenheit.

• These temperatures can be easily ranked, at the same time we

can determine their differences.
 Ratio-Level Data
 Practically all quantitative data are the ratio level of
measurement.

 It is the "highest" level of measurement

 It has all the characteristics of the interval level, but in addition,

the 0 point is meaningful and the ratio between two numbers is
meaningful.
 Examples include:
– Wages (Money)
– Units of production
– Changes in stock prices
– distance between branch offices
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Levels of Measurement

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 Discrete and Continuous Variables
• Discrete variable can have observed values only at isolated
points along a scale of values.
• In business statistics, such data typically occur through the
process of counting; hence, the values generally are expressed
as integers.
• A continuous variable can assume a value at any fractional
point along a specified interval of values.
• Continuous data are generated by the process of measuring.
 Importance of Statistics

 Data are numerical facts and figures from which conclusions

can be drawn.
 Such conclusions are important to the decision making
process in different ways.
 For example:
 Government officials use conclusions drawn from the latest
data on employment and inflation to make policy decision.

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 Financial planners use recent trends in stock market prices to
make investment decision
 Businesses use data to decide which products to develop and
market by using data that reveal consumer preferences.
 Physicians and hospitals use data on the effectiveness of
drugs and surgical procedures to provide patients with the best
possible treatment.
 Determining what factors promote employee morale and
motivation and other several areas of decision making.

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 Use or Importance of Statistics
 It simplifies the marks of data - It organizes and presents figure
in such a way that they start communicating meaning.
 It presents facts in definite form - the data collected is
presented in numeral forms so that it has preciseness while
convening meaning.
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 It facilities comparison -the maximum use of statistics is for

comparisons and finding out cause and effect relationship if at

all they exist.

 The comparisons help finding causes for change and also helps

in finding what changes can occur in future.

 It supports forecasting - the most powerful tool for businesses

and economics.
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 It helps to formulate and test hypothesis - It not only helps in
formulating and testing hypothesis, but also infer from the
same.
 It helps making rational decisions.
 It understands measures and describes the effects of action
and reactions.
 Statistics is used in business specially to help make better
decisions by understanding the sources of variation and by
uncovering patterns and relationships in business data.
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 In addition, it could also support a better and informed
decision making for problems such as;
 selecting locations for new stores/ warehouses, restaurants
 deciding which stocks to buy or sell and when
 deciding the quantity of goods to be carried in inventory and
when to reorder
 deciding to start a new business
 determining what factors promote employee morale and
motivation and other several areas of decision making.
 Applications of Statistics
 It is no exaggeration to say that the tools of statistics are used
by nearly every field of scientific research. Here are a few areas
that depend heavily on statistics:
 Psychology
 Economics
 Medicine
 Advertising
 Demography
 Etc,
 Naturally, given the great diversity of business itself, it’s not

surprising that statistics can be applied to many kinds of

business settings.