Week 1 - Lecture Slide

Statistics for Business and Economics (14e, Metric Version)
STAT2020 BUSINESS STATISTICS

Week 1: Overview and Data visualisation
© 2020 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed
with a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
1
Statistics for
Business and Economics (14e)
Metric Version
Anderson, Sweeney, Williams, Camm, Cochran, Fry, Ohlmann
© 2020 Cengage Learning
© 2020 Cengage. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part, except for use as permitted in a license distributed with
a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use. 2
Chapter 1 - Data and Statistics

1.1 - Applications in Business and Economics
1.2 - Data
1.3 - Data Sources
1.4 - Descriptive Statistics
1.5 - Statistical Inference
AND
1.9 - Ethical Guidelines for Statistical Practice
3
What Is Statistics?
• The term statistics can refer to numerical facts such as averages, medians,
percentages, and maximums that help us understand a variety of business and
economic situations.
• Statistics can also refer to the art and science of collecting, analyzing, presenting,
and interpreting data.
4
Applications in Business and Economics (1 of 2)

Accounting
• Public accounting firms use statistical sampling procedures when conducting
audits for their clients.
Economics
• Economists use statistical information in making forecasts about the future of the
economy or some aspect of it.
Finance
• Financial advisors use price-earnings ratios and dividend yields to guide their
investment advice.
5
Applications in Business and Economics (2 of 2)

Marketing
• Electronic point-of-sale scanners at retail checkout counters are used to collect
data for a variety of marketing research applications.
Production
• A variety of statistical quality control charts are used to monitor the output of a
production process.
Information Systems
• A variety of statistical information helps administrators assess the performance of
computer networks.
6
Data and Data Sets

• Data are the facts and figures collected, analyzed, and summarized for
presentation and interpretation.
• All the data collected in a particular study are referred to as the data set for the
study.
7
Elements, Variables, and Observations

• Elements are the entities on which data are collected.
• A variable is a characteristic of interest for the elements.
• The set of measurements obtained for a particular element is called an
observation.
• A data set with n elements contains n observations.
• The total number of data values in a complete data set is the number of elements
multiplied by the number of variables.
8
Data, Data Sets, Elements, Variables, and Observations
Company Stock Exchange Annual Sales in Earnings per share

millions of dollars in dollars
Dataram NQ 73.10 0.86

EnergySouth N 74.00 1.67
Keystone N 365.70 0.86
LandCare NQ 111.40 0.33
Psychemedics N 17.60 0.13
9
Scales of Measurement (1 of 6)
• Scales of measurement include
• Nominal
• Ordinal
• Interval
• Ratio
• The scale determines the amount of information contained in the data.
• The scale indicates the data summarization and statistical analyses that are most
appropriate.
10
Nominal scale
• Data are labels or names used to identify an attribute of the element.
• A nonnumeric label or numeric code may be used.
Example
Students of a university are classified by the school in which they are enrolled using
a nonnumeric label such as Business, Humanities, Education, and so on.
Alternatively, a numeric code could be used for the school variable (e.g., 1 denotes
Business, 2 denotes Humanities, 3 denotes Education, and so on).
11
Ordinal scale
• The data have the properties of nominal data and the order or rank of the data is
meaningful.
• A nonnumeric label or numeric code may be used.
Example
Students of a university are classified by their class standing using a nonnumeric
label such as Freshman, Sophomore, Junior, or Senior.
Alternatively, a numeric code could be used for the class standing variable (e.g., 1
denotes Freshman, 2 denotes Sophomore, and so on).
12
Interval scale
• The data have the properties of ordinal data, and the interval between
observations is expressed in terms of a fixed unit of measure.
• Interval data are always numeric.
Example
Melissa has an SAT score of 1985, while Kevin has an SAT score of 1880. Melissa
scored 105 points more than Kevin.
13
Ratio scale
• Data have all the properties of interval data and the ratio of two values is
meaningful.
• Ratio data are always numerical.
• Zero value is included in the scale.
Example:
Price of a book at a retail store is $200, while the price of the same book sold
online is $100. The ratio property shows that retail stores charge twice the
online price.
14
Categorical and Quantitative Data

