Lecture 2

LECTURE 2
Descriptive Statistics
Statistical Techniques in Business & Economics
Lind, D. A., Marchal, W. G., and Wathen, S. A.
18th Edition (2020)
Chapter 3 and 4
Business Statistics Saiful Islam

1
Executive MBA Program, 1st Semester 2024 Dept. of International Business
Lecture Overview
• Numerical Methods: Numerical measures of location, dispersion
• Sample statistics, population parameter and point estimators
• Measures of central location – mean, median, mode, percentiles &
quartiles
• Measures of variability – range, variance standard deviation ; box
plots

2
Parameter and Statistic
A population is a collection of all
possible individuals, objects, or
measurements of interest.
PARAMETER: A measurable
characteristic of a population.
A sample is a portion, or part, of

the population of interest
STATISTIC: A measurable characteristic of
a sample.

3
Characteristics of the Mean
• The arithmetic mean is the most widely used measure of location. It
requires the interval scale. Its major characteristics are:
• All values are used.
• It is unique.
• The sum of the deviations from the mean is 0.
• It is calculated by summing the values and dividing by the number of values.

4
Population Mean
• For ungrouped data, the population mean is the sum of all the
population values divided by the total number of population values:

5
EXAMPLE – Population Mean

6
Sample Mean
• For ungrouped data, the sample mean is the sum of all the sample
values divided by the number of sample values:

7
EXAMPLE – Sample Mean

8
Properties of the Arithmetic Mean
• Every set of interval-level and ratio-level data
has a mean.
• All the values are included in computing the
mean.
• A set of data has a unique mean.
• The mean is affected by unusually large or
small data values.
• The arithmetic mean is the only measure of
central tendency where the sum of the
deviations of each value from the mean is zero.

9
Weighted Mean
• The weighted mean of a set of numbers X1, X2, ..., Xn, with corresponding weights
w1, w2, ...,wn, is computed from the following formula:
• The Carter Construction Company pays its

hourly employees $16.50, $19.00, or $25.00
per hour. There are 26 hourly employees, 14
of which are paid at the $16.50 rate, 10 at the
$19.00 rate, and 2 at the $25.00 rate. What is
the mean hourly rate paid the 26 employees?
10
The Median
• The Median is the midpoint of • There is a unique median for each
data set.
the values after they have been
• It is not affected by extremely large
ordered from the smallest to or small values and is therefore a
the largest. valuable measure of central
tendency when such values occur.
• There are as many values above
the median as below it in the • It can be computed for ratio-level,
data array.
interval-level, and ordinal-level
data.
• For an even set of values, the • It can be computed for an open-
median will be the arithmetic ended frequency distribution if the
average of the two middle median does not lie in an open-
numbers. ended class.

11
Examples - Median
• The ages for a sample of five • The heights of four basketball
college students are: players, in inches, are:
21, 25, 19, 20, 22 76, 73, 80, 75
• Arranging the data in ascending • Arranging the data in ascending
order gives: order gives:
19, 20, 21, 22, 25. 73, 75, 76, 80.
• Thus the median is 21. • Thus the median is 75.5

12
The Mode
• The mode is the value of the observation that appears most
frequently.

13
Example - Mode

14
Mean, Median, Mode Using Excel
• Table 2–4 in Chapter 2 shows the
prices of the 80 vehicles sold last
month at Whitner Autoplex in
Raytown, Missouri.
• Determine the mean and the median
selling price.
• The mean and the median selling
prices are reported in the following
Excel output.
• There are 80 vehicles in the study.

15
Mean, Median, Mode Using Excel

16
The Relative Positions of the Mean, Median and the Mode

17
The Geometric Mean
• Useful in finding the average change of percentages, ratios, indexes, or growth
rates over time.
• It has a wide application in business and economics because we are often
interested in finding the percentage changes in sales, salaries, or economic
figures, such as the GDP, which compound or build on each other.
• The geometric mean will always be less than or equal to the arithmetic mean.
• The geometric mean of a set of n positive numbers is defined as the nth root of
the product of n values.
• The formula for the geometric mean is written:

18
Example – Geometric Mean
• Suppose you receive a 5 percent • The return on investment earned by
increase in salary this year and a 15 Atkins construction Company for four
percent increase next year. The successive years was: 30 percent, 20
average annual percent increase is percent, 40 percent, and 200
9.886, not 10.0. Why is this so? We percent. What is the geometric mean
begin by calculating the geometric rate of return on investment?
mean.
GM  ( 1.05 )( 1.15 )  1.09886 GM  4 ( 1.3 )( 1.2 )( 1.4 )( 3.0 )  4 6.552  1.5999

19
Dispersion
• Why Study Dispersion?
• A measure of location, such as the mean or the median, only describes the
center of the data. It is valuable from that standpoint, but it does not tell us
anything about the spread of the data.
• For example, if your nature guide told you that the river ahead averaged 3
feet in depth, would you want to wade across on foot without additional
information? Probably not. You would want to know something about the
variation in the depth.
• A second reason for studying the dispersion in a set of data is to compare the
spread in two or more distributions.

20
Dispersion

21
Measures of Dispersion
• Range
• Mean Deviation
• Variance and Standard Deviation

22
Example – Range and Mean Deviation
• The number of
cappuccinos sold at Range = Largest – Smallest value
the Starbucks location = 80 – 20 = 60
in the Orange Country
Airport between 4 and
7 p.m. for a sample of
5 days last year were
20, 40, 50, 60, and 80.
• Determine the mean
deviation for the
number of
cappuccinos sold.
23
Example – Variance and Standard Deviation
The number of traffic citations issued during the last five months in
Beaufort County, South Carolina, is 38, 26, 13, 41, and 22. What is the
population variance?

24
Example – Sample Variance
The hourly wages for a sample of
part-time employees at Home
Depot are: $12, $20, $16, $18,
and $19. What is the sample
variance?

25
End of Lecture 2
* All clipart, image and graphics are sourced from Google webpage

26

Lecture 2

Uploaded by

Copyright:

Available Formats

Lecture 2

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lecture 2

Uploaded by

Copyright:

Available Formats

LECTURE 2

Business Statistics Saiful Islam

Business Statistics Saiful Islam

A sample is a portion, or part, of

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

• The Carter Construction Company pays its

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

GM  ( 1.05 )( 1.15 )  1.09886 GM  4 ( 1.3 )( 1.2 )( 1.4 )( 3.0 )  4 6.552  1.5999

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

• Variance and Standard Deviation

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

Business Statistics Saiful Islam

You might also like