SOB 1040B: BUSINESS STATISTICS

LECTURE 1
INTRODUCTION TO BUSINESS STATISTICS

Business Statistics Graduate School of Business

Learning objectives
• By the end of this units, students should be able to:
• Explain the meaning of the subject statistics
• Define a variable.
• Describe the difference between a quantitative variable and a
qualitative variable.
• Describe the difference between cross-sectional data and time
series data.

Business Statistics Graduate School of Business 2

 Introduction: The nature of Statistics

• Statistics is the study of how to collect, organize, analyze and

interpret data in order to make inference and reach decisions in
the face of uncertainty.
• It is the branch of mathematics that transforms numbers into
useful information for decision makers.
• Statistics lets you know about the risks associated with making
a business decision and allows you to understand and reduce
the variation in the decision-making process.
• Statistics has its use in engineering, medicine, demography,
philosophy and many other disciplines.

Business Statistics Graduate School of Business 3

• In the business world, statistics has these important specific
uses:
1. To summarize business data
2. To draw conclusions from those data
3. To make reliable forecasts about business activities
4. To improve business processes

Business Statistics Graduate School of Business 4

Branches of statistics

• There are two main branches of statistics namely

descriptive statistics and inferential statistics.
• Descriptive statistics are the methods that help collect,
summarize, present, and analyze a set of data.
• Many of the tables and charts found in a typical presentation are the
products of descriptive methods, as are statistics such as the mean
or median of a group.
• Inferential statistics are the methods that use the data
collected from a small group to draw conclusions about a
larger group.
• When you use statistical methods to help choose which investment
from a set of investments might lead to a higher return or which
marketing strategy might lead to increased sales, you are using
inferential methods.
Business Statistics Graduate School of Business 5
Statistical terms
• Variables are characteristics of items or individuals.
• They are what you analyze when you use a statistical method.
• Examples of variables include sales, expenses by year, and net profit
• Data are the different values associated with a variable.
• Operational definitions are definitions that are universally
accepted meanings that are clear to all associated with an
analysis.
• Variable values are meaningless unless their corresponding variables
have operational definitions.

Business Statistics Graduate School of Business 6

Statistical terms
• Population consists of all the items or individuals about which
you want to reach conclusions.

• Sample is the portion of a population selected for analysis.

• Parameter is a measure that describes a characteristic of a

population.

• Statistic is a measure that describes a characteristic of a

sample
Business Statistics Graduate School of Business 7
Variable, Data and Data set
• A variable is any characteristic of a population or sample that is of
interest to us.
• Data refers to the actual values of variables. Data is basically any
recorded event. It is individual pieces of factual information recorded
and used for the purpose of analysis.
• Data set is a collection of data of individual items or elementary units
(people, households, companies etc.) on one or more variables.
• Any data set provides information about some group of individual
elements, which may be people, objects, events, or other entities.

Business Statistics Graduate School of Business

Classification of datasets
• Data sets can be classified based on:
• Number of variables
• Kind of data collected
• Timing of data collection
• Analyst’s control of data collection plan
• Let us now look at each of these classifications of dataset
one after the other beginning with number of variables.

Business Statistics Graduate School of Business 9

Number of Variables (univariate data set)
• Type of data set with just one BBA Student Annual Income (K)
variable recorded for each 1 5
elementary unit 2 15.25
3
• The type of analysis that can be 20
4 7.5
done with such data includes:
5 1.2
• Graphical analysis
6 12.5
• Landmark summaries
7 15
• Measures of dispersion
8 7.5
9 7.5
10 40
Business Statistics Graduate School of Business 10
Number of Variables (bivariate data set)
• Type of data set with two BBA Annual Age
Student Income (K)
variables recorded for each
1 5 32
elementary unit
2 15.25 35
• The type of analysis that can be 3 20 38
done with such data includes: 4 7.5 35
• Graphical analysis 5 1.2 27
• Landmark summaries 6 12.5 24
• Measures of dispersion 7 15 28
• Correlation 8 7.5 40
9 7.5 48
10 40 36

