Master of Business Administration Semester 1 MB0040 STATISTICS FOR MANAGEMENT- 4 Credits (Book ID: B1129)

1. (a) Statistics is the backbone of decision-making. Comment. Ans: Due to advanced communication network, rapid changes in consumer behaviour, varied expectations of variety of consumers and new market openings, modern managers have a difficult task of making quick andappropriate decisions. Therefore, there is a need for them to depend more upon quantitative techniques like mathematical models, statistics, operations research and econometrics.

Decision making is a key part of our day-to-day life. Even when we wish to purchase a television, we like to know the price, quality, durability, and maintainability of various brands and models before buying one. As you can see, in this scenario we are collecting data and making an optimum decision. In other words, we are using Statistics. Again, suppose a company wishes to introduce a new product, it has to collect data on market potential, consumer likings, availability of raw materials, feasibility of producing the product. Hence, data collection is the back-bone of any decision making process. Many organizations find themselves data-rich but poor in drawing information from it. Therefore, it is important to develop the ability to extract meaningful information from raw data to make better decisions. Statistics play an important role in this aspect. Statistics is broadly divided into two main categories. Below Figure illustrates the two categories. The two categories of Statistics are descriptive statistics and inferential statistics. Descriptive Statistics: Descriptive statistics is used to present the general description of data which is summarized quantitatively. This is mostly useful in clinical research, when communicating the results of experiments. Inferential Statistics: Inferential statistics is used to make valid inferences from the data which are helpful in effective decision making for managers or professionals. Statistical methods such as estimation, prediction and hypothesis testing belong to inferential statistics. The researchers make deductions or conclusions from the collected data samples regarding the characteristics of large population from which the samples are taken. So, we can say Statistics is the backbone of decision-making

(b) Statistics is as good as the user. Comment.

Statistics is used for various purposes. It is used to simplify mass data and to make comparisons easier. It is also used to bring out trends and tendencies in the data as well as the hidden relations between variables. All this helps to make decision making much easier. Let us look at each function of Statistics in detail.

1. Statistics simplifies mass data: The use of statistical concepts helps in simplification of complex data. Using statistical concepts, the managers can make decisions more easily. The statistical methods help in reducing the complexity of the data and consequently in the understanding of any huge mass of data. 2. Statistics makes comparison easier: Without using statistical methods and concepts, collection of data and comparison cannot be done easily. Statistics helps us to compare data collected from different sources. Grand totals, measures of central tendency, measures of dispersion, graphs and diagrams, coefficient of correlation all provide ample scopes for comparison. 3. Statistics brings out trends and tendencies in the data: After data is collected, it is easy to analyse the trend and tendencies in the data by using the various concepts of Statistics. 4. Statistics brings out the hidden relations between variables: Statistical analysis helps in drawing inferences on data. Statistical analysis brings out the hidden relations between variables. 5. Decision making power becomes easier: With the proper application of Statistics and statistical software packages on the collected data, managers can take effective decisions, which can increase the profits in a business. Seeing all these functionality we can say Statistics is as good as the user.

2. Distinguish between the following with example. (a) Inclusive and Exclusive limits. (b) Continuous and discrete data. (c) Qualitative and Quantitative data (d) Class limits and class intervals

Ans : (a) Inclusive and exclusive limits are relevant from data tabulation and class intervals point of view. Inclusive series is the one which doesn't consider the upper limit, for example, 00-10 10-20 20-30 30-40 40-50 In the first one (00-10), we will consider numbers from 00 to 9.99 only. And 10 will be considered in 10-20. So this is known as inclusive series. Exclusive series is the one which has both the limits included, for example, 00-09 10-19 20-29

30-39 40-49 Here, both 00 and 09 will come under the first one (00-09). And 10 will come under the next one. (b) Continuous and discrete data. Continuous Data : A set of data is said to be continuous if the values / observations belonging to it may take on any value within a finite or infinite interval. You can count, order and measure continuous data. For example height, weight, temperature, the amount of sugar in an orange, the time required to run a mile. Discrete Data : A set of data is said to be discrete if the values / observations belonging to it are distinct and separate, i.e. they can be counted (1,2,3,....). Examples might include the number of kittens in a litter; the number of patients in a doctors surgery; the number of flaws in one metre of cloth; gender (male, female); blood group (O, A, B, AB).
(C) Qualitative and Quantitative data: Qualitative data describes properties or characteristics that are used to identify things. Quantitative data describes data in terms of quantity