• Data can be further classified as being categorical or quantitative.
• The statistical analysis that is appropriate depends on whether the data for the
variable are categorical or quantitative.
• In general, there are more alternatives for statistical analysis when the data are
quantitative.
15
Categorical Data
• Labels or names are used to identify an attribute of each element
• Often referred to as qualitative data
• Use either the nominal or ordinal scale of measurement
• Can be either numeric or nonnumeric
• Appropriate statistical analyses are rather limited
16
Quantitative Data
• Quantitative data indicate how many or how much.
• Quantitative data are always numeric.
• Ordinary arithmetic operations are meaningful for quantitative data.
17
18
Cross-Sectional Data
Cross-sectional data are collected at the same or approximately the same point in
time.
Example
Data detailing the number of building permits issued in November 2013 in each of
the counties of Ohio.
19
Time Series Data (1 of 2)

Time series data are collected over several time periods.
Example
Data detailing the number of building permits issued in Lucas County, Ohio in each
of the last 36 months.
Graphs of time series data help analysts understand

• what happened in the past
• identify any trends over time, and
• project future levels for the time series
20
Time Series Data (2 of 2)

Graph of Time Series Data
21
Data Acquisition Considerations

Time Requirement
• Searching for information can be time consuming.
• Information may no longer be useful by the time it is available.
Cost of Acquisition
• Organizations often charge for information even when it is not their primary
business activity.
Data Errors
• Using any data that happen to be available or were acquired with little care can
lead to misleading information.
22
Descriptive Statistics
• Most of the statistical information in newspapers, magazines, company reports,
and other publications consists of data that are summarized and presented in a
form that is easy to understand.
• Such summaries of data, which may be tabular, graphical, or numerical, are
referred to as descriptive statistics.
Example
The manager of Hudson Auto would like to have a better understanding of the cost
of parts used in the engine tune-ups performed in her shop. She examines 50
customer invoices for tune-ups. The costs of parts, rounded to the nearest dollar,
are listed on the next slide.
23
Example: Hudson Auto Repair

Sample of Parts Cost ($) for 50 Tune-ups
• 91, 78, 93, 57, 75, 52, 99, 80, 97, 62

• 71, 69, 72, 89, 66, 75, 79, 75, 72, 76
• 104, 74, 62, 68, 97, 105, 77, 65, 80, 109
• 85, 97, 88, 68, 83, 68, 71, 69, 67, 74
• 62, 82, 98, 101, 79, 105, 79, 69, 62, 73
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Tabular Summary: Frequency and Percent Frequency
Parts Cost ($) Frequency Percent Frequency

50-59 2 4%
60-69 13 26%
70-79 16 32%
80-89 7 14%
90-99 7 14%
100-109 5 10%
TOTAL 50 100%
25
Graphical Summary: Histogram

Example: Hudson Auto
26
Numerical Descriptive Statistics

• The most common numerical descriptive statistic is the mean (or average).
• The mean demonstrates a measure of the central tendency, or central location of
the data for a variable.
• Hudson’s mean cost of parts, based on the 50 tune-ups studied is $79 (found by
summing up the 50 cost values and then dividing by 50).
27
Statistical Inference
Population: The set of all elements of interest in a particular study.
Sample: A subset of the population.
Statistical inference: The process of using data obtained from a sample to make
estimates and test hypotheses about the characteristics of a population.
Census: Collecting data for the entire population.
Sample survey: Collecting data for a sample.
28
Process of Statistical Inference

Example: Hudson Auto
29
Ethical Guidelines for Statistical Practice (1 of 2)

• In a statistical study, unethical behavior can take a variety of forms including:
• Improper sampling
• Inappropriate analysis of the data
• Development of misleading graphs
• Use of inappropriate summary statistics
• Biased interpretation of the statistical results
• One should strive to be fair, thorough, objective, and neutral as you collect,
analyze, and present data.
• As a consumer of statistics, one should also be aware of the possibility of
unethical behavior by others.
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Ethical Guidelines for Statistical Practice (2 of 2)

