Business Statistics: Communicating with Numbers

By Sanjiv Jaggia and Alison Kelly

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 2 Learning Objectives (LOs)
LO 2.1: Summarize qualitative data by forming
frequency distributions.
LO 2.2: Construct and interpret pie charts and bar
charts.
LO 2.3: Summarize quantitative data by forming
frequency distributions.
LO 2.4: Construct and interpret histograms, polygons,
and ogives.
LO 2.5: Construct and interpret a stem-and-leaf
diagram.
LO 2.6: Construct and interpret a scatterplot.

2-2
House Prices in Southern California
 A relocation specialist for a real estate firm in
Mission Viejo, CA gathers recent house sales
data for a client from Seattle, WA.
 The table below shows the sale price (in
$1,000s) for 36 single-family houses.

2-3
House Prices in Southern California
Use the sample information to:

1. Summarize the range of house prices.

2. Comment on where house prices tend to cluster.

3. Calculate percentages to compare house prices.

2-4
2.1 Summarizing Qualitative Data
LO 2.1 Summarize qualitative data by forming frequency
distributions.
 A frequency distribution for qualitative data
groups data into categories and records how many
observations fall into each category.
 Weather conditions in Seattle, WA during
February 2010.

2-5
LO 2.1 2.1 Summarizing Qualitative Data
 Categories: Rainy, Sunny, or Cloudy.
 For each category’s frequency, count the days
that fall in that category.
 Calculate relative frequency by dividing each
category’s frequency by the sample size.
Relative
Weather
Weather Frequency
Frequency Frequency
Cloudy
Cloudy 11 1/28=0.036
RainyRainy 20
20 20/28=0.714
Sunny
Sunny 77 7/28=0.250
Total
Total 28
28 28/28=1.000

2-6
LO 2.1 2.1 Summarizing Qualitative Data
 To express relative frequencies in terms of
percentages, multiply each proportion by 100%.
Relative
Weather Frequency Frequency Percentage
Cloudy 1 1/28=0.036 x 100= 3.6%
Rainy 20 20/28=0.714 x 100=71.4%
Sunny 7 7/28=0.250 x 100=25.0%
Total 28 28/28=1.000 x 100=100%

 Note that the total of the proportions must add

to 1.0 and the total of the percentages must add
to 100%.

2-7
LO 2.2 2.1 Summarizing Qualitative Data
 A pie chart is a segmented circle whose segments
portray the relative frequencies of the categories of
some qualitative variable.
 In this example,

the variable
Region is
proportionally
divided into
4 parts.

2-8
LO 2.2 2.1 Summarizing Qualitative Data
 A bar chart depicts the frequency or the
relative frequency for each category of the
qualitative data as a bar rising vertically from
the horizontal axis.
 For example, Adidas’ sales
may be proportionally
compared for each Region
over these two periods.

2-9
2.2 Summarizing Quantitative Data
LO 2.3 Summarize quantitative data by forming frequency distributions.

 A frequency distribution for quantitative data

groups data into intervals called classes, and
records the number of observations that fall into
each class.
 Guidelines when constructing frequency
distribution:
 Classes are mutually exclusive.

 Classes are exhaustive.

2-10
LO 2.3 2.2 Summarizing Quantitative Data
 The number of classes usually ranges from 5
to 20.

 Approximating the class width:

Largest value  Smallest value

Number of classes

2-11
LO 2.3 2.2 Summarizing Quantitative Data
 The raw data from the Introductory Case has been
converted into a frequency distribution in the
following table.
Class (in $1000s) Frequency
300 up to 400 4
401 up to 500 11
501 up to 600 14
601 up to 700 5
701 up to 800 2
Total 36

2-12
LO 2.3 2.2 Summarizing Quantitative Data
Class (in $1000s) Frequency
300 up to 400 4
400 up to 500 11
500 up to 600 14
600 up to 700 5
700 up to 800 2
Total 36

 Question: What is the price range over this time period?

 $300,000 up to $800,000

 Question: How many of the houses sold in the $500,000 up

to $600,000 range?
 14 houses

2-13
LO 2.3 2.2 Summarizing Quantitative Data
 A cumulative frequency distribution specifies how
many observations fall below the upper limit of a
particular class.

 Question: How many of the houses sold for less than

$600,000?
 29 houses

2-14
LO 2.3 2.2 Summarizing Quantitative Data
 A relative frequency distribution identifies the
proportion or fraction of values that fall into each
class.
Class frequency
Class relative frequency 
Total number of observations

 A cumulative relative frequency distribution

gives the proportion or fraction of values that fall
below the upper limit of each class.

