CH01

Statistics for Business and Economics
Ninth Edition, Global Edition
Chapter 1
Describing Data:
Graphical
Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 1

Chapter Goals (1 of 3)
After completing this chapter, you should be able to:
• Explain how decisions are often based on limited/sample
information
• Explain key definitions:
– Population vs. Sample
– Parameter vs. Statistic
– Sampling vs. Nonsampling Error
– Descriptive vs. Inferential Statistics
• Describe random sampling & systematic sampling
• Explain the difference between Descriptive and Inferential
statistics

• Identify types of data and levels of measurement
• Create and interpret graphs to describe categorical
variables:
– frequency distribution, bar chart, pie chart, Pareto diagram
• Create a line chart to describe time-series data
• Create and interpret graphs to describe numerical
variables:
– frequency distribution, histogram, ogive

• Construct and interpret graphs to describe relationships

between variables:
– Scatter plot, cross table
• Describe appropriate and inappropriate ways to display
data graphically

Section 1.1 Decision Making in an
Uncertain Environment (1 of 2)
Everyday decisions are based on limited/sample
information
Examples:
• Will the job market be strong when I graduate?
• Will the price of Yahoo stock be higher in six months than it
is now?
• Will profit rates remain low for the rest of the year if the
federal budget deficit is as high as predicted?

Section 1.1 Decision Making in an
Uncertain Environment (2 of 2)
Data are used to assist decision making
• Statistics is a tool to help process, summarize, analyze,
and interpret data.
• Statistics is a subject which deals with data in order to
make a good/correct decision.

Key Definitions
• A population is the collection of all items of interest or
under investigation
– N represents the population size
• A sample is an observed subset of the population

– n represents the sample size
• A parameter is a specific characteristic of a population

• A statistic is a specific characteristic of a sample

Population vs. Sample
Population Sample
Values calculated using Values computed from

population data are sample data are called
called parameters statistics

Examples of Populations
• Names of all registered voters in the United States
• Incomes of all families living in Daytona Beach
• Annual returns of all stocks traded on the New
York Stock Exchange
• Grade point averages of all the students in your
university

Random Sampling
Simple random sampling is a procedure in which
• each member of the population is chosen strictly by
chance,
• each member of the population is equally likely to be
chosen,
• every possible sample of n objects is equally likely to be
chosen
The resulting sample is called a random sample

Descriptive and Inferential Statistics
Two branches of statistics:
• Descriptive statistics
– Graphical, tabular and numerical procedures to
summarize and process data
• Inferential statistics
– Using data to make predictions, forecasts, and
estimates to assist decision making

Descriptive Statistics
• Collect data
– e.g., Survey
• Present data
– e.g., Tables and graphs
• Summarize data
– e.g., Sample mean   X i

Inferential Statistics
• Estimation
– e.g., Estimate the population
mean weight using the
sample mean weight
• Hypothesis testing
– e.g., Test the claim that the
population mean weight is
140 pounds
Inference is the process of drawing conclusions or

making decisions about a population based on sample
results
Section 1.2 Classification of Variables

Measurement Levels

Section 1.3-1.5 Graphical
Presentation of Data (1 of 2)
• Data in raw form are usually not easy to use for
decision making. Some type of organization is
needed
– Table
– Graph & Numerical
• The type of graph to use depends on the variable
being summarized

Section 1.3-1.5 Graphical
Presentation of Data (2 of 2)
• Techniques reviewed in this chapter:

Section 1.3 Tables and Graphs for
Categorical Variables

The Frequency Distribution Table
Summarize data by category
Example: Hospital Patients by Unit

Graph of Frequency Distribution
• Bar chart of patient data

Cross Tables
• Cross Tables (or contingency tables) list the
number of observations for every combination of
values for two categorical or ordinal variables
• If there are r categories for the first variable (rows)
and c categories for the second variable (columns),
the table is called an r  c cross table

Cross Table Example
• 3  3 Cross Table for Investment Choices by Investor
(values in $1000’s)
Investment Investor A Investor B Investor C Total

Category
Stocks 46 55 27 128
Bonds 32 44 19 95
Cash 15 20 33 68
Total 93 119 79 291

Graphing Multivariate Categorical
Data (1 of 2)
• Side by side horizontal bar chart

Graphing Multivariate Categorical
Data (2 of 2)
• Stacked bar chart

Vertical Side-by-Side Chart Example
• Sales by quarter for three sales territories:

Bar and Pie Charts
• Bar charts and Pie charts are often used for
qualitative (categorical) data
• Height of bar or size of pie slice shows the
frequency or percentage for each category

Bar Chart Example

Pie Chart Example

Pareto Diagram
• Used to portray categorical data
• A bar chart, where categories are shown in
descending order of frequency
• A cumulative polygon is often shown in the same
graph
• Used to separate the “vital few” from the “trivial
many”

Pareto Diagram Example (1 of 3)
Example: 400 defective items are examined for
cause of defect:
Source of
Manufacturing Error Number of defects
Bad Weld 34
Poor Alignment 223
Missing Part 25
Paint Flaw 78
Electrical Short 19
Cracked case 21
Total 400

Step 1: Sort by defect cause, in descending order
Step 2: Determine % in each category
Source of
Manufacturing Error Number of defects % of Total Defects
Poor Alignment 223 55.75
Paint Flaw 78 19.50
Bad Weld 34 8.50
Missing Part 25 6.25
Cracked case 21 5.25
Electrical Short 19 4.75
Total 400 100%