• The American Statistical Association developed the report “Ethical Guidelines for
Statistical Practice”.
• It contains 67 guidelines organized into 8 topic areas:
• Professionalism
• Responsibilities to Funders, Clients, and Employers
• Responsibilities in Publications and Testimony
• Responsibilities to Research Subjects
• Responsibilities to Research Team Colleagues
• Responsibilities to Other Statisticians/Practitioners
• Responsibilities Regarding Allegations of Misconduct
• Responsibilities of Employers Including Organizations, Individuals, Attorneys, or
Other Clients
31
Chapter 2 - Descriptive Statistics: Tabular and Graphical Displays

2.1 - Summarizing Data for a Categorical Variable
• Categorical data use labels or names to identify categories of like items.
2.2 - Summarizing Data for a Quantitative Variable
• Quantitative data are numerical values that indicate how much or how many.
2.3 - Summarizing Data for Two Variables Using Tables

2.4 - Summarizing Data for Two Variables Using Graphical Displays
2.5 - Data Visualization: Best Practices in Creating Effective Graphical
Displays
a certain product or service or otherwise on a password-protected website or school-approved learning management system for classroom use.
32
Summarizing Categorical Data

• Frequency Distribution
• Relative Frequency Distribution
• Percent Frequency Distribution
• Bar Chart
• Pie Chart
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Frequency Distribution
A frequency distribution is a tabular summary Rating Frequency
of data showing the number (frequency) of Poor 2

observations in each of several non- Below Average 3
overlapping categories or classes. Average 5
Above Average 9
Example: Marada Inn
Excellent 1
Guests staying at the Marada Inn were asked Total 20
to rate the quality of their accommodations as
being excellent, above average, average,
below average, or poor.
34
Relative Frequency and Percent Frequency Distributions (1 of 2)

Example: Marada Inn
• The relative frequency of a class is
the fraction or proportion of the Relative Percent
total number of data items belonging Rating Frequency Frequency
to the class. Poor 0.10 10%
Below Average 0.15 15%
Average 0.25 25%
Above Average 0.45 45%
Excellent 0.05 5%
• The percent frequency of a class is Total 1.00 100%
the relative frequency multiplied by
100.
35
Bar Chart
• A bar chart is a graphical display for
depicting qualitative data.
• A frequency, relative frequency, or
percent frequency scale can be used
for the other axis (usually the vertical
axis).
• Using a bar of fixed width drawn
above each class label, we extend the
height appropriately.
• The bars are separated to emphasize
the fact that each class is a separate
category.
36
Pie Chart
• The pie chart is a commonly used graphical
display for presenting relative frequency and
percent frequency distributions for
categorical data.
• First draw a circle; then use the relative
frequencies to subdivide the circle into
sectors that correspond to the relative
frequency for each class.
• Because there are 360 degrees in a circle, a
class with a relative frequency of 0.25 would
consume 0.25(360) = 90 degrees of the
circle.
37
Example: Marada Inn

• Half of the customers surveyed gave
Marada a quality rating of “above
average” or “excellent” (look at the
left side of the pie). This might
please the manager.
• For each customer who gave an
“excellent” rating, there were two
customers who gave a “poor” rating
(looking at the top of the pie). This
should displease the manager.
38
Summarizing Quantitative Data

• Frequency Distribution
• Relative Frequency and Percent Frequency Distributions
• Dot Plot
• Histogram
• Cumulative Distributions
• Stem-and-Leaf Display
39
Frequency Distribution – Quantitative Data (1 of 2)

The manager of Hudson Auto would like to gain a better understanding of the cost of
parts used in the engine tune-ups performed in the shop. She examines 50 customer
invoices for tune-ups. The costs of parts, rounded to the nearest dollar, are shown
below.
40
Frequency Distribution – Quantitative Data (2 of 2)

Example: Hudson Auto Repair Part Cost ($) Frequency
If we choose six classes the 50-59 2
approximate class width = (109 – 60-69 13
50)/6 = 9.83 or about 10. 70-79 16
80-89 7
90-99 7
100-109 5
Total 50
41
Relative Frequency and Percent Frequency Distributions (2 of 2)

