Basics of Statistics

Origin of the Term

The term statistics originates from:

• Latin: Status (meaning state or condition)

• Italian: Statista (meaning a statesman or politician)
• German: Statistik (coined by German scholar Gottfried Achenwall in the 18th century, meaning data
about the state)

Historically, statistics were used in governance for taxation, military planning, and land revenue
assessments. This early application was known as Political Arithmetic, pioneered by Sir William Petty and
John Graunt.

Definition and Meaning

Statistics is the science of collecting, organizing, presenting, analyzing, and interpreting numerical data
to aid in decision-making. It applies to various fields, including business, economics, health sciences, and
social sciences.

2. Uses of Statistics in Business Decision-Making

Statistics plays a crucial role in business by providing quantitative data and analytical tools for decision-
making.

• Quantitative Information: Provides insights on production levels, sales performance, revenue, and
expenditures.
• Time Series Analysis: Helps predict future trends based on past data (e.g., forecasting sales for the next
quarter).
• Decision Theory: Reduces uncertainty by applying probability models to business choices.
• Statistical Quality Control (SQC): Used in manufacturing industries to maintain product quality.

3. Functions of Statistics

Statistics serves several essential functions:

1. Condensation: Summarizes large datasets into manageable forms (e.g., averages, graphs).
2. Comparison: Allows businesses and researchers to compare trends over time or between different
groups.
3. Forecasting: Predicts future outcomes based on existing data (e.g., demand forecasting).
4. Hypothesis Testing: Tests assumptions in research and business strategies.
5. Expectation: Aids in decision-making by estimating probable future events.
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4. Importance of Statistics

Statistics is crucial in various sectors:

• Business & Industry: Used for production control, demand analysis, and financial planning.
• Science & Research: Helps in experimental design, hypothesis validation, and result interpretation.
• Banking & Insurance: Determines credit risk, customer behavior, and insurance premium calculations.
• Government & State Planning: Aids in population studies, economic planning, and national security
decisions.

5. Scope of Statistics

Statistics is widely used for:

• Numerical Representation: Converts raw data into understandable numerical summaries.

• Simplification of Complex Data: Makes complex datasets easier to analyze.
• Policy Formulation: Assists policymakers in making informed economic and social decisions.
• Hypothesis Testing: Validates or rejects research theories.
• Decision-Making: Supports business and economic forecasting.

6. Limitations of Statistics

Despite its importance, statistics has some limitations:

• Quantitative Nature: It focuses only on numerical data and cannot fully explain qualitative aspects like
emotions or opinions.
• Approximate Results: Conclusions are based on probability and sampling, which may not be 100%
accurate.
• Group Data Focus: It deals with mass data and may not be useful for studying individual cases.
• Requires Expertise: Misuse of statistical techniques can lead to incorrect conclusions.

Types of Data in Statistics

Data in statistics is categorized based on its source, characteristics, and structure. Understanding these
classifications helps in selecting the appropriate statistical tools for analysis. Below is a detailed
explanation of each type:

1. Based on the Source of Collection

(a) Primary Data

• Definition: Data collected directly from the source for a specific purpose.
• Methods of Collection:
o Surveys: Questionnaires, interviews, polls.
o Experiments: Scientific or controlled testing.
o Observations: Directly recording behavior or events.
• Example:
o A company conducting a customer feedback survey to assess product satisfaction.

(b) Secondary Data

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• Definition: Data that has already been collected by someone else for a different purpose.
• Sources:
o Books, research papers, government reports, newspapers.
o Online databases (World Bank, IMF, Census Reports).
• Example:
o Using World Bank economic reports for GDP analysis.

2. Based on the Number of Variables

(a) Univariate Data

• Definition: Data involving only one variable.

• Purpose: Analyzing distributions, averages, and trends for a single variable.
• Example:
o Height of students in a classroom.
o Sales figures of a single product over months.
• Statistical Tools Used: Mean, median, mode, variance, standard deviation.

(b) Bivariate Data

• Definition: Data involving two related variables, analyzed to determine relationships or correlations.
• Example:
o Income vs. Expenditure (Does higher income lead to more spending?).
o Advertising cost vs. Sales revenue (Does increased advertising increase sales?).
• Statistical Tools Used:
o Correlation coefficient (to measure relationship strength).
o Regression analysis (to predict one variable based on another).

