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Economics 240A

Power One
 Outline
 Course Organization
 Course Overview
 Resources for Studying

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I. Organization
Lectures are on Tuesdays and Thursdays, 5:00-6:15 PM in North Hall 1105.
Lecture Notes for class will cover the concepts
Text: Gerald Keller, Statistics for Management and Economics, Seventh
edition (2005)

The two Labs are back to back on Wednesdays, 5:00-5:50 in Leadbetter, Phelps
1530, and 6:00-6:50 in Gaviota, Phelps 1529. The capacity is 25 stations, so sign
up for a lab section the first day of class.

Software: Excel and EViews

Lab Notes will cover the procedures of analysis
TA: Munpyung O, Office, NH 2040
Section TBA
Exams: Midterm Tuesday, Nov. 1`
Final Tuesday, December 8, 7:30-10:30 PM
Organization ( Cont.)
Problem Sets, Pre-Midterm: #1 Sept. 29, 2005 due Oct 6, 2005
#2 Oct 6, 2005 due Oct 13, 2005
#3 Oct 13, 2005 due Oct 20, 2005
#4 Oct 20, 2005 due Oct 27, 2005
Problem Set, Post-Midterm #5 Nov. 3, 2005 due Nov. 10, 2005

Exercises: as assigned on the Lab Notes

Takehome Project: An exercise to test your quantitative and writing skills. You
can work collectively but the 2-3 page report must be yours. Last Fall we did
group projects with PowerPoint presentations and I will probably repeat this
format.

Your grade for the course will be based on your scores on the midterm(18%), final(37%)
and 2 projects(each 18%), and your effort as indicated by problem sets and lab exercises
turned in for credit(9%). Of course the latter are more important than the weight
indicated. I distribute the grades by letter, weighing the problem sets one third of a grade
point, and by total score for the class, and reconcile the course grades.
 Office hours
 Llad Phillips
• North Hall 3032, Wed. 4:00-4:40, by appt
• Llad@econ.ucsb.edu
 Munpyung O
• Section : Th NH 2111, 4:00-4:50
• Office, NH 2040, Tu 4:00-4:50
• Munpyung@econ.ucsb.edu

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 Course Overview
 Topics in Statistics
• Descriptive Statistics
• Exploratory Data Analysis
• Probability and Distributions
• Proportions
• Interval Estimation
• Hypothesis Testing
• Correlation and Regression
• Analysis of Variance
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 Concepts 1
 Two types of data:
• Time series
• Cross section

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http://research.stlouisfed.org/fred2/

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http://research.stlouisfed.org/fred2/

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Examples of:
1. Graphical Display of Results
2. Cross-Section Data
3. Survey Sample of 12,571
1. Men & women
2. Ages 15-44

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What is the
Message?

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 Concepts 2
 Population Versus Sample
 Special Election this Fall
• Population: All eligible voters
• Sample: Field poll

sample
Pop

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 Concepts 3
 Different views of the world (universe)
• Deterministic
• Stochastic

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 Statistical Inference and
Probability
 Deterministic
• Newtonian physics: e g. distance = rate*time
• Einsteinian(relativistic) physics: E=m*c2
 Stochastic (random)
• Quantum mechanics

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Statistical Inference and Probability
 Probability: A tool to understand chance
 What is chancy about the statistical world
we will study?
 Example:
• Suppose I number everyone in the class from 1
to 30?
• And draw one number a meeting to ask a
question; what is the likelihood I will call on
you today?
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Resources for Studying
 Keller  Instructor
• Text Readings • Lecture Notes
• CDROM • Lab Notes & Exercises
• Applets • Problem Sets
• PowerPoint Slide
Shows

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http://econ.ucsb.edu

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Keller CDROM

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http://www.duxbury.com/statistics

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Student Book Companion Siten

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 Concepts 4
 Three types of data
• Cardinal
• Ordinal
• Categorical

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Keller & Warrack Slide Show
 Excerpts from Ch. 2

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 Chapter 2

Graphical
Descriptive
Techniques
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2.1 Introduction
 Descriptive statistics involves the arrangement,
summary, and presentation of data, to enable
meaningful interpretation, and to support decision
making.
 Descriptive statistics methods make use of
• graphical techniques
• numerical descriptive measures.
 The methods presented apply to both
• the entire population
• the population sample
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2.2 Types of data and information

 A variable - a characteristic of population or

sample that is of interest for us.
• Cereal choice
• Capital expenditure
• The waiting time for medical services
 Data - the actual values of variables
• Interval data are numerical observations
• Nominal data are categorical observations
• Ordinal data are ordered categorical observations
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Types of data - examples
Interval data Nominal

Age - income Person Marital status

55 75000 1 married
42 68000 2 single
. . .
3 single
.
. .
Weight gain .
Computer .
Brand
+10 1 IBM
+5 2 Dell
. 3 IBM
. . .
. . 30
Types of data - examples
Interval data Nominal data

Age - income With nominal data,

55 75000 all we can do is,
42 68000 calculate the proportion
. . of data that falls into
. . gain each category.
Weight
+10
+5 IBM Dell Compaq Other Total
. 25 11 8 6
. 50
50% 22% 16% 12% 31
Types of data – analysis
 Knowing the type of data is necessary to properly
select the technique to be used when analyzing data.