Insights Relative Percent
• Only 4% of the parts costs are in the Parts Cost ($) Frequency Frequency
$50-59 class. 50-59 0.04 = 2/50 4 = .04(100)
60-69 0.26 26
• 30% of the parts costs are under $70. 70-79 0.32 32
80-89 0.14 14
• The greatest percentage (32% or almost
90-99 0.14 14
one-third) of the parts costs are in the
$70-79 class. 100-109 0.10 10
Total 1.00 100
• 10% of the parts costs are $100 or more.
42
Dot Plot
• One of the simplest graphical summaries of data is a dot plot.
• A horizontal axis shows the range of data values.
• Then each data value is represented by a dot placed above the axis.
43
Histogram
• The variable of interest is placed on
the horizontal axis.
• A rectangle is drawn above each
class interval with its height
corresponding to the interval’s
frequency, relative frequency, or
percent frequency.
• Unlike a bar graph, a histogram has
no natural separation between
rectangles of adjacent classes.
44
Histograms Showing Skewness
Moderately Skewed Left Symmetric Moderately Right Skewed

A longer tail to the left Left tail is the mirror image of
Ex: Exam Scores the right tail
A Longer tail to the right
Ex: Heights of People Ex: Housing Values
45
Cumulative Distributions
Cumulative frequency distribution – Hudson Auto Repair
shows the number of items with values
Cumulative Cumulative
less than or equal to the upper limit of Cumulative Relative Percent
each class. Cost ($) Frequency Frequency Frequency
Cumulative relative frequency ≤ 59 2 .04 4
distribution – shows the proportion of ≤ 69 15 = 2+13 .30 = 15/50 30 = .30(100)
items with values less than or equal to ≤ 79 31 .62 62
the upper limit of each class.
≤ 89 38 .76 76
Cumulative percent frequency ≤ 99 45 .90 90
distribution – shows the percentage of
≤ 109 50 1.00 100
items with values less than or equal to
the upper limit of each class.
46
Stem-and-Leaf Display (1 of 3)
• A stem-and-leaf display shows both the rank order and shape of a distribution of data.
• It is similar to a histogram on its side, but it has the advantage of showing the actual
data values.
• The leading digits of each data item are
arranged to the left of a vertical line.
• To the right of the vertical line we record
the last digit for each item in rank order.
• Each line (row) in the display is referred
to as a stem.
• Each digit on a stem is a leaf.
47
Leaf Units
If we have data with values such as
• A single digit is used to define each leaf.
8.6 11.7 9.4 9.1 10.2 11.0 8.8
• In the preceding example, the leaf unit was 1.
• Leaf units may be 100, 10, 1, 0.1, and so on.
• Where the leaf unit is not shown, it is assumed to
equal 1.
• The leaf unit indicates how to multiply the stem-and-
leaf numbers in order to approximate the original data.
48
Stretched Stem-and-Leaf Display

• If we believe the original stem-and-leaf
display has condensed the data too
much, we can stretch the display
vertically by using two stems for each
leading digit(s).
• Whenever a stem value is stated twice,
the first value corresponds to leaf
values of 0 - 4, and the second value
corresponds to leaf values of 5 - 9.
49
If we have data values such as
1806, 1717, 1974, 1791, 1682, 1910, and 1838
The 82 in 1682 is rounded down to 80 and is represented as an 8.
50
Summarizing Data for Two Variables using Tables

• Thus far we have focused on methods that are used to summarize the data for
one variable at a time.
• Often a manager is interested in tabular and graphical methods that will help
understand the relationship between two variables.
• Crosstabulation is a method for summarizing the data for two variables.
• Crosstabulation can be used when:
• one variable is categorical and the other is quantitative,
• both variables are categorical, or
• both variables are quantitative
• The left and top margin labels define the classes for the two variables.
51
Crosstabulation
Example: Finger Lakes Homes
The number of Finger Lakes homes sold for each style and price for the past two
years is shown below.
Insights
• The greatest number of homes
(19) in the sample are a split-level
style and priced at less than
$250,000.
• Only three homes in the sample
are an A-Frame style and priced
at $250,000 or more.
52
Crosstabulation: Row Percentages

Converting the entries in the table into row percentages or column percentages can
provide additional insight about the relationship between the two variables.
53
Crosstabulation: Column Percentages

