PROBABILITY and STATISTICS

Math-102
Spring semester- 2011

Romasa Dawood
Romasa.dawood@gift.edu.pk

P.S. Lecture slides are not substitute for the class lecture or course books.
 STATISTICS
What is Statistics?
 Statistics
 The consumer price index(CPI) fell by .3% in April (CNBC, May 16, 2003)
 From the database of 3458 stock funds, only 172 funds earned an A rating
(Business week, January 27, 2003).
 At Marriott International, more than 40% of managers worked their way
up through the ranks (Fortune, January 20, 2003)
 In Spring Semester, Math-102 class size in GIFT University is ------(GIFT
News, march 8,2011).

Numerical facts in preceding statements (.3%, 172, 40%....) are

called statistics.
 STATISTICS
Application in Business and Economics

 Accounting
 Finance

 Marketing
 Production

 Economics
 STATISTICS
Statistics is the art and science of collecting,
organizing, analyzing, presenting and interpreting
data.

Assignment Q: Keeping in mind the above mentioned

definition. Explain to your ‘Nanni Amma’, who faces
difficulty in understanding technical terms and
lengthy details, how you found out that, the number of
female staff in GIFT university, Gujranwala has
increased substantially over the past 4 years.
 STATISTICS
Types of Statistics

Descriptive Statistics
It consists of methods of organizing, summarizing, and
presenting data in an informative way.
Inferential Statistics
The methods used to determine something about the
population on the basis of a sample.
 STATISTICS
CONCEPTS

Data
Data are those facts or figures that we collect, analyze and summarize for
presentation and interpretation.
Elements/member
Elements are the entities on which data is collected.
Variable
Variable is a characteristic of interest for the elements.
Observation
The set of measurements obtained for a particular element is called an observation.
Population
The set of all units of interest (finite or infinite). E.g. all students at GIFT University,
Gujranwala.
Sample
A subset of the population actually observed. E.g. students in MATH- 102 class.
 Types of Data
Data: A Set of measurements
Qualitative Data
Quantitative Data
Continuous
Discreet
Based on the time they are collected, data can be classified
as either cross-section, time series or panel data
Cross-section Data
Time series Data
Panel Data
 Types of Data
Data: A Set of measurements
Qualitative Data
Qualitative Data includes labels or names used to identify an attribute
of each element.
 E.g. Gender, Hair Color, Attitude towards war or capital punishment.

Quantitative Data
Quantitative Data requires numeric values that indicate how much or
how many. A variable that can be measured numerically is called
quantitative variable.
Discrete, e.g. number of children, number of cars owned by a family
Continuous. e.g. distance, temperature, time( between 30 and 40
mins), length, height
 Types of
Data: A Set of measurements
Data
Cross-Sectional Data
A cross-sectional data set consists of a sample of individuals,
households, firms, cities, states, countries, or a variety of other
units, taken at a given point in time. E.g. the information on
incomes of 100 families for 2005 is an example of cross-section data.
Time-series Data
A time series data set consists of observations on a variable or
several variables over time. E.g. stock prices, money supply,
consumer price index, gross domestic product, annual homicide
rates, and cell phones sales figures.
Panel Data
A panel data (or longitudinal data) set consists of a time series for
each cross-sectional member in the data set.
Cross section Data
Time Series Data
Panel Data
 Levels of Measurement
Data: A Set of measurements
There’re four types of levels of measurement
1. Nominal level data
2. Ordinal Level data
3. Interval Level data
4. Ratio level data
 Levels of Measurement
Data: A Set of measurements
Qualitative Data
Nominal, e.g. Binary (head, Tail), (Male, Female),
hair color: black, golden, brown.
Ordinal, e.g. attitude to war or capital punishment:
Strongly agree, Agree, Neutral, disagree, strongly
disagree.
A qualitative variable is a variable with
qualitative data.
Example on the Levels of Measurement
Pizza Hut, Gujranwala asks their customers to rate the quality of services.

How would you rate the quality of our services?

