1

Chapter 1: Data and Statistics

1.1

Applications in Business and Statistics

Growth of technology has lead to a large increase in the amount of data collected
in the business worlds. Managers and others in business need tools to work with
this data. The best way to shown the importance of statistics is to give some
examples in a variety of fields.
1.1.1

Accounting

1. Audits of clients: statistically checking the accuracy of records and accounts.

1.1.2

Finance

1. Investment recommendations: How likely is it that this project will succeed?

2. Forecasting of stock and commodity prices. Is this price low or high, you
need statistics to answer this.
1.1.3

Marketing

1. Check the accuracy of registers in supplying data.

2. Will more advertising increase sales?
1.1.4

Economics

1. Forecasts of GDP or other aspects of the economy.

1.2

Data

Definition 1 Data: Facts or figures collected, analyzed, and summarized from

presentation and interpretation.
Definition 2 Data Set: The data collected for a particular study.
1.2.1

Elements, Variables, and Observations

Definition 3 Elements: These are things which data are collected about.
Definition 4 Variable: Is a characteristic of interest about the elements.
Definition 5 Observation: The set of all characteristics obtained for an element is called an observation.

Consider the following data set.

Name Age (yrs) Weight (lbs) Height (in) Gender
Bob
34
200
72
M
Nancy 25
100
60
F
Tom
50
185
74
M
Betty
45
115
65
F
The list of names in the left hand column are the elements of interest.
The list of names in columns 2 through 5 (age,weight, height, and gender)
are the variables.
Each individual row of the data set represents an observation.
1.2.2

Scales of Measurement

A scale of measurement determines the amount of information collected and

indicates the importance of the data.
Definition 6 Nominal Scale: Data is in the form of names or labels used to
identify an attribute of an element.
The gender variable in the above data set is on a nominal scale (M or F).
Definition 7 Ordinal Scale: If the data exhibits the properties of nominal
data and the order or rank of the data is meaningful.
Surveys often have data in this form. For example, rating things on a scale
of 1 to 5. This data can be in words or numbers.
Definition 8 Interval Scale: If the data exhibits the properties of ordinal
data and the interval between observations is expressed in terms of fixed units
of measure.
These data are typically numerical and are used often. The most well known
data of this type is SAT scores, they only come in blocks of 10. (1050,1250,980,1140).
Definition 9 Ratio Scale: If the data exhibits the properties of interval data
and the ratio of two values is meaningful.
Data such as height and weight are ratio scale data. They all contain a zero
point of reference. Most data is of this form. The ratio aspect of the data comes
in when two values are compared. If I wanted to compare the ages of Tom and
Nancy in the data set above, I would see that Tom is 50 and Nancy is 25. The
ratio property tells us that
50
=2
25
which means that Tom is two times or twice as old as Nancy.

1.2.3

Qualitative and Quantitative Data

We can also describe data as qualitative or quantitative.

Definition 10 Qualitative Data: Label or names to identify a characteristic
of an element. Also called categorical data. They follow the nominal or ordinal
scale of measurement. These data identify direction.
Definition 11 Quantitative Data: Numerical values which indicate how much
or how many. These data use interval or ratio measurement scales.
Definition 12 Qualitative Variable: Variable made up of qualitative data.
Examples: Gender, True or False, 1 to 5 scale, etc.
Definition 13 Quantitative Variable: Variable made up of quantitative data.
Examples: Age, Height, Sales, Wages, etc.
1.2.4

Cross-Sectional and Time Series Data

With the importance placed on forecasting it is important to know the difference

between cross-sectional and time series data.
Definition 14 Cross-Sectional Data: Data collected at or about the same
point in time.
Definition 15 Time-Series Data: Data collected over several time periods.
Forecasted can be made on time-series data.

1.3

Data Sources

1. Existing Sources
2. Survey Data
3. Experimental Studies

1.4

Descriptive Statistics

Definition 16 Descriptive Statistics: This is the area of statistics which

summarizes information about data.
These statistics can come in tables, graphs, or numbers. We are going to
learn all three. Graphs and tables are the subject of chapter 2 and the numerical
statistics are covered in chapter 3.

1.5

Statistical Inference

1. Definition 17 Population: A population is a collection of all items to

be studied.
Definition 18 Sample: A sample is a subset of a population.
By nature, we would like to study populations directly, however, time and
resources usually constrain us to the study of samples from a population.
Definition 19 Statistical Inference: This is process of generalizing
characteristics of samples onto the entire population.
Many facts are derived from statistical inference. Some of these facts
include the unemployment rate, GDP, the CPI, etc. In all cases, data
is taken from a portion of the economy and the facts are stated to be a
general state of the entire economy.

1.6

Statistical Analysis Using Microsoft Excel

1. Entering Data
2. Entering Functions and Formulas
3. Apply Tools
I will work through some examples.