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 (Ebook) Essentials of Statistics for Business and Economics
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 ESSENTIALS OF
STATISTICS FOR
BUSINESS AND
ECONOMICS 7e ­

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 ESSENTIALS OF
STATISTICS FOR
BUSINESS AND
ECONOMICS 7e ­
David R. Anderson
University of Cincinnati

Dennis J. Sweeney
University of Cincinnati

Thomas A. Williams
Rochester Institute of Technology

Jeffrey D. Camm
University of Cincinnati

James J. Cochran
Louisiana Tech University

Australia Brazil Japan Korea Mexico Singapore Spain United Kingdom United States

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This is an electronic version of the print textbook. Due to electronic rights restrictions, some third party content may be suppressed. Editorial
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 Essentials of Statistics for Business ©2015, 2011 Cengage Learning
and Economics, Seventh Edition
WCN: 02-200-203
David R. Anderson, Dennis J. Sweeney,
Thomas A. Williams, Jeffrey D. Camm, ALL RIGHTS RESERVED. No part of this work covered by the copy-
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 Dedicated to
Marcia, Cherri, Robbie, Karen, and Teresa

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 Brief Contents

Preface xxi
About the Authors xxv
Chapter 1 Data and Statistics 1
Chapter 2 Descriptive Statistics: Tabular and
Graphical Displays 33
Chapter 3  Descriptive Statistics: Numerical Measures 105
Chapter 4 Introduction to Probability 176
Chapter 5 Discrete Probability Distributions 222
Chapter 6 Continuous Probability Distributions 263
Chapter 7 Sampling and Sampling Distributions 296
Chapter 8 Interval Estimation 335
Chapter 9 Hypothesis Tests 375
Chapter 10 Comparisons Involving Means, Experimental Design, and
Analysis of Variance 424
Chapter 11  Comparisons Involving Proportions and a Test of
Independence 481
Chapter 12 Simple Linear Regression 520
Chapter 13 Multiple Regression 588
Appendix A References and Bibliography 639
Appendix B Tables 640
Appendix C Summation Notation online only
Appendix D  Self-Test Solutions and Answers to Even-Numbered
Exercises 667
Appendix E Microsoft Excel 2013 and Tools for Statistical
Analysis 706
Appendix F Computing p-Values Using Minitab and Excel 718
Index 722

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 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
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 Contents

Preface xxi
About the Authors xxv

Chapter 1 Data and Statistics 1

Statistics in Practice: Bloomberg Businessweek 2
1.1 Applications in Business and Economics 3
Accounting 3
Finance 4
Marketing 4
Production 4
Economics 4
Information Systems 5
1.2 Data 5
Elements, Variables, and Observations 5
Scales of Measurement 7
Categorical and Quantitative Data 8
Cross-Sectional and Time Series Data 8
1.3 Data Sources 11
Existing Sources 11
Statistical Studies 12
Data Acquisition Errors 14
1.4 Descriptive Statistics 14
1.5 Statistical Inference 16
1.6 Computers and Statistical Analysis 18
1.7 Data Mining 18
1.8 Ethical Guidelines for Statistical Practice 19
Summary 21
Glossary 21
Supplementary Exercises 22
Appendix An Introduction to StatTools 29

Chapter 2 Descriptive Statistics: Tabular and Graphical

Displays 33
Statistics in Practice: Colgate-Palmolive Company 34
2.1 Summarizing Data for a Categorical Variable 35
Frequency Distribution 35

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x Contents

Relative Frequency and Percent Frequency Distributions 36

Bar Charts and Pie Charts 36
2.2 Summarizing Data for a Quantitative Variable 42
Frequency Distribution 42
Relative Frequency and Percent Frequency Distributions 43
Dot Plot 44
Histogram 44
Cumulative Distributions 46
Stem-and-Leaf Display 47
2.3 Summarizing Data for Two Variables Using Tables 55
Crosstabulation 55
Simpson’s Paradox 58
2.4 Summarizing Data for Two Variables Using Graphical Displays 64
Scatter Diagram and Trendline 64
Side-by-Side and Stacked Bar Charts 65
2.5 Data Visualization: Best Practices in Creating Effective
Graphical Displays 70
Creating Effective Graphical Displays 71
Choosing the Type of Graphical Display 72
Data Dashboards 72
Data Visualization in Practice: Cincinnati Zoo and
Botanical Garden 74
Summary 77
Glossary 78
Key Formulas 79
Supplementary Exercises 79
Case Problem 1 Pelican Stores 84
Case Problem 2 Motion Picture Industry 85
Appendix 2.1 Using Minitab for Tabular and Graphical Presentations 86
Appendix 2.2 Using Excel for Tabular and Graphical Presentations 89
Appendix 2.3 Using StatTools for Tabular and Graphical Presentations 103