3. Based on Nature of Data

(a) Qualitative Data (Categorical Data)

• Definition: Data that describes qualities, characteristics, or attributes without numerical values.
• Types:
o Nominal Data: Categorical data with no specific order.
▪ Example: Gender (Male, Female, Other), Blood Group (A, B, O, AB).
o Ordinal Data: Categorical data that has a meaningful order but lacks precise numerical
differences.
▪ Example: Customer satisfaction (Low, Medium, High), Education levels (Primary,
Secondary, Higher).

(b) Quantitative Data (Numerical Data)

• Definition: Data that is numerical and measurable.

• Types:
o Discrete Data: Only takes whole numbers (e.g., number of students in a class).
o Continuous Data: Can take any value within a range (e.g., weight, temperature).
• Example:
o Sales revenue in dollars, Temperature in Celsius, Age of individuals.
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4. Based on Time Frame of Data Collection

(a) Cross-Sectional Data

• Definition: Data collected at a single point in time from multiple sources.

• Purpose: Used to compare different groups or individuals at a specific moment.
• Example:
o Census data that provides population details in a given year.
o Market survey results showing customer preferences in 2024.

(b) Time Series Data

• Definition: Data collected over a period of time at regular intervals.

• Purpose: Helps analyze trends, patterns, and changes over time.
• Example:
o Monthly stock prices of a company.
o Annual rainfall data from 2000 to 2023.
• Statistical Tools Used:
o Trend analysis, moving averages, time series forecasting models.

8. Population and Sampling

• Population: The entire set of individuals or items under study (e.g., all students in a university).
• Sample: A subset of the population selected for analysis (e.g., a survey of 500 students).

Purpose of Sampling:

Studying an entire population is often impractical due to time and cost constraints. Sampling provides a
manageable and cost-effective alternative.

9. Parameter vs. Statistic

• Parameter: A numerical characteristic of a population (e.g., the average income of all households in a
country).
• Statistic: A numerical characteristic of a sample (e.g., the average income of 1,000 randomly selected
households).

10. Descriptive vs. Inferential Statistics

• Descriptive Statistics: Summarizes and describes data using measures like mean, median, mode, and
graphical representations. Example: A census report.
• Inferential Statistics: Makes predictions or generalizations about a population based on sample data.
Example: Poll results predicting election outcomes.

11. Types of Statistical Inference

Statistical inference helps make conclusions about a population based on a sample:

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• Estimation: Predicts population parameters based on sample data.

o Point Estimation: Provides a single estimated value (e.g., sample mean).
o Interval Estimation: Gives a range of values (confidence intervals).
• Hypothesis Testing: Tests assumptions about a population.

Key Concepts in Hypothesis Testing:

• Null Hypothesis (H₀): Assumes no effect or difference. Example: "There is no difference in test scores
between online and offline students."
• Alternative Hypothesis (H₁): Suggests a significant effect. Example: "Students taking online courses
perform better."
• Type I Error: Rejecting a true null hypothesis (false positive, denoted by α).
• Type II Error: Failing to reject a false null hypothesis (false negative, denoted by β).

1. Population:
o The complete set of individuals, items, or data being studied.
o Example: All students in a university.
2. Sample:
o A subset of the population used to represent the whole.
o Example: 200 students selected from the university.
3. Sampling Frame:
o A complete list of all units in the population from which a sample is drawn.
o Example: A university’s student database.
4. Sampling Error:
o The difference between the sample estimate and the true population parameter.
o It occurs because a sample, rather than the full population, is studied.

2. Types of Sampling Methods

Sampling methods are categorized into Probability Sampling (where every element has a known chance of
being selected) and Non-Probability Sampling (where elements are selected based on convenience or
judgment).
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Key Takeaway

• Use Probability Sampling when accuracy and representativeness are critical.

• Use Non-Probability Sampling when time and cost constraints exist or when studying hard-to-reach
populations.

A. Probability Sampling Methods

(These methods ensure a fair representation of the population.)

