Descriptive Statistics And Its Usefulness - Research Paper Example

Running Head: DESCRIPTIVE STATISTICS AND ITS USEFULNESS TYPE HERE TYPE YOUR HERE MODULE HERE HERE DATE OF SUBMISSION HERE ABSTRACT This papers talks about the advantages that people and organization could gain by depending on the techniques of descriptive statistics. It further provides various examples from every day life to ascertain the importance of statistics in our day to day affairs. In the end, this paper talks about the usefulness of probabilities for business managers and their drawbacks. Descriptive statistics is a tool that describes the composition or type of data. They are used to summarize the data and with the techniques of graphical analysis they form the basis of quantative analysis and other analytical measures. (Weiss, 2004) For me, statistics are everywhere around us in this world. We face a lot of situation which involves statistics and more particularly descriptive statistics in our lives. In fact this interaction with statistics is so frequent that it is often very difficult to spend even hours of our lives without having to look at statistics or descriptive statistics. The reason behind statistics being all around us, confines in the daily activities or routine tasks, which we go through. For example, suppose we are watching a match involving our favorite NBA team, Lakers. Before the match we are going to make some inferences. These inferences will be based on the basis of statistics are more importantly descriptive statistics. For example, to say Lakers is going to win will be based on certain variables that both the Lakers and the opposing team possess. For example, our inferences could be based on the fact that on average, Lakers is scoring more baskets than the opposing team. Similarly it can be on the basis that the players of Lakers such as Bryant and Gosol are taller than the players of opposing team. It could be any reason based on the variable between the two teams. If we define variable, it is used to define certain characteristics that differ from one person to another or from one entity to another. This is how we can use statistics as tool to make inferences in our daily life and gives us a little idea about how important statistics can be. From the above example, it has become really clear that statistics play vital role in our daily lives. The above example might not affect our lives greatly but think about certain situation where using the techniques of descriptive statistics can make our lives better, if we apply the right techniques to a data and make inferences which might benefit us. Let's now take an example of a company which trades stocks in NYSE. Suppose that the market is bullish and shares prices are rising. This increase could be graphed as the following diagram: Source: http://www.nasdaq.com/ Date: 28 September 2009 The above diagram shows the data of NYSE index on a 28 September 2009. From the above data, we can see that the market has reached peak at 1'o'clock. By the use of descriptive statistics and comparing the data of several days, we may come to a conclusion that NYSE reaches its peak each day at 1'o'clock and can disburse all the investment before 1'o'clock to make huge profits. This will create a motivation for the company to invest in the shares by large amount to maximize its profits. However, suppose that the market has a trend that after reaching a certain point it goes down or loses its value. (Orr, 1995) If this trend line or line of best fit, which is a part of descriptive statistics, is known, it will provide this company comprehendible information about not only the timings and compositions of optimum investment in NYSE, but will also tell the company when to divest from the market, before the market indices start to fall. This is how giant brokers operating New York Stock Exchange make the use of descriptive statistics to make any situation a win-win situation and avoid losses. However, the scope of descriptive statistics is not limited to large companies only; even an individual can use the means and tools provided by descriptive statistics to make efficient use of the resources at his disposal. For example, most of us has limited amount of money and thus we have to plan our budgets to make the best possible buys. For example, if we want to buy a new car but we cannot decide on which car to buy given our limited income and money constraints. Although, suppose we have saved enough to buy a new car, but the thing we are worried about is the cost of fuel that we have to bear. This could be planned by the use of descriptive statistics. We can look at the mileage (efficiency of fuel consumption) of different cars to make sure that we buy the best possible alternative. Mileage could be calculated by taking out the average of distance travelled on each and dividing it by the number of liters of fuel consumed. This how mean could be used be used as a descriptive statistics measure to make sure that we use the resources with maximum efficiency and make the best possible decisions from the resources we possess. Descriptive statistics can also be used to plan, reform and help the governments to channel their spending in a way that maximizes the utility or usefulness of this their investment. For example, suppose that an economy is growing at a good rate for past few years, but recently it has faced a slump or has seen a period where there has been little or no growth. The techniques of descriptive statistics could be used in the situation to arrive at