 Type of analysis allowed for each type of data

 Interval data – arithmetic calculations
 Nominal data – counting the number of observation in each
category
 Ordinal data - computations based on an ordering process

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Cross-Sectional/Time-Series Data
 Cross sectional data is collected at a certain point
in time
• Marketing survey (observe preferences by gender, age)
• Test score in a statistics course
• Starting salaries of an MBA program graduates

 Time series data is collected over successive

points in time
• Weekly closing price of gold
• Amount of crude oil imported monthly

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2.3 Graphical Techniques for
Interval Data
 Example 2.1: Providing information
concerning the monthly bills of new
subscribers in the first month after signing
on with a telephone company.
• Collect data
• Prepare a frequency distribution
• Draw a histogram

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 Example 2.1: Providing information
Collect data Prepare a frequency distribution
How many classes to use?
Bills Number of observations Number of classes
42.19 Less then 50 5-7
38.45 50 - 200 7-9
29.23 200 - 500 9-10
89.35 500 - 1,000 10-11
118.04
1,000 – 5,000 11-13
110.46
5,000- 50,000 13-17
0.00
More than 50,000 17-20
72.88
83.05 Class width = [Range] / [# of classes]
.
.
[119.63 - 0] / [8] = 14.95 15
(There are 200 data points Largest
Largest
Largest
Largest
observation
Smallest
Smallest
Smallest
Smallest
observation
observation
observation observation
observation
observation
observation 35
Example 2.1: Providing information

Bin Frequency
Draw a Histogram 15 71
80
30 37
Frequency

60 45 13
40 60 9
20 75 10
0
90 18
15 30 45 60 75 90 105 120 105 28
Bills 120 14

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Example 2.1: Providing information
nnnnWhat information can we extract from this histogram
About half of all A few bills are in Relatively,
the bills are small the middle range large number
80 71+37=108 13+9+10=32 of large bills
18+28+14=60
Frequency

60

40

20

0 105
120
45
15
30

60
75
90

Bills
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Class width
 It is generally best to use equal class width, but
sometimes unequal class width are called for.

 Unequal class width is used when the frequency

associated with some classes is too low. Then,
• several classes are combined together to form a wider
and “more populated” class.
• It is possible to form an open ended class at the higher
end or lower end of the histogram.

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Shapes of histograms
 There are four typical shape characteristics

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Shapes of histograms

Negatively skewed

Positively skewed
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Modal classes
A modal class is the one with the largest number
of observations.
A unimodal histogram

The modal class

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Descriptive Statistics
 Central Tendency
• mode
• median
• mean
 Dispersion
• standard deviation
• interquartile range (IQR)

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 Concepts 5
 Normal Distribution
• Central tendency: mean or average
• Dispersion: standard deviation
 Non-normal distributions

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 Concepts 6
 What do we mean by central tendency?
 Possibilities
• What is the most likely outcome?
• What outcome do we expect?
• What is the outcome in the middle?

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Moving from Concepts to
Measures

 Mode: most likely value.

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Moving from Concepts to
Measures

 Mode: most likely value.

 Median: sort the data from largest to
smallest. The observation with half of the
values larger and half smaller is the median.

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Moving from Concepts to
Measures
 Median: sort the data from largest to
smallest. The observation with half of the
values larger and half smaller is the median.
 Mode: most likely value.
 Mean or average: sum the values of all of
the observations and divide by the number
of observations.

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 Concepts 7
 What do we mean by dispersion?
 Possibilities
• How far, on average are the values from the
mean?
• What is the range of values from the biggest to
the smallest?

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Exploratory Data Analysis
 Stem and Leaf Diagrams
 Box and Whiskers Plots

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Males: Weight Data

140 145 160 190 155 165 150 190 195 138
160 155 153 145 170 175 175 170 180 135 170 157
130 185 190 155 170 155 215 150 145 155 155 150
155 150 180 160 135 160 130 155 150 148 155 150
140 180 190 145 150 164 140 142 136 123 155

Females:
140 120 130 138 121 125 116 145 150 112 125 130
120 130 131 120 118 125 135 125 118 122 115 102
115 150 110 116 108 95 125 133 110 150 108
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Box Diagram
median

First or lowest quartile; Upper or highest quartile

25% of observations below 25% of observations above
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Whiskers
 The whiskers end with points that are not
outliers
 Outliers are beyond 1.5 times the
interquartile range ( in this case IQR = 31),
so 1.5*31 = 46.5
 1st quartile – 1.5*IQR = 125 – 46.5 =
78.5,but the minimum is 95 so the lower
whisker ends with 95.

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3rd Quartile + 1.5* IQR = 156 + 46.5 = 202.5; 1st value below =195
 Next Tuesday Only!
 Meet in Ellison 2626
• Exploratory data analysis using JMP

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http://www.dof.ca.gov/

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