1. Simple Random Sampling (SRS)

Definition: Every unit in the population has an equal and independent chance of being selected.
Methods:

• Lottery method (random draw)

• Random number generators
Example: Selecting 50 students randomly from a school.
Merits: Eliminates selection bias.
Demerits: Time-consuming and requires a complete population list.
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3. Stratified Sampling

• Definition: The population is divided into subgroups (strata), and samples are drawn proportionally from
each stratum.
• Example: A company divides employees into departments (Finance, HR, Marketing) and samples
proportionally from each.
• Merits: Increases accuracy by ensuring representation.
Demerits: Requires detailed knowledge of population characteristics.

4. Cluster Sampling

• Definition: The population is divided into clusters, and entire clusters are randomly selected.
• Example: Randomly selecting schools from a district and surveying all students in those schools.
• Merits: Cost-effective for large populations.
• Demerits: Increases the chance of sampling bias.

5. Multi-Stage Sampling

• Definition: Combines multiple sampling methods, often involving multiple stages of selection.
Example:

1. Randomly selecting states.

2. Randomly selecting cities from those states.
3. Randomly selecting households within those cities.

Merits: Flexible and reduces data collection costs.

Demerits: Complex and may introduce errors at multiple stages.

B. Non-Probability Sampling Methods

(Used when a complete sampling frame is unavailable or when cost/time constraints exist.)

1. Convenience Sampling

• Definition: Sampling based on ease of access to participants.

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• Example: Surveying people at a mall entrance.

• Merits: Fast and cost-effective.
• Demerits: High risk of bias, unrepresentative sample.

2. Judgmental (Purposive) Sampling

• Definition: The researcher selects participants based on expertise or relevance.

• Example: Selecting experts for a study on climate change.
• Merits: Useful for specialized studies.
• Demerits: Subjective and may not represent the general population.

3. Quota Sampling

• Definition: The population is divided into groups, and a specific number of participants are selected from
each.
• Example: Selecting an equal number of male and female respondents.
• Merits: Ensures representation.
• Demerits: May be biased if selection is not random.

4. Snowball Sampling

• Definition: Existing participants recruit future participants.

• Example: Finding drug addicts through referrals.
• Merits: Useful for hard-to-reach populations.
• Demerits: Sampling bias is high.

5. Self-Selection Sampling

• Definition: Participants volunteer to be part of the study.

• Example: Online surveys where users choose to participate.
• Merits: Easy and low-cost.
• Demerits: High risk of self-selection bias.
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Here is the correct matching of List I with List II:

• Simple Random Sampling: 1. Equal probability of selection of an item in a trial

• Random Sampling: 2. Equal probability of each item in all trials
• Stratified Random Sampling: 4. Random choice of all items from each stratum
• Stratified Systematic Random Sampling: 3. Random selection of first and systematic of the rest

2. Which of the following is true about sampling?

a) Sample is a part of population.

b) Sampling saves time, money and energy.

c) Sampling helps in estimating sampling error.

d) All of the above.

Ans: d) All of the above.

Q3.Which of the following is not a probability sampling?

a) Simple random sampling.

b) Quota sampling.

c) Stratified Sampling.

d) Cluster sampling.

Ans: b) Quota sampling.

Q4.Which of the following is not a non-probability sampling?

a) Judgmental sampling.
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b) Convenience sampling.

c) Extensive sampling.

d) Cluster sampling.

Ans: d) Cluster sampling.

Q5.Sampling which provides for a known non-zero chance of selection is:

a) Probability sampling.

b) Non probability sampling.

c) Quota sampling.

d) Extensive sampling.

Ans: a) Probability sampling.

Q6.Which of the following would generally require the largest sample size?

a) Cluster sampling.

b) Simple random sampling.

c) Systematic sampling.

d) Proportional stratified sampling.

Ans: a) Cluster sampling.

Q7.In which sample population is divided into different strata and sample is taken from different
strata?

a) Quota Sampling.

b) Snow ball sampling.

c) Stratified sampling.

d) Purposive Sampling.

Ans: c) Stratified sampling.

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Q8.In which sample the investigator has complete freedom to choose his sample according to his
desire?

a) Quota Sampling.

b) Snow ball sampling.

c) Stratified sampling.

d) Purposive or judgmental or selective Sampling.

Ans: d) Purposive or judgmental or selective Sampling.

Q9.As the sample size increases, the sampling error also:

a) Increases.

d) Decreases.

c) Constant.

d) None of the above.

Ans: d) Decreases.