the causation behind this period of slump. For example, an economy is made up of three sectors: primary, secondary and tertiary. A good starting point of the decline in the economy could be due to the decreased or inefficient performance of any of these sectors of the economy. Now, in order to adjudicate the reason behind the fall of the economy we can use the techniques of the descriptive statistics. For example, we can look at the output produced or production of each sector. Then we can compare it with the average and the sectors producing less than the national average output are the reasons behind the decline of the economy. In the recent years, descriptive statistics have become an integral part of the social research methods. Many researches could not be completed with having a separate section of statistics and results. The statistical analyses portion of a research forms probably the most important part of the whole study and hypothesis are rejected or accepted based on this section in the research report. The tools provided by descriptive statistics have helped to answer various important problems and have shed light on various social vices in the society. For example, how can we forget the famous the illustration by an economist called Phillips who promulgated the famous Phillips curve. He used the techniques of descriptive statistics to compare the records of inflation and unemployment and concluded that an increase in inflation causes a reduction in unemployment. This was a benefit of a descriptive statistics that helped to crack the myth of unemployment and inflation. In fact, the techniques of descriptive statistics help to correlate the different elements and help us to avoid certain problem by controlling some other factors. Thus, descriptive statistics provide us with an indirect control of any problem. Suppose the following table shows how much distance I walked each day of the week: DAYS: DISTANCE (KM) SUNDAY 1.7 MONDAY 1.7 TUESDAY 2 WEDNESDAY 2 THURSDAY 1.7 FRIDAY 2.4 SATURDAY 2.5 Let's apply the techniques of descriptive statistics to determine the distance travelled in a week during my daily morning week. The population in this case is the number of days I walked. This could be defined in the terms of numbers, for example, each day I walked 2 kilometers approximately. In other words, I can describe the population by saying that most of the days I walked around 1.7 km (mode) or I walked an average of 2.5 km on the 3rd and 4th day (median). Similarly, descriptive statistics can be applied to my job also. For example, I can use the descriptive statistics ascertain my position in the industry or where I stand by looking at the average salary that the people in the same job are commanding and comparing it to my salary. I can also use descriptive statistics to find out how much salary most of the people are receiving in the job that requires the same skill level as my job. This way I can make inferences about my position in the company and job market. The probability can be defined as a 'chance' that a member of the population has a certain behavior trait or characteristics. For example, many companies use the probability to find out the motivation level of the employees in the company. If for example, there are 50 people in a company and 25 are happy, then we can say that every 2nd person in the company is motivated. Similarly, other types of probabilities used could be how many people will be absent on a particular day etc. This could be used by the employers to control the state of affairs of their businesses. For example, they will calculate the number of people that will be absent on a particular day by relying on the probabilities calculations. They can use this information to make alternative arrangement or ask the head office to send re-enforcement to cover for the absent employees. Similarly, by ascertaining that every 2nd people in the company is a motivated employee, they can use this information and arrange a picnic trip for people who are not happy to boost their morale. However, the information provided by probability analysis is often misleading and could have negative effects on the business. Since, it is only an estimate and not actual information it could lead to inaccurate answers. For example, if a manager finds that most of the people who were supposed to be absent, as determined by the probability analysis, are present and re-enforcing staff also turns up, there would be a problem of over-staffing and larger payroll than usual which would mean a decline in the profits of a company. Similarly, by arranging a picnic trip for 25 people, there's no means to select which 25 people should be sent to the trip and other problem will also occur if a business relies on probability analysis information too much. Thus, in the end we can easily conclude that, although statistical analysis, particularly descriptive statistics is a useful tool governing everyday affairs of our daily lives. The tools and information provided by these analyses could help a person, businesses and even government to make better decisions and increase the efficient use of the resources at their disposal. However, with that said, like over reliance on anything is bad, the same principle applies to statistical analysis also and if we rely too much on them, then we will lose the beauty of our lives. References Neil A. Weiss. (2004). Introductory Statistics 7th Edition. Addison Wesley David B. Orr. (1995). Fundamentals of Applied Statistics and Surveys. Chapman and Hall. Read More