(d) Class limits and class intervals :

Class Limits : Class limits are the smallest and largest observations (data, events etc) in each class. Therefore, each class has two limits: a lower and upper. Example: Class 200 299 300 399 400 499 500 599 600 699 700 799 800 899 Total Frequency Frequency 12 19 6 2 11 7 3 60

Using the frequency table above, what are the lower and upper class limits for the first three classes?

For the first class, 200 299 The lower class limit is 200 The upper class limit is 299 For the second class, 300 399 The lower class limit is 300 The upper class limit is 399 For the third class, 400 499 The lower class limit is 400 The upper class limit is 499

Class Intervals: Class interval is the difference between the upper and lower class boundaries of any class. Example: Class 200 299 300 399 400 499 500 599 600 699 700 799 800 899 Total Frequency Frequency 12 19 6 2 11 7 3 60

Using the table above, determine the class intervals for the first class. For the first class, 200 299 The class interval = Upper class boundary lower class boundary Upper class boundary = 299.5 Lower class boundary = 199.5 Therefore, the class interval = 299.5 199.5

= 100
3. In a management class of 100 students three languages are offered as an additional subject viz. Hindi, English and Kannada. There are 28 students taking Hindi, 26 taking Hindi and 16 taking English. There are 12 students taking both Hindi and English, 4 taking Hindi and English and 6 that are taking English and Kannada. In addition, we know that 2 students are taking all the three languages. i) If a student is chosen randomly, what is the probability that he/she is not taking any of these three languages? If a student is chosen randomly, what is the probability that he/ she is taking exactly one language?

ii)

Ans: 4. List down various measures of central tendency and explain the difference between them?

Central tendency: central tendency relates to the way in which quantitative data is

clustered around some value.[1] A measure of central tendency is a way of specifying - central value. In practical statistical analysis, the terms are often used before one has chosen even a preliminary form of analysis: thus an initial objective might be to "choose an appropriate measure of central tendency". In the simplest cases, the measure of central tendency is an average of a set of measurements, the word average being variously construed as mean, median, or other measure of location, depending on the context. However, the term is applied to multidimensional data as well as to univariate data and in situations where a transformation of the data values for some or all dimensions would usually be considered necessary: in the latter cases, the notion of a "central location" is retained in converting an "average" computed for the transformed data back to the original units. In addition, there are several different kinds of calculations for central tendency, where the kind of calculation depends on the type of data (level of measurement). Both "central tendency" and "measure of central tendency" apply to either statistical populations or to samples from a population. Basic measures of central tendency The following may be applied to individual dimensions of multidimensional data, after transformation, although some of these involve their own implicit transformation of the data.

Arithmetic mean - the sum of all measurements divided by the number of observations in the data set Median - the middle value that separates the higher half from the lower half of the data set Mode - the most frequent value in the data set

Geometric mean - the nth root of the product of the data values Harmonic mean - the reciprocal of the arithmetic mean of the reciprocals of the data values Weighted mean - an arithmetic mean that incorporates weighting to certain data elements Truncated mean - the arithmetic mean of data values after a certain number or proportion of the highest and lowers data values have been discarded. Midrange - the arithmetic mean of the maximum and minimum values of a data set.