Chapter 3 Descriptive Statistics: Numerical Measures 105

Statistics in Practice: Small Fry Design 106
3.1 Measures of Location 107
Mean 107
Weighted Mean 109
Median 110
Geometric Mean 112
Mode 113
Percentiles 114
Quartiles 115

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 Contents xi

3.2 Measures of Variability 122

Range 122
Interquartile Range 123
Variance 123
Standard Deviation 124
Coefficient of Variation 125
3.3 Measures of Distribution Shape, Relative Location, and Detecting
Outliers 129
Distribution Shape 129
z-Scores 129
Chebyshev’s Theorem 131
Empirical Rule 132
Detecting Outliers 133
3.4 Five-Number Summaries and Box Plots 136
Five-Number Summary 137
Box Plot 137
3.5 Measures of Association Between Two Variables 141
Covariance 142
Interpretation of the Covariance 144
Correlation Coefficient 146
Interpretation of the Correlation Coefficient 147
3.6 Data Dashboards: Adding Numerical Measures to Improve
Effectiveness 151
Summary 155
Glossary 155
Key Formulas 156
Supplementary Exercises 158
Case Problem 1 Pelican Stores 163
Case Problem 2 Motion Picture Industry 164
Case Problem 3 Business Schools of Asia-Pacific 165
Case Problem 4 Heavenly Chocolates Website Transactions 167
Case Problem 5 African Elephant Populations 168
Appendix 3.1 Descriptive Statistics Using Minitab 169
Appendix 3.2 Descriptive Statistics Using Excel 171
Appendix 3.3 Descriptive Statistics Using StatTools 174

Chapter 4 Introduction to Probability 176

Statistics in Practice: National Aeronautics and Space Administration 177
4.1 Experiments, Counting Rules, and Assigning Probabilities 178
Counting Rules, Combinations, and Permutations 179
Assigning Probabilities 183
Probabilities for the KP&L Project 185

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xii Contents

4.2 Events and Their Probabilities 188

4.3 Some Basic Relationships of Probability 192
Complement of an Event 192
Addition Law 193
4.4 Conditional Probability 199
Independent Events 202
Multiplication Law 202
4.5 Bayes’ Theorem 207
Tabular Approach 210
Summary 213
Glossary 213
Key Formulas 214
Supplementary Exercises 215
Case Problem Hamilton County Judges 219

Chapter 5 Discrete Probability Distributions 222

Statistics in Practice: Citibank 223
5.1 Random Variables 224
Discrete Random Variables 224
Continuous Random Variables 224
5.2 Developing Discrete Probability Distributions 227
5.3 Expected Value and Variance 232
Expected Value 232
Variance 232
5.4 Binomial Probability Distribution 237
A Binomial Experiment 237
Martin Clothing Store Problem 239
Using Tables of Binomial Probabilities 243
Expected Value and Variance for the Binomial Distribution 244
5.5 Poisson Probability Distribution 248
An Example Involving Time Intervals 249
An Example Involving Length or Distance Intervals 249
5.6 Hypergeometric Probability Distribution 252
Summary 255
Glossary 256
Key Formulas 257
Supplementary Exercises 258
Appendix 5.1 Discrete Probability Distributions with Minitab 261
Appendix 5.2 Discrete Probability Distributions with Excel 261

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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
 Contents xiii

Chapter 6 Continuous Probability Distributions 263

Statistics in Practice: Procter & Gamble 264
6.1 Uniform Probability Distribution 265
Area as a Measure of Probability 266
6.2 Normal Probability Distribution 269
Normal Curve 269
Standard Normal Probability Distribution 271
Computing Probabilities for Any Normal Probability Distribution 276
Grear Tire Company Problem 277
6.3 Normal Approximation of Binomial Probabilities 281
6.4 Exponential Probability Distribution 285
Computing Probabilities for the Exponential Distribution 285
Relationship Between the Poisson and Exponential Distributions 286
Summary 288
Glossary 289
Key Formulas 289
Supplementary Exercises 289
Case Problem Specialty Toys 293
Appendix 6.1 Continuous Probability Distributions with Minitab 294
Appendix 6.2 Continuous Probability Distributions with Excel 295

