Basic statistics for business & economics

Basi c Statistic s fo r

Busines s & Economic s

Douglas A. Lind William G. Marchal Samuel A. Wathen

McGRAW-HIL L INTERNATIONA L EDITIO N

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Basi c Statistic s fo r

Busines s & Economic s

N H ^ Asian Network

for Higher Education

No/)0 3 7

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Basi c Statistic s fo r

Busines s & Economic s

Sixt h Editio n

Dougla s A . Lin d

Coastal Carolina University and The University of Toledo

W illiam G. Marchal

The University of Toledo

Samuel A. Wathen

Coastal Carolina University

Graw

Boston Burr Ridge, IL Dubuque. IA New York San Francisco St- Louis

Bangkok Bogota Caracas Kuala Lumpur Lisbon London Madrid Mexico City

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BASIC STATISTICS FOR BUSINESS AND ECONOMICS

International Edition 2008

Exclusive rights by McGraw-Hill Education (Asia), for manufacture and export. This book cannot

be re-exported from the country to which it is sold by McGraw-Hill. The International Edition is

not available in North America.

Published by McGraw-Hill/Irwin, a business unit of The McGraw-Hill Companies, Inc., 1221

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by The McGraw-Hill Companies, Inc. All rights reserved. No part of this publication may be

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outsid 10 e the United States. 09 08 07 06 05 04 03

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When ordering this title, use ISBN: 978-007-126365-8 or MHID: 007-126365-9

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To Jane, my wife and best friend, and our sons, their wives, and our

grandchildren: Mike and Sue (Steve and Courtney), Steve and Kathryn

(Kennedy), and Mark and Sarah (fared, Drew, and Nate).

Douglas A. Lind

To our family, especially the most recent additions, Tascha and Stephen.

William G. Marchal

To my wonderful family: Isaac, Hannah, and Barb.

Samuel A. Wathen

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The McGraw-Hill/lrwin Series

Operations and Decision Sciences

Business Statistics

Aczel and Sounderpandian

Complete Business Statistics

Sixth Edition

ALEKS Corporation

ALEKS for Business Statistics

Alwan

Statistical Process Analysis

First Edition

Bowerman and O'Connell

Business Statistics in Practice

Fourth Edition

Bowerman, O'Connell, Orris,

and Porter

Essentials of Business Statistics

Second Edition

Cooper and Schindler

Business Research Methods

Tenth Edition

Doane, Mathieson, and Tracy

Visual Statistics

Second Edition, 2.0

Doane and Seward

Applied Statistics in Business

and Economics

First Edition

Doane and Seward

Essential Statistics in Business

and Economics

First Edition

Gitlow, Oppenheim, Oppenheim,

and Levine

Quality Management

Third Edition

Kutner, Nachtsheim, Neter, and Li

Applied Linear Statistical Models

Fifth Edition

Kutner, Nachtsheim, and Neter

Applied Linear Regression Models

Fourth Edition

Lind, Marchal, and Wathen

Statistical Techniques in Business

and Economics

Thirteenth Edition

Olson and Shi

Introduction to Business Data

Mining

First Edition

Orris

Basic Statistics Using Excel

and Megastat

First Edition

Siegel

Practical Business Statistics

Fifth Edition

Wilson, Keating, and John Gait

Solutions, Inc.

Business Forecasting

Fifth Edition

Quantitative Methods and

Management Science

Hillier and Hillier

Introduction to Management

Science: A Modeling and Case

Studies Approach with

Spreadsheets

Third Edition

Stevenson and Ozgur

Introduction to Management

Science with Spreadsheets

First Edition

Kros

Spreadsheet Modeling for

Business Decisions

First Edition

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Prefac e

The objective of Basic Statistics for Business and Economics is to provide students

majoring in management, marketing, finance, accounting, economics, and other fields

of business administration with an introductory survey of the many applications of de￾scriptive and inferential statistics. While we focus on business applications, we also

use many problems and examples that are student oriented and do not require previ￾ous courses.