Q10. Which of the following would usually require the smallest sample size because of its efficiency?

a) Cluster sampling.

b) Simple random sampling.

c) Quota sampling.

d) Stratified sampling.

Ans: b) Simple random sampling.

Q11. The techniques used for sampling are:

a) Instantaneous sampling.

b) Natural sampling.

c) Flat top sampling.

d) All of the above.

Ans: d) All of the above.

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Q12. Sampling is advantageous as it:

a) Helps in reducing the volume of data.

b) Saves time, money and energy in data collection.

c) Helps in achieving higher degree of accuracy if populations to be studied are homogenous in nature.

d) All of the above.

Ans: d) All of the above.

Q13. Random sampling is useful as it:

a) Reasonably more accurate as compared to other methods.

b) Economical in nature.

c) Free from personal biases of the investigator.

d) All of the above.

Ans: d) All of the above.

Q14.A technique of Building up a list or a sample of a special population by using an initial set of
members as informants is called

a) Quota sampling.

b) Convenience Sampling.

c) Snow ball Sampling.

d) Purposive sampling.

Ans: c) Snow ball Sampling.

Q15. Statement R: Stratified sampling is used in situation where the population can be easily divided groups.

Statement S: Elements within a group are heterogeneous with respect to characteristics.

1. Statement R is correct but Statement S is wrong

2. Both the Statements are correct
3. Both the Statements are wrong
4. Statement R is wrong but Statement S is correct

Answer is: "Statement R is correct but Statement S is wrong."

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Explanation:

• Statement R: "Stratified sampling is used in a situation where the population can be easily divided into
groups."
o In stratified sampling, the population is divided into homogeneous groups (strata) based on
shared characteristics (e.g., age, gender, income level).
• Statement S: "Elements within a group are heterogeneous with respect to characteristics."
o In stratified sampling, elements within a group (stratum) are homogeneous, meaning they share
similar characteristics.
o The heterogeneity exists between different strata, not within them.

Q15.Branch of statistics which study the unknown aspects of a population distribution is

(a) Estimation

(b) Hypothesis testing

(c) Inferential statistics

(d) Descriptive statistics.

Answer is: (c) Inferential statistics

Explanation:

• Inferential statistics is the branch of statistics that studies unknown aspects of a population
distribution by using data from a sample. It involves estimation and hypothesis testing to make
predictions or inferences about a larger population.
• Descriptive statistics (d) only summarizes and describes the features of a dataset without making
predictions.

Q16.Statistics that estimate the values for a population from a sample of that population is _____.

A. Inferential

B. Descriptive

C. Predictive

D. Factual claim

Answer is: A. Inferential

Explanation:

• Inferential statistics is used to estimate population values based on a sample. It involves drawing
conclusions, making predictions, and testing hypotheses about a population using sample data.
• Descriptive statistics (B) only summarizes or describes data but does not make predictions.
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• Predictive statistics (C) is not a standard statistical term but may relate to predictive modeling, which
uses data to forecast future outcomes.
• Factual claim (D) is not related to statistical estimation.
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Measures of Central Tendency

A measure of central tendency is a single value that represents the entire dataset, giving a sense of the
dataset's central or typical value. The three main measures are:

1. Arithmetic Mean (AM)

2. Geometric Mean (GM)
3. Harmonic Mean (HM)
4. Median
5. Mode
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Demerits of Arithmetic Mean:

1. Sensitivity to Extreme Values:

o The arithmetic mean is highly sensitive to outliers or extreme values. A single very large or very small value
can significantly distort the mean, making it unrepresentative of the data set.

2. Inapplicable to Open-ended Series:

o The arithmetic mean cannot be calculated for open-ended data sets, where the class intervals lack
specific upper or lower limits (e.g., "Above 100" or "Below 20").
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3. Non-graphical:

o Unlike the median or mode, the arithmetic mean does not lend itself to a clear graphical representation,
which can make its interpretation more difficult visually.

4. Misleading Results:

o In certain cases, the mean may provide misleading results, particularly when the data contains outliers.
For example, in a salary dataset where most salaries are around $30,000, but a few employees earn
millions, the mean will be skewed upwards and may not represent the central tendency accurately.

Merits of Arithmetic Mean:

1. Simplicity:

o It is the easiest and most straightforward measure of central tendency. The calculation involves simply
adding up the values and dividing by the number of observations.