Arithmetic mean: In mathematics and statistics, the arithmetic mean, often referred to as simply the mean or average when the context is clear, is a method to derive the central tendency of a sample space. The term "arithmetic mean" is preferred in mathematics and statistics because it helps distinguish it from other means such as the geometric and harmonic mean. In addition to mathematics and statistics, the arithmetic mean is used frequently in fields such as economics, sociology, and history, though it is used in almost every academic field to some extent. For example, per capita GDP gives an approximation of the arithmetic average income of a nation's population. While the arithmetic mean is often used to report central tendencies, it is not a robust statistic, meaning that it is greatly influenced by outliers. Notably, for skewed distributions, the arithmetic mean may not accord with one's notion of "middle", and robust statistics such as the median may be a better description of central tendency. Median: a median is described as the numeric value separating the higher half of a sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to highest value and picking the middle one. If there is an even number of observations, then there is no single middle value; the median is then usually defined to be the mean of the two middle values.[1][2] In a sample of data, or a finite population, there may be no member of the sample whose value is identical to the median (in the case of an even sample size), and, if there is such a member, there may be more than one so that the median may not uniquely identify a sample member. Nonetheless, the value of the median is uniquely determined with the usual definition. A related concept, in which the outcome is forced to correspond to a member of the sample, is the medoid. At most, half the population have values less than the median, and, at most, half have values greater than the median. If both groups contain less than half the population, then some of the population is exactly equal to the median. For example, if a < b < c, then the median of the list {a, b, c} is b, and, if a < b < c < d, then the median of the list {a, b, c, d} is the mean of b and c; i.e., it is (b + c)/2. The median can be used as a measure of location when a distribution is skewed, when end-values are not known, or when one requires reduced importance to be attached to outliers, e.g., because they may be measurement errors. A disadvantage of the median is the difficulty of handling it theoretically.[citation needed] Mode (statistics) : In statistics, the mode is the value that occurs most frequently in a data set or a probability distribution.[1] In some fields, notably education, sample data are often called scores, and the sample mode is known as the modal score.[2]

Like the statistical mean and the median, the mode is a way of capturing important information about a random variable or a population in a single quantity. The mode is in general different from the mean and median, and may be very different for strongly skewed distributions. The mode is not necessarily unique, since the same maximum frequency may be attained at different values. The most ambiguous case occurs in uniform distributions, wherein all values are equally likely Geometric mean : The geometric mean, in mathematics, is a type of mean or average, which indicates the central tendency or typical value of a set of numbers. It is similar to the arithmetic mean, except that the numbers are multiplied and then the nth root (where n is the count of numbers in the set) of the resulting product is taken. For instance, the geometric mean of two numbers, say 2 and 8, is just the square root of their 2 product; that is 2 8 = 4. As another example, the geometric mean of the three numbers 4, 1, and 1/32 is the cube root of their product (1/8), which is 1/2; that is
3

4 1 1/32 = .

The geometric mean can also be understood in terms of geometry. The geometric mean of two numbers, a and b, is the length of one side of a square whose area is equal to the area of a rectangle with sides of lengths a and b. Similarly, the geometric mean of three numbers, a, b, and c, is the length of one side of a cube whose volume is the same as that of a right cuboid with sides whose lengths are equal to the three given numbers. The geometric mean only applies to positive numbers.[1] It is also often used for a set of numbers whose values are meant to be multiplied together or are exponential in nature, such as data on the growth of the human population or interest rates of a financial investment. The geometric mean is also one of the three classic Pythagorean means, together with the aforementioned arithmetic mean and the harmonic mean. For all positive data sets containing at least one pair of unequal values, the harmonic mean is always the least of the three means, while the arithmetic mean is always the greatest of the three and the geometric mean is always in between (see Inequality of arithmetic and geometric means.) Harmonic mean : the harmonic mean (sometimes called the subcontrary mean) is one of several kinds of average. Typically, it is appropriate for situations when the average of rates is desired. The harmonic mean H of the positive real numbers x1, x2, ..., xn > 0 is defined to be

From the third formula in the above equation it is more apparent that the harmonic mean is related to the arithmetic and geometric means.