Step 3: Show results graphically

Section 1.4 Graphs to Describe Time-
Series Data
• A line chart (time-series plot) is used to show the
values of a variable over time
• Time is measured on the horizontal axis
• The variable of interest is measured on the
vertical axis

Line Chart Example

Section 1.5 Graphs to Describe
Numerical Variables

Frequency Distributions
What is a Frequency Distribution?
• A frequency distribution is a list or a table…
• containing class groupings (categories or ranges
within which the data fall)...
• and the corresponding frequencies with which
data fall within each class or category

Why Use Frequency Distributions?
• A frequency distribution is a way to summarize
data
• The distribution condenses the raw data into a
more useful form...
• and allows for a quick visual interpretation of the
data

Class Intervals and Class Boundaries
• Each class grouping has the same width
• Determine the width of each interval by
largest number  smallest number
w  interval width 
number of desired intervals
• Use at least 5 but no more than 15-20 intervals
• Intervals never overlap
• Round up the interval width to get desirable
interval endpoints

Frequency Distribution Example (1 of 3)
Example: A manufacturer of insulation randomly
selects 20 winter days and records the daily high
temperature
data:
24, 35, 17, 21, 24, 37, 26, 46, 58, 30,
32, 13, 12, 38, 41, 43, 44, 27, 53, 27

• Sort raw data in ascending order:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58
• Find range: 58  12 = 46
• Select number of classes: 5 (usually between 5 and 15)
• Compute interval width: 10  46 then round up 
 5 
• Determine interval boundaries: 10 but less than 20, 20 but
less than 30, , 60 but less than 70
• Count observations & assign to classes

Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58
Interval Frequency Relative Percentage

Frequency
10 but less than 20 3 .15 15
20 but less than 30 6 .30 30
30 but less than 40 5 .25 25
40 but less than 50 4 .20 20
50 but less than 60 2 .10 10
Total 20 1.00 100

Histogram
• A graph of the data in a frequency distribution is
called a histogram
• The interval endpoints are shown on the
horizontal axis
• the vertical axis is either frequency, relative
frequency, or percentage
• Bars of the appropriate heights are used to
represent the number of observations within each
class
Histogram Example

Histograms in Excel (1 of 2)

Histograms in Excel (2 of 2)

Questions for Grouping Data into
Intervals
• How wide should each interval be?
(How many classes should be used?)
• How should the endpoints of the intervals be
determined?
– Often answered by trial and error, subject to user
judgment
– The goal is to create a distribution that is neither too
"jagged" nor too "blocky”
– Goal is to appropriately show the pattern of variation in
the data

How Many Class Intervals?
• Many (Narrow class intervals) 3.5
– may yield a very jagged distribution 3

2.5
with gaps from empty classes
Frequency
2
1.5
– Can give a poor indication of how 1
0.5
frequency varies across classes 0
4
8
12
16
20
24
28
32
36
40
44
48
52
56
60
More
Temperature
• Few (Wide class intervals)

– may compress variation too much
and yield a blocky distribution
– can obscure important patterns of
variation.

The Cumulative Frequency
Distribution
Data in ordered array:
12, 13, 17, 21, 24, 24, 26, 27, 27, 30, 32, 35, 37, 38, 41, 43, 44, 46, 53, 58
Cumulative Cumulative
Class Frequency Percentage
Frequency Percentage
10 but less than 20 3 15 3 15
20 but less than 30 6 30 9 45
30 but less than 40 5 25 14 70
40 but less than 50 4 20 18 90
50 but less than 60 2 10 20 100
Total 20 100 blank blank

The Ogive Graphing Cumulative
Frequencies

Scatter Diagrams
• Scatter Diagrams are used for paired
observations taken from two numerical
variables
• The Scatter Diagram:
– one variable is measured on the vertical axis
and the other variable is measured on the
horizontal axis

Scatter Diagram Example

Scatter Diagrams in Excel

Chapter Summary (1 of 2)
• Reviewed incomplete information in decision
making
• Introduced key definitions:
– Population vs. Sample
– Parameter vs. Statistic
– Descriptive vs. Inferential statistics
• Described random sampling
• Examined the decision making process

Chapter Summary (2 of 2)
• Reviewed types of data and measurement levels
• Data in raw form are usually not easy to use for decision
making -- Some type of organization is needed:
– Table
– Graph
• Techniques reviewed in this chapter:
– Frequency distribution – Line chart
– Cross tables – Frequency distribution
– Bar chart – Histogram and ogive
– Pie chart – Stem-and-leaf display
– Pareto diagram – Scatter plot

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Statistics for Business and Economics

Ninth Edition, Global Edition

Copyright © 2020 Pearson Education Ltd. All Rights Reserved. Slide - 1

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• Construct and interpret graphs to describe relationships

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• A sample is an observed subset of the population

• A parameter is a specific characteristic of a population

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Values calculated using Values computed from

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Inference is the process of drawing conclusions or

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Investment Investor A Investor B Investor C Total

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• Count observations & assign to classes

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Interval Frequency Relative Percentage

20 but less than 30 6 .30 30

30 but less than 40 5 .25 25

40 but less than 50 4 .20 20

50 but less than 60 2 .10 10

Total 20 1.00 100

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– may yield a very jagged distribution 3