Chapter 7 Sampling and Sampling Distributions 296

Statistics in Practice: Meadwestvaco Corporation 297
7.1 The Electronics Associates Sampling Problem 298
7.2 Selecting a Sample 299
Sampling from a Finite Population 299
Sampling from an Infinite Population 301
7.3 Point Estimation 304
Practical Advice 306
7.4 Introduction to Sampling Distributions 308
7.5 Sampling Distribution of x 310
Expected Value of x 310
Standard Deviation of x 311
Form of the Sampling Distribution of x 312
Sampling Distribution of x for the EAI Problem 314
Practical Value of the Sampling Distribution of x 315
Relationship Between the Sample Size and the
Sampling Distribution of x 316
7.6 Sampling Distribution of p 320
Expected Value of p 321
Standard Deviation of p 321

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xiv Contents

Form of the Sampling Distribution of p 322

Practical Value of the Sampling Distribution of p 322
7.7 Other Sampling Methods 326
Stratified Random Sampling 326
Cluster Sampling 327
Systematic Sampling 327
Convenience Sampling 327
Judgment Sampling 328
Summary 328
Glossary 329
Key Formulas 330
Supplementary Exercises 330
Appendix 7.1 Random Sampling with Minitab 333
Appendix 7.2 Random Sampling with Excel 333
Appendix 7.3 Random Sampling with StatTools 334

Chapter 8 Interval Estimation 335

Statistics in Practice: Food Lion 336
8.1 Population Mean: σ Known 337
Margin of Error and the Interval Estimate 337
Practical Advice 341
8.2 Population Mean: σ Unknown 343
Margin of Error and the Interval Estimate 344
Practical Advice 347
Using a Small Sample 347
Summary of Interval Estimation Procedures 349
8.3 Determining the Sample Size 352
8.4 Population Proportion 355
Determining the Sample Size 357
Summary 360
Glossary 361
Key Formulas 362
Supplementary Exercises 362
Case Problem 1 Young Professional Magazine 365
Case Problem 2 Gulf Real Estate Properties 366
Case Problem 3 Metropolitan Research, Inc. 368
Appendix 8.1 Interval Estimation with Minitab 368
Appendix 8.2 Interval Estimation Using Excel 370
Appendix 8.3 Interval Estimation with StatTools 373

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 Contents xv

Chapter 9 Hypothesis Tests 375

Statistics in Practice: John Morrell & Company 376
9.1 Developing Null and Alternative Hypotheses 377
The Alternative Hypothesis as a Research Hypothesis 377
The Null Hypothesis as an Assumption to Be Challenged 378
Summary of Forms for Null and Alternative Hypotheses 379
9.2 Type I and Type II Errors 380
9.3 Population Mean: σ Known 383
One-Tailed Test 383
Two-Tailed Test 389
Summary and Practical Advice 391
Relationship Between Interval Estimation and Hypothesis Testing 393
9.4 Population Mean: σ Unknown 398
One-Tailed Test 398
Two-Tailed Test 399
Summary and Practical Advice 401
9.5 Population Proportion 404
Summary 406
Summary 409
Glossary 410
Key Formulas 410
Supplementary Exercises 410
Case Problem 1 Quality Associates, Inc. 413
Case Problem 2 
Ethical Behavior of Business Students at Bayview
University 415
Appendix 9.1 Hypothesis Testing with Minitab 416
Appendix 9.2 Hypothesis Testing with Excel 418
Appendix 9.3 Hypothesis Testing with StatTools 422

Chapter 10 Comparisons Involving Means, Experimental Design,

and Analysis of Variance 424
Statistics in Practice: U.S. Food and Drug Administration 425
10.1 Inferences About the Difference Between Two Population Means:
σ1 and σ2 Known 426
Interval Estimation of µ1 2 µ2 426
Hypothesis Tests About µ1 2 µ2 429
Practical Advice 430
10.2 Inferences About the Difference Between Two Population Means:
σ1 and σ2 Unknown 433
Interval Estimation of µ1 2 µ2 433

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xvi Contents

Hypothesis Tests About µ1 2 µ2 435

Practical Advice 437
10.3 Inferences About the Difference Between Two Population Means:
Matched Samples 441
10.4 An Introduction to Experimental Design and Analysis of Variance 447
Data Collection 448
Assumptions for Analysis of Variance 449
Analysis of Variance: A Conceptual Overview 449
10.5 Analysis of Variance and the Completely Randomized Design 452
Between-Treatments Estimate of Population Variance 453
Within-Treatments Estimate of Population Variance 454
Comparing the Variance Estimates: The F Test 455
ANOVA Table 456
Computer Results for Analysis of Variance 457
Testing for the Equality of k Population Means: An
Observational Study 459
Summary 463
Glossary 464
Key Formulas 464
Supplementary Exercises 466
Case Problem 1 Par, Inc. 471
Case Problem 2 Wentworth Medical Center 472
Case Problem 3 Compensation for Sales Professionals 473
Appendix 10.1 Inferences About Two Populations Using Minitab 474
Appendix 10.2 Analysis of Variance with Minitab 475
Appendix 10.3 Inferences About Two Populations Using Excel 475
Appendix 10.4 Analysis of Variance with Excel 477
Appendix 10.5 Inferences About Two Populations Using StatTools 478
Appendix 10.6 Analysis of a Completely Randomized Design Using
StatTools 480

