What Is Statistics?

Chapter 1

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Learning Objectives
LO1-1 Explain why knowledge of statistics is important.
LO1-2 Define statistics and provide an example of how
statistics is applied.
LO1-3 Differentiate between descriptive and inferential
statistics.
LO1-4 Classify variables as qualitative or quantitative, and
discrete or continuous.
LO1-5 Distinguish between nominal, ordinal, interval, and
ratio levels of measurement.
LO1-6 List the values associated with the practice of
statistics.

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 LO1-1 Explain why knowledge
of statistics is important.

Uses of Statistics
1. Statistics is one of the tools used to make
decisions in business.
2. We apply statistical concepts in our lives.
3. As a student of business or economics, it
is important to have a basic knowledge of
statistics and the skills to organize,
analyze, transform, and present the data.

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 LO1-1

Why Study Statistics?

1. Numerical information is everywhere.
2. Statistical techniques are used to make decisions that
affect our daily lives.
3. The knowledge of statistical methods will help you
understand how decisions are made and give you a
better understanding of how they affect you.

No matter what line of work you select, you will find

yourself faced with decisions where an understanding of
data analysis is helpful.

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 LO1-2 Define statistics and provide an
example of how statistics is applied.

Who Uses Statistics?

Statistical techniques are used extensively

by marketing, accounting, quality control,
consumers, professional sports people,
hospital administrators, educators,
politicians, physicians, etc.

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 LO1-3 Differentiate between descriptive
and inferential statistics.

Types of Statistics –
Descriptive and Inferential
Statistics
Descriptive Statistics - methods of organizing,
summarizing, and presenting data in an informative
way

EXAMPLE 1: There are a total of 46,837 miles of interstate highways in the

United States. The interstate system represents only 1% of the nation’s total
roads but carries more than 20% of the traffic. The longest is I-90, which
stretches from Boston to Seattle, a distance of 3,099 miles.

EXAMPLE 2: The average person spent $103.00 on traditional Valentine’s

Day merchandise in 2013. This is an increase of $0.50 from 2012.

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 LO1-3

Types of Statistics –
Descriptive and Inferential
Statistics

Inferential Statistics - A decision, estimate,

prediction, or generalization about a
population based on a sample.

Note: In statistics the word population and sample have a broader

meaning. A population or sample may consist of individuals
or objects.

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 LO1-3

Population versus Sample

A population is a collection of all possible individuals, objects, or
measurements of interest.

A sample is a portion, or part, of the population of interest.

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 LO1-3

Why take a sample instead of

studying every member of the
population?
1. Prohibitive cost of census
2. Destruction of item being studied may
be required
3. Not possible to test or inspect all
members of a population being studied

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 LO1-3

Usefulness of a Sample in
Learning about a Population
Using a sample to learn something about a
population is done extensively in business,
agriculture, politics, and government.

EXAMPLE: Television networks constantly monitor

the popularity of their programs by hiring Nielsen
and other organizations to sample the preferences
of TV viewers.

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 LO1-4 Classify variables as qualitative or
quantitative, and discrete or continuous.

Types of Variables

A. Qualitative or attribute variable - the

characteristic being studied is nonnumeric
EXAMPLES: Gender, religious affiliation, type of automobile
owned, state of birth, eye color

B. Quantitative variable - information is reported

numerically
EXAMPLES: balance in your checking account, minutes
remaining in class, or number of children in a family

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 LO1-4

Quantitative Variables -
Classifications
Quantitative variables can be classified as either discrete
or continuous.

A. Discrete variables can only assume certain

values and there are usually “gaps” between values.

EXAMPLE: the number of bedrooms in a house or the number of

hammers sold at the local Home Depot (1,2,3,…,etc.)

B. Continuous variables can assume any value within

a specified range.

EXAMPLE: the pressure in a tire, the weight of a pork chop, or the

height of students in a class
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 LO1-4

Summary of Types of Variables

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 LO1-5 Distinguish between nominal, ordinal,
interval, and ratio levels of measurement.

Four Levels of Measurement

Nominal level - data that is classified Interval level - similar to the ordinal
into categories and cannot be level, with the additional property that
arranged in any particular order meaningful amounts of differences
between data values can be
determined. There is no natural zero
EXAMPLES: eye color, gender, religious point.
affiliation
EXAMPLE: temperature on the Fahrenheit
scale

Ordinal level – data arranged in

some order, but the differences Ratio level - the interval level with an
inherent zero starting point.
between data values cannot be Differences and ratios are meaningful
determined or are meaningless for this level of measurement.
EXAMPLE: During a taste test of 4 soft drinks,
Mellow Yellow was ranked number 1, Sprite EXAMPLES: monthly income of surgeons, or
number 2, Seven-up number 3, and distance traveled by manufacturer’s
Orange Crush number 4. representatives per month

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 LO1-5

Nominal-Level Data
Properties:
1. Observations of a qualitative variable
can only be classified and counted.
2. There is no particular order to the
labels.

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 LO1-5

Ordinal-Level Data
Properties:
1. Data classifications are
represented by sets of labels or
names (high, medium, low) that
have relative values.
2. Because of the relative values,
the data classified can be
ranked or ordered.

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 LO1-5

Interval-Level Data
Properties:
1. Data classifications are ordered according to the amount of
the characteristic they possess.
2. Equal differences in the characteristic are represented by
equal differences in the measurements.

Example: Women’s dress sizes

(as shown in the table to the right)

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 LO1-5

Ratio-Level Data
 Practically all quantitative data is recorded on the ratio
level of measurement.
 Ratio level is the “highest” level of measurement.

Properties:
1. Data classifications are ordered according to the amount of the
characteristics they possess.
2. Equal differences in the characteristic are represented by equal
differences in the numbers assigned to the classifications.
3. The zero point is the absence of the characteristic and the ratio
between two numbers is meaningful.

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 LO1-5

Why is the Level of Measurement

Important?
1. The level of measurement dictates the
calculations that can be done to
summarize and present the data.
2. It is used to determine the statistical tests
that should be performed on the data.

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 LO1-5

Summary of the Characteristics for

Levels of Measurement

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 LO1-6 List the values associated
with the practice of statistics.

Ethics and Statistics

 Practice of statistics should be based on
integrity and honesty when:
1. Collecting data
2. Analyzing data
3. Reporting results and conclusions based on
the data

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