Business Statistics Graduate School of Business 11

Number of Variables
• Multivariate data set
• Data set with three or more variables recorded for each
elementary unit
• The type of analysis that can be done with such data
includes:
• Graphical analysis
• Landmark summaries
• Measures of dispersion
• Correlation
• Regression

Business Statistics Graduate School of Business 12

Example of multivariate dataset
BBA Student Annual Income (K) Gender Age

1 5 M 32
2 15.25 F 35
3 20 M 38
4 7.5 F 35
5 1.2 M 27
6 12.5 F 24
7 15 M 28
8 7.5 F 40
9 7.5 F 48
10 40 M 36
Business Statistics Graduate School of Business 13
Kind of data
• Quantitative data are values of a variable that are recorded as
meaningful numbers.
• Quantitative variables are sometimes referred to as the numerical
variables.
• Quantitative data of two forms:
1. Discrete variables that can assume values only from a list of specific
numbers.
• These have numerical values that arise from a counting process.
• Examples of discrete variables include number of children in a
household, number of power cuts in Chainda in June 2023, number
of students in SOB 1040B class.
Business Statistics Graduate School of Business 14
Kind of data
• Under this classification, data can be classified as either being:

1. Quantitative data, or

2. Qualitative data.

• Let us now look at each of these.

Business Statistics Graduate School of Business 15

Kind of data
2. Continuous variable are variables that are not restricted
to a simple list of numbers.
• Continuous variables produce numerical responses that
arise from a measuring process.
• Examples of continuous variables include income,
price, distance to the market, time you wait for teller
service at a bank and so on.

Business Statistics Graduate School of Business 16

Kind of data
• Qualitative data are nonnumerical observations that are
assigned numbers to help classify them in categories
• Categorical variables have values that can only be placed into
categories such as yes and no.
• We can only report the proportion or percentage of all
observations that fall into a particular category
• Examples include variables such as marital status, race, sex,
occupation, etc.

Business Statistics Graduate School of Business 17

Kind of data-Example on types of variables
Question Response Data type

Do you currently have a profile on Facebook? Yes No Categorical

How many text messages have you sent in __________________ Quantitative (Discrete)
the past week?

How long did it take to download a video ____________ Seconds Quantitative (Continuous)
game?

Business Statistics Graduate School of Business 18

Kind of data-Measurement Scales
• The values for variables can themselves be classified by the
level of measurement, or measurement scale.
• We use the terms nominal scale and ordinal scale to
describe the values for a categorical variable and use the
terms interval scale and ratio scale to describe numerical
values.
• A nominal scale classifies data into distinct categories in
which no ranking is implied.
• An ordinal scale classifies values into distinct categories in
which ranking is implied.

Business Statistics Graduate School of Business 19

Kind of data-Measurement Scales
• An interval scale is an ordered scale in which the difference
between measurements is a meaningful quantity but does
not involve a true zero point.
• A ratio scale is an ordered scale in which the difference
between the measurements involves a true zero point, as in
height, weight, age, or salary measurements.

Business Statistics Graduate School of Business 20

Timing of data collection
• Cross-Sectional
• Data collected at the same or approximately the same point in
time.
• For example, suppose that a bank wishes to analyze last month’s
cell phone bills for its employees. Then, because the cell phone
costs given by these bills are for different employees in the same
month, the cell phone costs are cross-sectional data.
• Time-Series
• Data measurements at successive points in time. E.g., inflation.

Business Statistics Graduate School of Business 21

Timing of data collection
• Longitudinal or panel data
• Data measured for the same elementary units at different times.

Business Statistics Graduate School of Business 22

Control of data collection plan
• Primary data
• Data collected by the analyst or on behalf of the analyst but the
analyst is involved in planning the study and data collection
protocol. Primary data are data collected by an individual directly
through personally planned experimentation or observation.
• Advantage of primary data
• Analyst can target exactly what is needed
• Disadvantage of primary data
• Expensive and time-consuming

Business Statistics Graduate School of Business 23

Control of data collection plan
• Secondary data
• Data collected by others for their own purposes
• Advantage of secondary data
• Often inexpensive or even free
• Disadvantage of secondary data
• Analyst might not find all the data that is needed

Business Statistics Graduate School of Business 24

END OF LECTURE 1

Business Statistics Graduate School of Business 25