Equivalently, the harmonic mean is the reciprocal of the arithmetic mean of the reciprocals. As a simple example, the harmonic mean of 1, 2, and 4 is Weighted mean : The weighted mean is similar to an arithmetic mean (the most common type of average), where instead of each of the data points contributing equally to the final average, some data points contribute more than others. The notion of weighted mean plays a role in descriptive statistics and also occurs in a more general form in several other areas of mathematics. If all the weights are equal, then the weighted mean is the same as the arithmetic mean. While weighted means generally behave in a similar fashion to arithmetic means, they do have a few counter-intuitive properties, as captured for instance in Simpson's paradox. The term weighted average usually refers to a weighted arithmetic mean, but weighted versions of other means can also be calculated, such as the weighted geometric mean and the weighted Truncated mean: A truncated mean or trimmed mean is a statistical measure of central tendency, much like the mean and median. It involves the calculation of the mean after discarding given parts of a probability distribution or sample at the high and low end, and typically discarding an equal amount of both. For most statistical applications, 5 to 25 percent of the ends are discarded. In some regions of Central Europe it is also known as a Windsor mean, but this name should not be confused with the Winsorized mean: in the latter, the observations that the trimmed mean would discard are instead replaced by the largest/smallest of the remaining values. Mid-range : the mid-range or mid-extreme of a set of statistical data values is the arithmetic mean of the maximum and minimum values in a data set,[1] or:

As such it is a measure of central tendency. The midrange is highly sensitive to outliers and ignores all but two data points. It is therefore a very non-robust statistic (having a breakdown point of 0, meaning that a single observation can change it arbitrarily), and it is rarely used in statistical analysis. The midhinge is the 25% trimmed mid-range, and is more robust, having a breakdown point of 25%.
5. Define population and sampling unit for selecting a random sample in each of the following cases. a) Hundred voters from a constituency b) Twenty stocks of National Stock Exchange

c) Fifty account holders of State Bank of India d) Twenty employees of Tata motors. 6. What is a confidence interval, and why it is useful? What is a confidence level?

Ans: a confidence interval (CI) is a particular kind of interval estimate of a population parameter and is used to indicate the reliability of an estimate. It is an observed interval (i.e. it is calculated from the observations), in principle different from sample to sample, that frequently includes the parameter of interest, if the experiment is repeated. How frequently the observed interval contains the parameter is determined by the confidence level or confidence coefficient.

A confidence interval with a particular confidence level is intended to give the assurance that, if the statistical model is correct, then taken over all the data that might have been obtained, the procedure for constructing the interval would deliver a confidence interval that included the true value of the parameter the proportion of the time set by the confidence level.[clarification needed] More specifically, the meaning of the term "confidence level" is that, if confidence intervals are constructed across many separate data analyses of repeated (and possibly different) experiments, the proportion of such intervals that contain the true value of the parameter will approximately match the confidence level; this is guaranteed by the reasoning underlying the construction of confidence intervals. A confidence interval does not predict that the true value of the parameter has a particular probability of being in the confidence interval given the data actually obtained. (An interval intended to have such a property, called a credible interval, can be estimated using Bayesian methods; but such methods bring with them their own distinct strengths and weaknesses).

Master of Business Administration Semester 1 MB0040 STATISTICS FOR MANAGEMENT- 4 Credits (Book ID: B1129) Assignment Set- 2 (60 Marks) Note: Each question carries 10 Marks. Answer all the questions
1. (a) What are the characteristics of a good measure of central tendency? (b) What are the uses of averages? 2. Your company has launched a new product .Your company is a reputed company with 50% market share of similar range of products. Your competitors also enter with their new products equivalent to your new product. Based on your earlier experience, you initially estimated that, your market share of the new product would be 50%. You carry out random sampling of 25 customers who have purchased the new product ad realize that only eight of them have actually purchased your product. Plan a hypothesis test to check whether you are likely to have a half of market share. 3. The upper and the lower quartile income of a group of workers are Rs 8 and Rs 3 per day respectively. Calculate the Quartile deviations and its coefficient? 4. The cost of living index number on a certain data was 200. From the base period, the percentage increases in prices wereRent Rs 60, clothing Rs 250, Fuel and Light Rs 150 and Miscellaneous Rs 120. The weights for different groups were food 60, Rent 16, clothing 12, Fuel and Light 8 and Miscellaneous 4. 5. Education seems to be a difficult field in which to use quality techniques. One possible outcome measures for colleges is the graduation rate (the percentage of the students matriculating who graduate on time). Would you recommend using P or R charts to examine graduation rates at a school? Would this be a good measure of Quality? 6. (a) Why do we use a chi-square test? (b) Why do we use analysis of variance?