Poor….Fair….Average……Good ….Excellent
or
Pizza Hut, Gujranwala asks respondents to rate the quality of the service
on a five-point scale (1-5) as:
1 for poor
2 for fair
3 for average
4 for good
5 for excellent
We can reverse the coding method 1 for excellent and 5 for poor.
 Levels of Measurement
Data: A Set of measurements
Quantitative Data
Interval, e.g. Fahrenheit temperature
Ratio (real zero), e.g. distance, number of children

A quantitative variable is a variable with quantitative

data.
Interval level Data
Quantitative Data
Interval, e.g. Fahrenheit temperature

 The third level of Data is interval data. One can say the temperature
scales. E.g. 25 0C is warmer than 200C by exactly 50C. Also we can say
that 250C is cooler than 300C by 50C.
But we cannot say that 300C is twice as warm as 150C because
temperature measured in Celsius does not have an absolute zero
point. That is the zero point is arbitrarily chosen and 00C shows
some level of temperature. If we consider Fahrenheit in which 32 F
corresponds to 00C and 68 F corresponds to 20 C and 500C
corresponds 10 F then we cannot say that 200c is twice as warm as
100C
Interval level Data
Interval Data provide not only greater than or less
than information, but also details on how much
greater than or less than.
Interval data have no absolute zero point. So that we
cannot use comparisons such as ‘twice as many’ or
‘half as much’ with interval data.
Ratio level Data
How many e-mail messages did you send yesterday?
How old are you?
The answer for both questions provides details about
how much greater or less. They have an absolute zero
point: 0 message means no message.
Sources of Data
Existing Sources
Internal sources; such as companies own personnel files accounting
records.
External sources; Organizations that specializes in collecting and
maintaining data make available substantial amounts of business and
economic data. E.g. Dow jones & company, Dun and Bradstreet,
Bloomberg provide extensive business database to clients.
Internet
Government Agencies
Statistical Studies
At times data needed for a particular study is not available through
existing sources. Then usually statistical studies are conducted. They’re
either experimental or observational.
Experimental study
How a new drug affects blood pressure?
Observational/Non experimental study
Studies of smokers and non smokers are observational
studies as researchers do not attempt to control or
determine who will smoke and who will not smoke.
 Example 1

1. How many elements this data set contains?

2. Which of the variable are quantitative and which are qualitative?
3. What is the average CD capacity for the sample?
4. What percentage of the minisystem provides an FM tuning rating
of very good or excellent?
5. What percentage of the minisystem includes two tape decks?
 Example 2
State whether each of the following variable is qualitative
or quantitative and indicate its measurement scale.
1. Age
2. Gender
3. Class Rank
4. Make of Automobile
5. Number of people favoring the death penalty
6. Annual Sales
7. Soft drink size ( small, medium, large)
8. Employee Classification ( GS1 through GS18)
9. Earning per share
10. Method of payment( Cash, Check, Credit Card)
Example 3.
What is your monthly pocket money?
0---1000
1500-2500
3000-4500
5000 & above
Example 3
Regarding the monthly pocket money
You may think of an absolute zero point for pocket
money as no pocket money at all
You may think of comparisons, 1500 Rs is twice as
much as 3000 Rs.
That leads you to deciding that pocket monies are
ratio data.
But it is not Ratio Data
 Example 3
Reason

Respondents are asked to place themselves into one of

the four categories of pocket money, so we can code
these categories from 1 to 4 with 1 for the lowest and 4
for the highest amount.
If you are in the second category and Ayesha in the
first we know that your income is higher than Ayesha,
but we don’t know exactly how much higher, we
cannot say as much as twice, therefore, in this case, we
are collecting ‘Ordinal Data’.
References
Lind, A. Douglas, William G. Marchal and Samuel A.
Wathen, Basic Statistics for Business & Economics,
13th Edition, McGraw Hill/Irwin Publishing.

Mann, Prem S., Introductory Statistics, Sixth Edition

2005, John Wiley & Sons, Inc., Noida.

Anderson, Sweeney, Williams “Statistics for Business

and Economics” 9th edition 2005 Thomson South-
Western