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Applied Statistics in Business & Economics 2nd edition David P. Doane and Lori E. Seward


Copyright Š 2009 by The McGraw-Hill Companies, Inc. All rights reserved.


Overview of Statistics


What is Statistics? Why Study Statistics? Uses of Statistics Statistical Challenges Writing and Presenting Reports Critical Thinking Statistics: An Evolving Field 1-2

What is Statistics? • Statistics is the science of collecting, organizing, analyzing, interpreting, and presenting data. • A statistic is a single measure (number) used to summarize a sample data set. For example, the average height of students in this class. • A statistician is an expert with at least a master’s degree in mathematics or statistics or a trained professional in a related field. 1-3

Why Study Statistics? Communication Understanding the language of statistics facilitates communication and improves problem solving.

Computer Skills The use of spreadsheets for data analysis and word processors or presentation software for reports improves upon your existing skills.


Why Study Statistics? Information Management Statistics help summarize large amounts of data and reveal underlying relationships.

Technical Literacy Career opportunities are in growth industries propelled by advanced technology. The use of statistical software increases your technical literacy. 1-5

Why Study Statistics? Career Advancement Statistical literacy can enhance your career mobility.

Quality Improvement Statistics helps firms oversee their suppliers, monitor their internal operations and identify problems.


Uses of Statistics Two primary kinds of statistics: Descriptive statistics – the collection, organization, presentation and summary of data. Inferential statistics – generalizing from a sample to a population, estimating unknown parameters, drawing conclusions, making decisions.


Uses of Statistics

Overview of Statistics

(Figure 1.1)

Statistics Collecting and Describing Data Sampling and Surveys


Visual Displays

Numerical Probability Models Summaries

Making Inferences from Samples Testing Estimating Regression Parameters Hypotheses and Trends

Quality Control

Uses of Statistics Auditing Sample from over 12,000 invoices to estimate the proportion of incorrectly paid invoices.

Marketing Identify likely repeat customers for and suggests co-marketing opportunities based on a database of 5 million Internet purchases. 1-9

Uses of Statistics Health Care Evaluate 100 incoming patients using a 42-item physical and mental assessment questionnaire.

Quality Control Initiate a triple inspection program, setting penalties for workers who produce poor-quality output. 1-10

Uses of Statistics Purchasing Determine the defect rate of a shipment and whether that rate has changed significantly over time.

Medicine Determine whether a new drug is really better than the placebo or if the difference is due to chance. 1-11

Uses of Statistics Forecasting Manage inventory by forecasting consumer demand.

Product Warranty Determine the average dollar cost of engine warranty claims on a new hybrid engine.


Statistical Challenges The Ideal Data Analyst • Is technically current (e.g., software-wise). • Communicates well. • Is proactive. • Has a broad outlook. • Is flexible. • Focuses on the main problem. 1-13

Statistical Challenges The Ideal Data Analyst • Meets deadlines. • Knows his/her limitations and is willing to ask for help. • Can deal with imperfect information. • Has professional integrity.


Statistical Challenges Working with Imperfect Data State any assumptions and limitations and use generally accepted statistical tests to detect unusual data points or to deal with missing data.

Dealing with Practical Constraints You will face constraints on the type and quantity of data you can collect.


Statistical Challenges Upholding Ethical Standards Know and follow accepted procedures, maintain data integrity, carry out accurate calculations, report procedures, protect confidentiality, cite sources and financial support.

Using Consultants Hire consultants at the beginning of the project, when your team lacks certain skills or when an unbiased or informed view is needed. 1-16

Statistical Challenges Skills Needed for Success in Business (Table 1.1)

For initial job success


For long-range job success

Common weaknesses


Managerial accounting

Communication skills

Accounting principles

Managerial economics

Writing skills


Managerial finance



Oral communication

Unrealistic expectations

Writing and Presenting Reports Rules for Power Writing • Outline the report before you begin. • Complete the report in sections. • Ask trusted peers to review the report and make any necessary revisions. • Be prepared to make multiple revisions.