Chapter 11 
Comparisons Involving Proportions and a Test of
Independence 481
Statistics in Practice: United Way 482
11.1 Inferences About the Difference Between Two Population
Proportions 483
Interval Estimation of p1 2 p2 483
Hypothesis Tests About p1 2 p2 485
11.2 Testing the Equality of Population Proportions for
Three or More Populations 489
A Multiple Comparison Procedure 495
11.3 Test of Independence 500

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 Contents xvii

Summary 508
Glossary 508
Key Formulas 508
Supplementary Exercises 509
Case Problem 1 A Bipartisan Agenda for Change 514
Appendix 11.1 Inferences About Two Population Proportions Using
Minitab 515
Appendix 11.2 Chi-Square Tests Using Minitab 516
Appendix 11.3 Chi-Square Tests Using Excel 516
Appendix 11.4 Inferences About Two Population Proportions Using
StatTools 518
Appendix 11.5 Chi-Square Tests Using StatTools 519

Chapter 12 
Simple Linear Regression 520
Statistics in Practice: Alliance Data Systems 521
12.1 Simple Linear Regression Model 522
Regression Model and Regression Equation 522
Estimated Regression Equation 523
12.2 Least Squares Method 525
12.3 Coefficient of Determination 536
Correlation Coefficient 539
12.4 Model Assumptions 543
12.5 Testing for Significance 544
Estimate of σ2 544
t Test 546
Confidence Interval for β1 548
F Test 548
Some Cautions About the Interpretation of Significance Tests 550
12.6 Using the Estimated Regression Equation for Estimation
and Prediction 554
Interval Estimation 555
Confidence Interval for the Mean Value of y 555
Prediction Interval for an Individual Value of y 556
12.7 Computer Solution 561
12.8 Residual Analysis: Validating Model Assumptions 565
Residual Plot Against x 566
Residual Plot Against y^ 569
Summary 571
Glossary 572
Key Formulas 572
Supplementary Exercises 574
Case Problem 1 Measuring Stock Market Risk 580

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xviii Contents

Case Problem 2 U.S. Department of Transportation 581

Case Problem 3 Selecting a Point-and-Shoot Digital Camera 581
Case Problem 4 Finding the Best Car Value 583
Appendix 12.1 Regression Analysis with Minitab 584
Appendix 12.2 Regression Analysis with Excel 584
Appendix 12.3 Regression Analysis Using StatTools 587

Chapter 13 Multiple Regression 588

Statistics in Practice: dunnhumby 589
13.1 Multiple Regression Model 590
Regression Model and Regression Equation 590
Estimated Multiple Regression Equation 590
13.2 Least Squares Method 591
An Example: Butler Trucking Company 592
Note on Interpretation of Coefficients 594
13.3 Multiple Coefficient of Determination 600
13.4 Model Assumptions 604
13.5 Testing for Significance 605
F Test 605
t Test 608
Multicollinearity 609
13.6 Using the Estimated Regression Equation for Estimation and
Prediction 612
13.7 Categorical Independent Variables 615
An Example: Johnson Filtration, Inc. 615
Interpreting the Parameters 617
More Complex Categorical Variables 619
Summary 623
Glossary 623
Key Formulas 624
Supplementary Exercises 625
Case Problem 1 Consumer Research, Inc. 631
Case Problem 2 Predicting Winnings for NASCAR Drivers 632
Case Problem 3 Finding the Best Car Value 634
Appendix 13.1 Multiple Regression with Minitab 635
Appendix 13.2 Multiple Regression with Excel 635
Appendix 13.3 Multiple Regression Analysis Using StatTools 636

Appendix A: References and Bibliography 639

Appendix B: Tables 640

Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
 Contents xix

Appendix C: Summation Notation online only

Appendix D: Self-Test Solutions and Answers to Even-Numbered

Exercises 667

Appendix E: Microsoft Excel 2013 and Tools for Statistical

Analysis 706

Appendix F: Computing p-Values Using Minitab and Excel 718

Index 722

Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
 Copyright 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
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