January 2022 Department of Management

Unit -1

An Overviews of Statistics

1.1 Meaning and Nature of Statistics

What is Statistics?

The word statistics is derived from the Italian word ‘’Statista’’ meaning ‘’statesmen’’ the team
is first used by Gottfried Achenwall (1719-1772)

Statistics: refers to the science of collecting, organizing analyzing, presenting, and

interpreting numerical data to make a wise decision based on such analysis
Statistics: aggregates of numerically expressed facts (figures) collected systematically to
achieve the pre-determined purpose
Statistics is a field of study (body of knowledge) concerned with systematic data
collection and presentation of numerical data to make a decision
‘Statistics’ means numerical information expressed in quantitative terms. This
information may relate to objects, subjects, activities, phenomena, or regions of space.
Data have no limits as to their reference, coverage, and scope
A.L. Bowley has defined statistics as the science of counting, averages, and measurement
of social organisms regarded as a whole in all its manifestations.
Justification of statistics meaning
o Numerically expressed and should be well defined
o Should be aggregates of data (facts), should be general, and do not concern individuals
in a specific manner
o Statistical data are collected for predetermined goal
o Statistical data are collected in a systematic manner
o It is a procedural investigation
Examples:
Yearly unemployment figures
Figures show salaries of teachers
Test scores of students
Monthly income of employees in a firm

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1.2 Stages of Statistical Investigation

Data Collection
o Process of obtaining measurements, counts, or any other thing by experimentation or
observation
o Refers to the foundation of statistical work
o Factors to be considered
Specifying the purpose and scope of the study
Assess if similar studies have been conducted
Determine the period of data collection, desired accuracy and design the data
collection method
Determine the data to be collected
Determine the source of data to be collected
Data Organization
o Process of editing, classifying, condensing, and presenting data using a table, graphs,
chart, etc
o The collected data may involve irrelevant figures, omissions, mistakes, incorrect
facts….
Data Presentation
o Stages of presenting grouped, organized, and analyzed data through tables graphs
charts
o The process of re-organization, classification, compilation, and summarization of data
to present it in a meaningful form.
Data Analysis
o The process of extracting relevant information from summarized organized data
without giving conclusion about the facts
o Involves complicated and sophisticated mathematical techniques
o Concerned with computation of averages (mean, mode and median) and computations
of measures of dispersion (variance, standard deviation, mean deviation)
Data Interpretation/ Inference of data
o Stage of generalizing and drawing a valid conclusion from analyzed data and
interpreted data

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o The interpretation and further observation of the various statistical measures through
the analysis of the data by implementing those methods by which conclusions are
formed and inferences made.
o In model days using software like SPSS, STATA, SAS

1.3 Why do we use statistics?

Data is everywhere
Statistical techniques are used to make much decision
No matter what your future line of work you will make the decision that will involve
data
Used to estimates unknown population characteristics
Measure’s magnitude of data variations
Contribute to managing complex & large data
Used to forecast future events
Formulates hypothesis

Applications of Statistics in Business Decision

In Economics and Business, statistics is useful in the following ways:

 helps in formulation of economic laws and policies.

 helps in studying economic problems.
 helps in compiling the national income accounts.
 helps in economic and business planning.
 used to take decisions on location and size
 helps to study demand and supply
 helps in forecasting price and inflation
 helps controlling the quality of the product or process
 helps in making marketing decisions
 helps for production, planning and inventory management.
 helps in business risk analysis
 helps in resource long term requirements, in estimating consumers Preference and
 helps in business research.

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Importance of Statistics in Different Fields

Statistics plays a vital role in every field of human activity. Statistics has an important role in
determining the existing position of per capita income, unemployment, population growth rate,
housing, schooling medical facilities in a country. Now statistics holds a central position in almost
every field like Industry, Commerce, Trade, Physics, Chemistry, Economics, Mathematics,
Biology, Botany, Psychology, Astronomy application of statistics is very wide. Now we discuss
some important fields in which statistics is commonly applied.
1. Business: Statistics play an important role in business. A successful businessman must be
very quick and accurate in decision-making. He knows that what his customers want, he
should, therefore, know what to produce and sell and in what quantities. Statistics help a
businessman to plan production according to the taste of the customers, the quality of the
products can also be checked more efficiently by using statistical methods. So, all the
activities of the businessman are based on statistical information. He can make the correct
decision about the location of the business, marketing of the products, financial resources,
etc…
2. In Economics: Statistics play an important role in economics. Economics largely depends
upon statistics. National income accounts are multipurpose indicators for economists and
administrators. Statistical methods are used for the preparation of these accounts. In
economics research, statistical methods are used for collecting and analyzing the data and
testing hypotheses. The relationship between supply and demands is studied by statistical
methods, the imports and exports, the inflation rate, the per capita income are the
problems which require good knowledge of statistic
3. In Mathematics: Statistical plays a central role in almost all-natural and social sciences.
The methods of natural sciences are most reliable but conclusions draw from them are
only probable, because they are based on incomplete evidence. Statistical help in
describing these measurements more precisely. Statistics is a branch of applied
mathematics. A large number of statistical methods like probability averages, dispersions,
estimation, are used in mathematics and different techniques of pure mathematics like
integration, differentiation, and algebra are used in statistics.
4. In Banking: Statistics play an important role in banking. The banks make use of statistics
for several purposes. The banks work on the principle that all the people who deposit their