Statistical Techniques in Business and Economics was published in 1967. The first

edition of Basic Statistics for Business and Economics was published in 1994. For

earlier editions of both texts, locating relevant business data was difficult. That has

changed! Today locating data is not a problem. The number of items you purchase at

the grocery store is automatically recorded at the checkout counter. Phone companies

track the time of our calls, the length of calls, and the number of the person called.

Credit card companies maintain information on the number, time and date, and

amount of our purchases. Costco can tell you the total amount of your purchases last

year by item and by dates. Medical devices automatically monitor our heart rate,

blood pressure, and temperature. A large amount of business information is recorded

and reported almost instantly. CNN, USA Today, and MSNBC, for example, all have

websites where you can track stock prices with a delay of less than twenty minutes.

Today, skills are needed to deal with a large volume of numerical information.

First, we need to be critical consumers of information presented by others. Second,

we need to be able to reduce large amounts of information into a concise and mean￾ingful form to enable us to make effective interpretations, judgments, and decisions.

All students have calculators and most have either personal computers or access

to personal computers in a campus lab. Statistical software, such as Microsoft Excel

and MINITAB, is available on these computers. The commands necessary to achieve

the software results are available in a special section at the end of each chapter. We use

screen captures within the chapters, so the student becomes familiar with the nature of

the software output. Because of the availability of computers and software it is no

longer necessary to dwell on calculations. We have replaced many of the calculation

examples with interpretative ones, to assist the student in understanding and inter￾preting the statistical results. In addition we now place more emphasis on the concep￾tual nature of the statistical topics. While making these changes, we still continue to

present, as best we can, the key concepts, along with supporting examples.

The sixth edition of Basic Statistics for Business and Economics is the product of

many people: students, colleagues, reviewers, and the staff at McGraw-Hill/lrwin. We

thank them all.

Ed Pappanastos of Troy University has been a reviewer on our texts for several

editions and has been a principle participant in the design and testing of Homework

Manager and Homework Manager Plus applications for both books. We are sincerely

grateful to reviewers whose valuable suggestions guided us on every revision decision.

We hope you will be pleased with the final product.

Larry Ammann

University of Texas, Dallas

Doug Barrett

University of North Alabama

Doris Bennett

Jacksonville State University

Bongsik Shin

San Diego State University

Derek Burnett

Loras College

Susan Carter

Doane College

vii

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viii Preface

Gary Cummings

Walsh College

Joe Easton

Pueblo Community College

Ronald Elkins

Central Washington University

Mary Gray

American University

Don Gren

Salt Lake Community College

M. Ryan Haley

University of Wisconsin, Oshkosh

Janice Harder

Motlow State Community College

Richard Herschel

Saint Joseph's University

Stacey Jones

Seattle University

Susan Lenker

Central Michigan University

Mihail Motzev

Walla Walla College

Pin Ng

Northern Arizona University

John O'Neill

Siena College

Kevin Palmateer

Yakima Valley Community College

Darlene Riedemann

Eastern Illinois University

Leonie Stone

Sfafe University of New York, Geneseo

Debbie Tesch

McGraw-Hill/lrwi Xavier University n sponsored symposia on teaching business statistics in Pasadena

and Atlanta, and those in-depth discussions also contributed to this work. It is your

course and your students we learned about, and we believe this edition is improved

based on those sessions. Thank you for contributing:

Scott Bailey

Troy University

John (Doug) Barrett

University of North Alabama

James Carden

University of Mississippi

Chia-Shin Chung

Cleveland State University

Joan Donohue

University of South Carolina

Alison Kelly Hawke

Suffolk University

Fred Hulme

Baylor University

L. Allison Jones-Farmer

Auburn University

John Landry

Metropolitan State College of Denver

Ed Melnick

New York University

Carolyn Monroe

Baylor University

Khosrow Moshirvaziri

California State University, Long Beach

Maureen O'Brien

University of Minnesota, Duluth

J. Burdeane Orris

Butler University

Priya Rajagopalan

Purdue University

Mary Anne Rothermel

University of Akron

Pali Sen

University of North Florida

Murali Shanker

Kent State University

Jesus Valencia

Slippery Rock University

Kathleen Whitcomb

University of South Carolina

Blake Whitten

University of Iowa

Bill Younkin

University of Miami

Xiaolong (Jonathan) Zhang

Georgia Southern University

Zhiwei (Henry) Zhu

University of Louisiana

Their suggestions and thorough review of the previous edition and the manuscript

of this edition make this a better text.