2. Comprehensive:

o The arithmetic mean takes all observations in the data set into account, making it a comprehensive
measure. Every value influences the final mean.

3. Equal Weight:

o The arithmetic mean gives equal weight to every data point. Each observation has the same impact on the
final value, unlike the weighted mean where some observations have more influence.

4. Calculated Value:

o Unlike the median and mode, which are based on the position of data points, the arithmetic mean is a
calculated value that uses all the data in the set.

5. Objectivity:

o The mean is not influenced by personal biases. It’s based purely on the numerical data, making it a purely
objective measure.

6. Mathematical Utility:

o The arithmetic mean is useful for further mathematical calculations like addition, subtraction,
multiplication, and division, making it applicable in various statistical analyses.

7. Comparative Base:

o The arithmetic mean serves as a strong basis for comparing multiple datasets. It gives a consistent
measure of central tendency that can be used to compare different data sets or distributions.

8. Stability:

o The arithmetic mean is a stable measure of central tendency. Minor changes in the data typically have a
minimal impact on the mean, making it a reliable measure in many cases.
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Individual Series: Data points are not grouped; each value is treated individually.
Discrete Series: Data values are repeated; frequencies are considered in the calculation.
Continuous Series: Data values are grouped into intervals; midpoints of these intervals are used for the
calculation.
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Comparison of Geometric Mean (GM) and Harmonic Mean (HM):

• GM is generally used when data is multiplicative or when you need to average ratios, percentages, or
growth rates.
• HM is often used in scenarios like calculating average rates or speeds, where the data points are
inversely related (i.e., the smaller values have a greater impact).
• AM ≥ GM ≥ HM holds true for any set of positive numbers.
• This relationship is useful in various fields such as economics, finance, and statistics, where different
types of averages are used to analyze data with different characteristics.
• The inequality reflects the fact that the arithmetic mean is the most sensitive to outliers, while the
harmonic mean tends to give more weight to smaller values and is often used in situations where rates
are involved.
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Graphical Representation of Median

The median can also be found graphically using a cumulative frequency curve or Ogive. This method involves
plotting the cumulative frequency on the vertical axis and the upper bounds of the class intervals on the horizontal
axis. The median is determined by locating the point where the curve crosses the median position.

Merits of Median:

1. Resistant to Outliers: The median is not influenced by extreme values, making it a better measure for skewed
distributions.

2. Simple to Calculate: Especially useful for ordinal data and when values are arranged in order.

3. Applicable to Skewed Data: Provides a better representation of the central value for skewed distributions than
the mean.

Demerits of Median:

1. Ignores Data Variability: The median only considers the middle value and ignores the spread or variation of the
rest of the data.
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2. Not Suitable for Further Calculations: Unlike the mean, the median cannot be used in most algebraic
operations.

3. Difficult for Large Datasets: Sorting the data to find the median can be time-consuming for large datasets.

Median vs. Mean:

• Median: Better when data is skewed or contains outliers, as it is less affected by extreme values.

• Mean: Best when data is symmetrically distributed or when every data point is important.
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Mode (Measure of Central Tendency)

The mode is the value that occurs most frequently in a data set. It is a measure of central tendency that identifies the
peak or most frequent value in a distribution.

Key Features of Mode:

• Most Frequent Value: The mode is the value or values that appear most frequently in a dataset.

• Useful for Categorical Data: It is particularly useful for nominal data, where the mean and median may not be
applicable.

• Can Be Multimodal: A dataset may have one mode (unimodal), more than one mode (bimodal or multimodal), or
no mode at all if all values occur with equal frequency.
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Graphical Method for Finding Mode:

The mode can also be determined graphically using a Histogram or Frequency Polygon. Here's how it can
be done:

1. Histogram:
o A histogram represents the frequencies of the classes with bars. The mode is located at the
highest peak of the histogram (i.e., the tallest bar).
2. Frequency Polygon:
o The mode can also be found at the peak of the frequency polygon, which is a line graph created
by joining the midpoints of the bars in the histogram.