Example: Finger Lakes Homes
Price Range Home Style: Home Style: Log Home Style: Split Home Style: A-
Colonial Frame
Less than 60.00 30.00 54.29 80.00
250,000 dollars
Greater than or 40.00 70.00 45.71 20.00
equal to 250,000
Total 100 100 100 100
54
Crosstabulation: Simpson’s Paradox

• Data in two or more crosstabulations are often aggregated to produce a
summary crosstabulation.
• We must be careful in drawing conclusions about the relationship between
the two variables in the aggregated crosstabulation.
• In some cases the conclusions based upon an aggregated crosstabulation can
be completely reversed if we look at the unaggregated data. The reversal of
conclusions based on aggregate and unaggregated data is called Simpson’s
paradox.
55
Summarizing Data for Two Variables Using Graphical Displays

• In most cases, a graphical display is more useful than a table for recognizing
patterns and trends.
• Displaying data in creative ways can lead to powerful insights.
• Scatter diagrams and trendlines are useful in exploring the relationship
between two variables.
56
Scatter Diagram and Trendline

• A scatter diagram is a graphical presentation of the relationship between two
quantitative variables.
• One variable is shown on the horizontal axis and the other variable is shown
on the vertical axis.
• The general pattern of the plotted points suggests the overall relationship
between the variables.
• A trendline provides an approximation of the relationship.
57
Scatter Diagram (1 of 2)
A Positive Relationship A Negative Relationship No Apparent Relationship
58
Scatter Diagram (2 of 2)
Example: Panthers Football Team
The Panthers football team is interested in investigating the relationship,
if any, between interceptions made and points scored.
X = Number of Y = Number of
Interceptions Points Scored
1 14
3 24
2 18
1 17
3 30
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Example: Panthers Football Team

Insights gained from the preceding Scatter Diagram
• The scatter diagram indicates a positive relationship between the
number of interceptions and the number of points scored.
• Higher points scored are associated with a higher number of
interceptions.
• The relationship is not perfect; all plotted points in the scatter
diagram are not on a straight line.
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Statistics for Business and Economics (14e, Metric Version)

STAT2020 BUSINESS STATISTICS

Chapter 1 - Data and Statistics

Applications in Business and Economics (1 of 2)

Applications in Business and Economics (2 of 2)

Data and Data Sets

Elements, Variables, and Observations

Data, Data Sets, Elements, Variables, and Observations

Company Stock Exchange Annual Sales in Earnings per share

Dataram NQ 73.10 0.86

Categorical and Quantitative Data

Time Series Data (1 of 2)

Graphs of time series data help analysts understand

Time Series Data (2 of 2)

Data Acquisition Considerations

Example: Hudson Auto Repair

• 91, 78, 93, 57, 75, 52, 99, 80, 97, 62

Tabular Summary: Frequency and Percent Frequency

Parts Cost ($) Frequency Percent Frequency

Graphical Summary: Histogram

Numerical Descriptive Statistics

Process of Statistical Inference

Ethical Guidelines for Statistical Practice (1 of 2)

Ethical Guidelines for Statistical Practice (2 of 2)

Chapter 2 - Descriptive Statistics: Tabular and Graphical Displays

2.3 - Summarizing Data for Two Variables Using Tables

Summarizing Categorical Data

of data showing the number (frequency) of Poor 2

Relative Frequency and Percent Frequency Distributions (1 of 2)

Example: Marada Inn

Summarizing Quantitative Data

Frequency Distribution – Quantitative Data (1 of 2)

Frequency Distribution – Quantitative Data (2 of 2)

Relative Frequency and Percent Frequency Distributions (2 of 2)

Histograms Showing Skewness

Moderately Skewed Left Symmetric Moderately Right Skewed

Stretched Stem-and-Leaf Display

The 82 in 1682 is rounded down to 80 and is represented as an 8.

Summarizing Data for Two Variables using Tables

Crosstabulation: Row Percentages

Crosstabulation: Column Percentages

Crosstabulation: Simpson’s Paradox

Summarizing Data for Two Variables Using Graphical Displays

Scatter Diagram and Trendline

A Positive Relationship A Negative Relationship No Apparent Relationship

Example: Panthers Football Team

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