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money with the banks do not withdraw it at the same time. The bank earns profits out of
these deposits by lending to others on interest. The bankers use statistical approaches
based on probability to estimate the numbers of depositors and their claims for a certain
day.
5. In a State Management (Administration): Statistics is essential for a country. Different
policies of the government are based on statistics. Statistical data are now widely used in
taking all administrative decisions. Suppose if the government wants to revise the pay
scales of employees because of an increase in the living cost, statistical methods will be
used to determine the rise in the cost of living. The preparation of federal and provincial
government budgets mainly depends upon statistics because it helps in estimating the
expected expenditures and revenue from different sources. So statistics are the eyes of the
administration of the state.
6. In Accounting and Auditing: Accounting is impossible without exactness. But for
decision-making purposes, so much precision is not essential the decision may be taken
based on approximation, know as statistics. The correction of the values of current assets
is made based on the purchasing power of money or the current value of it. In auditing
sampling techniques are commonly used. An auditor determines the sample size of the
book is audited based on error.
7. In Natural and Social Sciences: Statistics plays a vital role in almost all the natural and
social sciences. Statistical methods are commonly used for analyzing the results of the
experiment, testing their significance in Biology, Physics, Chemistry, Mathematics,
Meteorology, Research chambers of commerce, Sociology, Business, Public
Administration, Communication and Information Technology
8. In Astronomy: Astronomy is one of the oldest branches of statistical study; it deals with
the measurement of distance, sizes, masses, and densities of heavenly bodies using
observations. During these measurements’ errors are unavoidable so most probable
measurements are founded by using statistical methods.
9. Marketing: to know the potential demand for a certain product
10. Production operation: used to make the sample of product produced, product acceptance

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Limitations of statistics
 Statistics cannot deal with individual values rather aggregate values
 Statistics cannot deal with qualitative characteristics (attitude, perception, personality,
beauty, intelligence, courage cannot be quantified)
 Statistical conclusions are not universally true, it is not an exact science (e.g not exact
as 2+2=4) or since statistics are collected for a particular purpose, such data may not
be relevant or useful in other situations or cases
 Statistical interpretation requires high understanding and skills
 Statistics are affected by several factors
 Statistics must be reasonably accurate. Wrong figures, if analyzed, will lead to
erroneous conclusions

1.4 Types of Statistics

The two main branches of statistics are descriptive statistics and inferential statistics. Both of
these are employed in the scientific analysis of data and both are equally important for the
student.

1. Descriptive Statistics: Refers to areas of statistics concerned with methods and tools
used in data collections, organization, processing summarizing, and describing important
features of data without further inference. Mostly concerned with measures of central
tendency (mean, mode, median)
Descriptive statistics deals with the presentation and collection of data. This is usually
the first part of statistical analysis. It is usually not as simple as it sounds, and the
statistician needs to be aware of designing experiments, choosing the right focus group,
and avoid biases that are so easy to creep into the experiment. Different areas of study
require different kinds of analysis using descriptive statistics. For example, a physicist
studying turbulence in the laboratory needs the average quantities that vary over small
intervals of time. The nature of this problem requires that physical quantities be
averaged from a host of data collected through the experiment.
Descriptive statistics are very important because if we simply presented our raw data, it
would be hard to visualize what the data was showing, especially if there was a lot of it.

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Descriptive statistics, therefore, enables us to present the data in a more meaningful way,
which allows simpler interpretation of the data
2. Inferential statistics: Refers to areas of statistics (class of statistics) concerned with
methods of inferring (concluding) characteristics of a population-based on sample
results.
 Deals with the process of using data obtained from a sample to make estimates about
the characteristics or features of the population
 Inferential statistics, also known as inductive statistics, goes beyond describing a
given problem situation employing collecting, summarizing, and meaningfully
presenting the related data. Instead, it consists of methods that are used for drawing
inferences or making broad generalizations, about a totality of observations based on
knowledge about a part of that totality
 Used to support decision-makers to arrive (achieved) rational decisions under
uncertain conditions
 Inferential statistics are techniques that allow us to use these samples to make
generalizations about the populations from which the samples were drawn. It is,
therefore, important that the sample accurately represents the population
 Inferential statistics takes data from a sample and makes inferences about the
larger population from which the sample was drawn. Because the goal of
inferential statistics is to draw conclusions from a sample and generalize them to
a population, we need to have confidence that our sample accurately reflects the
population
 It is about using data from the sample and then making inferences about the larger
population from which the sample is drawn. The goal of inferential statistics is to draw
conclusions from a sample and generalize them to the population. It determines the
probability of the characteristics of the sample using probability theory. The most
common methodologies used are hypothesis tests, Analysis of variance
 Inductive statistics: -refers to the condition under which information from the sample
is used to conclude population

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Descriptive Vs Inferential Statistics

Descriptive Statistics Inferential Statistics

Concerned with describing the target Make inference from the sample and generalize the
population population
Organize, analyze and present data in
a meaningful manner Compares, test and predict the future outcome
The final result is shown in the forms
of chart, table, graph Total results are in probability score
Tries to conclude the population beyond the data
Describes data that is known available
Tool: Measures of Central Tendency
(mean, mode, median) Tool: Hypothesis test, ANOVA, ACOVA

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