2-15
LO 2.3 2.2 Summarizing Quantitative Data
 Here are the relative frequency and the cumulative
relative frequency distributions for the house-price
data.
Relative
Class (in $1000s) Frequency Frequency Cumulative Relative Frequency
300 up to 400 4 4/36 = 0.11 0.11
400 up to 500 11 11/36 = 0.31 0.11 + 0.31 = 0.42
500 up to 600 14 14/36 = 0.39 0.11 + 0.31 + 0.39 = 0.81
600 up to 700 5 5/36 = 0.14 0.11 + 0.31 + 0.39 + 0.14 = 0.95
700 up to 800 2 2/36 = 0.06 0.11 + 0.31 + 0.39 + 0.14 + 0.06  1.0
Total 36 1.0

2-16
LO 2.3 2.2 Summarizing Quantitative Data
Use the data on the previous slide to answer the
following two questions.

 Question: What percent of the houses sold for at

least $500,000 but not more than $600,000?
 39%

 Question: What percent of the houses sold for

less than $600,000?
 81%

2-17
2.2 Summarizing Quantitative Data
LO 2.4 Construct and interpret histograms, polygons, and
ogives.

 Histograms

 Polygons

 Ogives

2-18
LO 2.4 2.2 Summarizing Quantitative Data
 A histogram is a visual representation of a
frequency or a relative frequency distribution.

 Bar height represents the respective class

frequency (or relative frequency).

 Bar width represents the class width.

2-19
LO 2.4 2.2 Summarizing Quantitative Data

 Here are the frequency and relative frequency

histograms for the house-price data.

 Note that the only difference is the y-axis scale.

2-20
LO 2.4 2.2 Summarizing Quantitative Data
 Shape of Distribution: typically symmetric or
skewed
 Symmetric—mirror image on both sides of its
center.

Symmetric Distribution

2-21
LO 2.4 2.2 Summarizing Quantitative Data
 Skewed distribution
 Positively skewed - data
form a long, narrow tail
to the right.

 Negatively skewed -
data form a long,
narrow tail to the left.

2-22
LO 2.4 2.2 Summarizing Quantitative Data
 A polygon is a visual representation of a
frequency or a relative frequency distribution.

 Plot the class midpoints on x-axis and

associated frequency (or relative
frequency) on y-axis.

 Neighboring points are connected with a

straight line.

2-23
LO 2.4 2.2 Summarizing Quantitative Data
 Here is a polygon for the house-price data.

2-24
LO 2.4 2.2 Summarizing Quantitative Data
 An ogive is a visual representation of a
cumulative frequency or a cumulative
relative frequency distribution.

 Plot the cumulative frequency (or cumulative

relative frequency) of each class above the
upper limit of the corresponding class.

 The neighboring points are then connected.

2-25
LO 2.4 2.2 Summarizing Quantitative Data
 Here is an ogive for the house-price data.

 Use the ogive to approximate the percentage of

houses that sold for less than $550,000.
Answer: 60%

2-26
2.3 Stem-and-Leaf Diagrams
LO 2.5 Construct and interpret a stem-and-leaf diagram.

 A stem-and-leaf diagram provides a visual

display of quantitative data.

 It gives an overall picture of the data’s center and

variability.

 Each value of the data set is separated into two

parts: the stem consists of the leftmost digits,
while the leaf is the last digit.

2-27
LO 2.5 2.3 Stem-and-Leaf Diagrams
 The following data set shows the wealthiest
people in the world and their associated ages.
 The leftmost digit is the stem while the last digit is
the leaf as shown here.
Age = 36

2-28
2.4 Scatterplots
LO 2.6 Construct and interpret a
scatterplot.
 A scatterplot is used to determine if two
variables are related.
 Each point is a pairing:
(x ,y )i i

(x1,y1), (x2,y2), etc. y-axis

 This scatterplot shows

income against
education. x-axis

2-29
LO 2.6 2.4 Scatterplots
 Linear relationship: upward or downward-
sloping trend of the data.
 Positive linear
relationship (shown
here): as x increases, so
does y.
 Negative linear
relationship: as x
increases, y decreases.

2-30
LO 2.6 2.4 Scatterplots
 Curvilinear relationship
 As x increases,
y increases at an
increasing (or
decreasing) rate.
 As x increases y
decreases, at an
increasing (or
decreasing) rate.

2-31
LO 2.6 2.4 Scatterplots
 No relationship: data are randomly scattered
with no discernible pattern.

 In this scatterplot, there

is no apparent
relationship between x
and y.

2-32
S
LOs 2.1, 2.2, and 2.4 Some Excel Commands
 Pie chart or Bar chart: select the relevant
categorical names with respective data, then
choose Insert > Pie > 2-D Pie or Insert > Bar > 2-D
Bar.

 Histogram: select the relevant data, and choose

Data > Data Analysis > Histogram.

 Scatterplot: select the x- and y-coordinates, choose

Input > Scatter, and select the graph at the top left.

2-33