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fee

Special thanks go to a number of people. Darlene Riedemann of Eastern Illinois

University reviewed the page proofs and Instructor's Manual, checking exercises for

accuracy. Professor Kathleen Whitcomb of the University of South Carolina prepared

the study guide. Dr. Samuel Wathen of Coastal Carolina University prepared the test

bank. Professor Rene Ordonez of Southern Oregon University prepared the PowerPoint

presentation. Ms. Denise Heban and the authors prepared the Instructor's Manual.

We also wish to thank the staff at McGraw-Hill/lrwin. This includes Richard T.

Hercher, Jr., Executive Editor; Katie Jones, Developmental Editor; Sankha Basu,

Marketing Manager; James Labeots, Project Manager, and others we do not know

personally, but who made valuable contributions.

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Brie f Content s

1 What Is Statistics? 1

2 Describing Data: Frequency Tables, Frequency Distributions,

and Graphic Presentation 21

3 Describing Data: Numerical Measures 57

4 Describing Data: Displaying and Exploring Data 95

5 A Survey of Probability Concepts 125

6 Discrete Probability Distributions 164

7 Continuous Probability Distributions 196

8 Sampling Methods and the Central Limit Theorem 224

9 Estimation and Confidence Intervals 257

10 One-Sample Tests of Hypothesis 291

11 Two-Sample Tests of Hypothesis 326

1 2 Analysis of Variance 360

13 l jnear Regression and Correlation 390

1 4 Multiple Regression and Correlation Analysis 438

15 Chi-Square Applications 4<S4

MegaStat for Excel 508

Visual Statistics 2.2 512

Appendix A: Data Sets 517

Appendix B: Tables 529

\|)|)Lii(li\ C: Answers to ()dd-Numbered Chapter Exercises 542

Photo Credits 57]

lndc> "3

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Content s

Chapter

1 What Is Statistics? 1

Introduction 2

Why Study Statistics? 2

What Is Meant by Statistics? 4

Types of Statistics 6

Descriptive Statistics 6

Inferential Statistics 6

Types of Variables 8

Levels of Measurement 9

Nominal-Level Data 10

Ordinal-Level Data 11

Interval-Level Data 11

Ratio-Level Data 12

Exercises 14

Ethics and Statistics 14

Computer Applications 14

Chapter Summary 16

Chapter Exercises 16

exercises.com 18

Data Set Exercises 19

Answers to Self-Review 20

2 Describing Data: Frequency

Iables, Frequency Distributions,

and Graphic Presentation 21

Introduction 22

Constructing a Frequency Table 23

Relative Class Frequencies 23

Graphic Presentation of Qualitative

Data 24

Constructing Frequency Distributions:

Quantitative Data 29

Class Intervals and Class

Midpoints 33

A Software Example 33

Relative Frequency Distribution 34

Exercises 35

Graphic Presentation of a Frequency

Distribution 36

Histogram 36

Frequency Polygon 39

Exercises 41

Cumulative Frequency

Distributions 43

Exercises 45

Chapter Summary 47

Chapter Exercises 47

exercises.com 53

Data Set Exercises 53

Software Commands 54

Answers to Self-Review 55

3 Describing Data: Numerical

Measures 57_

Introduction 58

The Population Mean 59

The Sample Mean 60

Properties of the Arithmetic Mean 61

The Weighted Mean 63

The Median 64

The Mode 66

Software Solution 68

The Relative Positions of the Mean, Median,

and Mode 69

The Geometric Mean 71

Why Study Dispersion? 73

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xii Contents

Measures of Dispersion 75

Range 75

Mean Deviation 75

Exercises 77

Variance and Standard

Deviation 78

Exercises 81

Software Solution 82

Exercises 83

Interpretation and Uses of the Standard

Deviation 84

Chebyshev's Theorem 84

The Empirical Rule 85

Exercises 86

Ethics and Reporting Results 87

Chapter Summary 87

Pronunciation Key 89

Chapter Exercises 89

exercises.com 91

Data Set Exercises 92

Software Commands 93

Answers to Self-Review 94

Describing Data: Displaying

and Kxploring Data 95

Introduction 96

Dot Plots 96

Other Measures of Dispersion 99

Quartiles. Deciles, and Percentiles 99

Box Plots 103

Skewness 106

"' rib i-.a Relationship between

: ' 1

Software Commands 122

Answers to Self-Review 124

Chapter

5 A Survey of Probability

Concepts 125

Introduction 126

What Is a Probability? 127

Approaches to Assigning

Probabilities 129

Classical Probability 129

Empirical Probability 130

Subjective Probability 132

Exercises 133

Some Rules for Computing

Probabilities 134

Rules of Addition 134

Exercises 139

Rules of Multiplication 140

Contingency Tables 143

Tree Diagrams 145

Exercises 147

Principles of Counting 148

The Multiplication Formula 148

The Permutation Formula 150

The Combination Formula 151

Exercises 153

Chapter Summary 154

Pronunciation Key 155

Chapter Exercises 155

exercises.com 159

Data Set Exercises 160

Software Commands 161

Answers to Self-Review 162

Discrete Probability

I) i stribut ions J 64

Introduction 165

What Is a Probability Distribution? 165

Random Variables 167

Discrete Random Variable 168

Continuous Random Variable 168

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The Mean, Variance, and Standard Deviation

of a Probability Distribution 169

Mean 169

Variance and Standard Deviation 169

Exercises 171

Binomial Probability Distribution 173

How Is a Binomial Probability

Computed? 174

Binomial Probability Tables 176

Exercises 180

Cumulative Binomial Probability

Distributions 181

Exercises 182

Poisson Probability Distribution 183

Exercises 188

Chapter Summary 188

Chapter Exercises 189

Data Set Exercises 193

Software Commands 193

Answers to Self-Review 195

Chapter

7 Continuous Probability

Distributions 196

Introduction 197

The Family of Uniform Probability

Distributions 197

Exercises 201

The Family of Normal Probability

Distributions 201

The Standard Normal Probability

Distribution 204

Applications of the Standard Normal

Distribution 205

The Empirical Rule 206

Exercises 208

Finding Areas under the

Normal Curve 208

Exercises 212

Exercises 215

Exercises 217

Chapter Summary 218

Chapter Exercises 219

Data Set Exercises 222

Software Commands 222

Answers to Self-Review 223

xiii

Chapter

8 Sampling Methods and the

Central Limit Theorem 224

Introduction 225

Sampling Methods 225

Reasons to Sample 225

Simple Random Sampling 226

Systematic Random Sampling 229

Stratified Random Sampling 229

Cluster Sampling 230

Exercises 231

Sampling "Error" 233

Sampling Distribution of the

Sample Mean 234

Exercises 237

The Central Limit Theorem 238

Exercises 244

Using the Sampling Distribution

of the Sample Mean 245

Exercises 248

Chapter Summary 248

Pronunciation Key 249

Chapter Exercises 249

exercises.com 254

Data Set Exercises 254

Software Commands 255

Answers to Self-Review 256

Chapter

9 Estimation and Confidence

Intervals 257

Introduction 258

Point Estimates and Confidence Intervals

for a Mean 258

Population Standard Deviation (IT)

Known 258

A Computer Simulation 263

Exercises 265

Population Standard Deviation (IT)

Unknown 266

Exercises 273

A Confidence Interval

for a Proportion 273

Exercises 276

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