Writing and Presenting Reports Writing Style • Answer research question succinctly. • List most important results first. • Include section headings and avoid lengthy paragraphs. • Provide clear data sources. • Use appendices for technical information. • Be stylistically consistent. 1-19

Writing and Presenting Reports Avoid Jargon • Present technical concepts so that others can understand them.

Make It Attractive • Reports should have a title page, descriptive title, date, and author names.


Writing and Presenting Reports Watch Your Spelling and Grammar • Get someone you trust to red-pencil your work. Don’t rely on software to catch all spelling and grammar errors.


Writing and Presenting Reports Organizing a Technical Report Typical business report style includes: • Executive Summary (1 page maximum) - Briefly describe task and goals, data and data sources, methods that were used, main findings and any limitations. • Introduction (1 to 3 paragraphs) - Statement of the problem - Data sources and definitions - Methods utilized 1-22

Writing and Presenting Reports Organizing a Technical Report Typical business report style includes: • Body of the Report (as long as necessary) - Discussion, explanations, interpretations - Tables and graphs, as needed • Conclusions (1 to 3 paragraphs) - Statement of findings (in order of importance) - Limitations (if necessary) - Future research suggestions 1-23

Writing and Presenting Reports Organizing a Technical Report Typical business report style includes: • Bibliography and Sources • Appendices (if needed for lengthy or technical material)


Writing and Presenting Reports Tables and Graphs • Tables should be embedded in the narrative near the paragraph in which they are interpreted. • Number and title each table above the table, each graph below the graph.


Writing and Presenting Reports Rules for Presenting Oral Reports Select a few key points to convey. Use simple charts and diagrams. Emphasize using color and fonts creatively. Avoid gratuitous jokes. Have backup slides or transparencies. Rehearse timing. Refer audience to written report for details. 1-26

Imagine yourself in the audience.

Writing and Presenting Reports The Three Ps • Pace yourself when presenting. Take your time, introduce yourself, your data and your project. Make the first minute count. • Plan what your are going to present. Organize your ideas with an outline. Keep it simple! • Practice before presenting to get the timing right. Consider videotaping yourself or practicing in front of peers. 1-27

Writing and Presenting Reports Pictures Help Make the Point

(Figure 1.3) 1-28

Critical Thinking • Statistics is an essential part of critical thinking because it allows us to test an idea against empirical evidence. • Empirical Data represent data collected through observation and experiments.


Critical Thinking Pitfall 1: Making Conclusions about a Large Population from a Small Sample Be careful about making generalizations from small samples (e.g., a group of 10 patients).

Pitfall 2: Making Conclusions from Nonrandom Samples Be careful about making generalizations from retrospective studies of special groups (e.g., heart attack patients). 1-30

Critical Thinking Pitfall 3: Conclusions From Rare Events Be careful about drawing strong inferences from events that are not surprising when looking at the entire population (e.g., winning the lottery).

Pitfall 4: Using Poor Survey Methods Be careful about using poor sampling methods or vaguely worded questions (e.g., anonymous survey or quiz). 1-31

Critical Thinking Pitfall 5: Assuming a Causal Link Based on Observations Be careful about drawing conclusions when no cause-and-effect link exists (e.g., most shark attacks occur between 12p.m. and 2p.m.).

Pitfall 6: Making Generalizations about Individuals from Observations about Groups Avoid reading too much into statistical generalizations (e.g., men are taller than women). 1-32

Critical Thinking Pitfall 7: Unconscious Bias Be careful about unconsciously or subtly allowing bias to color handling of data (e.g., heart disease in men vs. women).

Pitfall 8: Significance versus Importance Statistically significant effects may lack practical importance (e.g., Austrian military recruits born in the spring average 0.6 cm taller than those born in the fall). 1-33

Statistics: An Evolving Field • Statistics is a relatively young field, having been developed mostly during the 20th century. • Its mathematical frontiers continue to expand with the aid of computers. • Major recent developments include - Exploratory data analysis (EDA) - Computer-intensive statistics - Design of experiments - Robust product design - Advanced Bayesian methods - Graphical Methods…and more 1-34

Applied Statistics in Business & Economics

End of Chapter 1


Chap1-Applied Stats in Bus & Eco - Doane/Seward-2E  

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