Merits of Mode:

1. Unaffected by Extreme Values: The mode is not influenced by extreme values or outliers in the data.
2. Best Indicative Value: It best indicates the most frequent value in the data set, which is useful in
understanding common occurrences.
3. Ease of Calculation: It is relatively easy to calculate, especially in situations where you only need to
know the most frequent value.
4. Graphical Determination: The mode can be determined both mathematically and graphically, making
it versatile.
5. Applicability to Open-ended Classes: The mode can be determined even for open-ended classes,
unlike the mean or median.
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Demerits of Mode:

1. Not Based on All Values: The mode is not based on all the values of a series, making it less reliable in
some cases.
2. Lacks Algebraic Treatment: The mode cannot be used for further algebraic calculations and is less
suitable for advanced statistical operations.
3. Difficulty in Ascertainment: In some cases, the mode may be difficult to determine, especially in
unimodal distributions where frequencies are similar.
4. Fails to Represent Small Values: The mode may fail to represent small values in a series, which might
affect its usefulness as a central tendency measure.

what is the relationship of mean median and mode

Mode = 3 Median – 2 Mean

(Mean – Mode) = 3 (Mean – Median)

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Dispersion in statistics
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Merits of Range:
Simplest Measure of Dispersion – Easy to understand and compute.
Quick Calculation – Requires only the highest and lowest values.
Limitations of Range
Not Based on All Observations – Only considers the highest and lowest values, ignoring the rest of the
data.
Highly Affected by Sampling Fluctuations – A small change in extreme values can significantly alter the
range.
Unreliable Measure of Dispersion – Does not provide a complete picture of data variability.
Cannot Be Used for Open-End Classifications – If a class interval is unbounded (e.g., "50 and above"),
range cannot be accurately calculated.
Uses of Range:
Quality Control – Used in manufacturing to monitor product consistency.
Stock Market Analysis – Helps track fluctuations in share prices.
Weather Forecasting – Measures temperature variations over a period.
Everyday Life – Used in analyzing income disparity, test scores, etc.
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Advantages of Quartile Deviation:

1. Clear definition and easy to compute.
2. Insensitive to extreme values (outliers).
3. Can be computed for open-ended frequency distributions.
Disadvantages of Quartile Deviation:
1. Excludes all observations outside the middle 50%, limiting its scope.
2. Not suitable for algebraic manipulations or further complex analysis.
3. Highly influenced by sampling fluctuations.
4. Less commonly used in higher-level statistical studies.
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Example:
Given data: 5, 10, 15, 20, 25
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Question:
Calculate the Standard Deviation (SD) for the following data set:
10, 12, 15, 18, 20
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Key Properties of Standard Deviation (SD):

1. Always Non-Negative – SD is zero or positive; zero only if all values are identical.
2. Measures Spread Around Mean – Indicates how much data deviates from the average.
3. Higher SD = More Variation – Greater spread means a larger SD.
4. Sensitive to Outliers – Extreme values can inflate SD.
5. Useful in Normal Distribution – Helps determine confidence intervals (68%-95%-99.7% Rule).
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Lorenze curve

It is graphical method of dispersion.

It studies the degree of inequality in the distribution of income and wealth b/w countries.
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Q1.For a symmetrical distribution, Q1 and Q3 are 20 and 60 respectively. The value of median will be:
A. 20
B. 30
C. 40
D. 50

Q2.The arithmetic mean of the marks obtained by 50 students was calculated as 44. It was later
discovered that a score of 36 was misread as 56. Find the correct value of arithmetic mean of the
marks obtained by the students.

A. 43

B. 43.6

C. 45

D. 50

3.Branches of statistics includes

A. applied statistics

B. mathematical statistics

C. industry statistics

D. both a and b

4.If each observation of the data is increased by 5, then what happens to its mean?

A. is increased by 4

B. is increased by 5

C. is decreased by 4
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D. is decreased by 5

5.The measurements of spread or scatter of the individual values around the central point is called:
A. Measures of dispersion
B. Measures of central tendency
C. Measures of skewness
D. Measures of kurtosis

6. The correct relationship among Arithmetic Mean (AM), Geometric Mean (GM) and Harmonic Mean
(HM) is
A. GM = AM + HM
B. AM < HM
C. (GM)2 = HM*AM
D. AM = GM – HM

7.The degree to which numerical data tend to spread about an average value called:

A. Constant

B. Flatness

C. Variation

D. Skewness

8.If the mean is 20 and the median is 25, what is the mode?
a) 15
b) 30
c) 35
d) 40
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