‘An excellent reference book for the undergraduate student; fi lled with examples and applications – Fifth both practical (i.e. computer-based) and traditional (i.e. pen and paper problems); wide-ranging and Edition MICHAEL BARROW sensibly ordered. The book is written clearly, easy to follow ... yet not in the least patronising. This is a particular strength.’ Christopher Gerry, UCL AS ‘There are thousands of intro stats books on the market, but few which are suffi ciently orientated CT STATISTICS FOR ECONOMICS, C towards economics, and even fewer that treat topics with as much rigour as Barrow does.’ A Andy Dickerson, University of Sheffi eld O T U ACCOUNTING AND BUSINESS STUDIES ‘The Barrow exercises and online resources offer good scope for directing students to a great source I NS of self study.’ Robert Watkins, Kingston University TT Fifth Edition I N I C G Do you need to brush up on your statistical skills to truly excel in your economics S or business course? If you want to increase your confi dence in statistics then this A is the perfect book for you. The fi fth edition of Statistics for Economics, Accounting N and Business Studies continues to present a user-friendly and concise introduction F to a variety of statistical tools and techniques. Throughout the text, the author D O demonstrates how and why these techniques can be used to solve real-life problems, highlighting common mistakes and assuming no prior knowledge of the subject. B R U New to this fi fth edition: S E • Chapter 11, Seasonal adjustment of time-series data is back by popular demand. I • New worked examples in every chapter and more real-life business examples – NC such as whether the level of general corruption in a country harms investment E and whether boys or girls perform better at school – show how to apply an O S understanding of statistical techniques to wider business practice. N S • New interactive online resource MathXL for Statistics. See below for more details. SO T M MathXL for Statistics U A brand new online learning DI resource for this edition available C I to users of this book at E www.pearsoned.co.uk/barrow This core textbook is aimed at undergraduate and S S MBA students taking an introductory statistics , An unrivalled online study and testing resource course on their economics, accounting or that generates a personalised study plan and business studies degree. provides extensive practice questions exactly B where you need them. Michael Barrow is a Senior Lecturer in Economics A at the University of Sussex. He has acted as a • Interactive questions with randomised values R consultant for major industrial, commercial and allow you to practise the same concept as government bodies. R many times as you need until you master it. O • Guided solutions break down the question for W you step-by-step. • Audio animations talk you through key statistical techniques. www.pearson-books.com an imprint of Front cover image: © Getty Images CVR_BARR7942_05_SE_CVR.indd 1 9/3/09 10:56:41 STFE_A01.qxd 26/02/2009 09:01 Page i Statistics for Economics, Accounting and Business Studies The Power of Practice With your purchase of a new copy of this textbook, you received a Student Access Kit for getting started with statistics using MathXL. Follow the instructions on the card to register successfully and start making the most of the resources. Don’t throw it away! The Power of Practice MathXLis an online study and testing resource that puts you in control of your study, providing extensive practice exactly where and when you need it. MathXLgives you unrivalled resources: ● Sample testsfor each chapter to see how much you have learned and where you still need practice. ● A personalised study plan, which constantly adapts to your strengths and weaknesses, taking you to exercises you can practise over and over with different variables every time. ● ‘Help me solve this’ provide guided solutions which break the problem into its component steps and guide you through with hints. ● Audio animationsguide you step-by-step through the key statistical techniques. ● Click on the E-booktextbook icon to read the relevant part of your textbook again. See pages xiv–xv for more details. To activate your registration go to www.pearsoned.co.uk/barrowand follow the instructions on-screen to register as a new user. ➔ STFE_A01.qxd 26/02/2009 09:01 Page ii We work with leading authors to develop the strongest educational materials in Accounting, bringing cutting-edge thinking and best learning practice to a global market. Under a range of well-known imprints, including Financial Times Prentice Hall, we craft high-quality print and electronic publications, which help readers to understand and apply their content, whether studying or at work. To find out more about the complete range of our publishing, please visit us on the World Wide Web at: www.pearsoned.co.uk STFE_A01.qxd 26/02/2009 09:01 Page iii Statistics for Economics, Accounting and Business Studies Fifth Edition Michael Barrow University of Sussex STFE_A01.qxd 26/02/2009 09:01 Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published 1988 Fifth edition published 2009 © Pearson Education Limited 1988, 2009 The right of Michael Barrow to be identified as author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. ISBN 13: 978-0-273-71794-2 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Barrow, Michael. Statistics for economics, accounting and business studies / Michael Barrow. – 5th ed. p. com. Includes bibliographical references and index. ISBN 978-0-273-71794-2 (pbk. : alk. paper) 1. Economics–Statistical methods. 2. Commercial statistics. I. Title. HB137.B37 2009 519.5024′33–dc22 2009003125 10 9 8 7 6 5 4 3 2 1 13 12 11 10 09 Typeset in 9/12pt Stone Serif by 35 Printed and bound by Ashford Colour Press Ltd. Gosport The publisher’s policy is to use paper manufactured from sustainable forests. STFE_A01.qxd 26/02/2009 09:01 Page v For Patricia, Caroline and Nicolas STFE_A01.qxd 26/02/2009 09:01 Page vi STFE_A01.qxd 26/02/2009 09:01 Page vii Contents Guided tour of the book xii Getting started with statistics using MathXL xiv Preface to the fifth edition xvii Introduction 1 1 Descriptive statistics 7 Learning outcomes 8 Introduction 8 Summarising data using graphical techniques 10 Looking at cross-section data: wealth in the UK in 2003 16 Summarising data using numerical techniques 24 The box and whiskers diagram 44 Time-series data: investment expenditures 1973–2005 45 Graphing bivariate data: the scatter diagram 58 Data transformations 60 Guidance to the student: how to measure your progress 62 Summary 63 Key terms and concepts 64 Reference 64 Problems 65 Answers to exercises 71 Appendix 1A: Σnotation 75 Problems on Σnotation 76 Appendix 1B: E and V operators 77 Appendix 1C: Using logarithms 78 Problems on logarithms 79 2 Probability 80 Learning outcomes 80 Probability theory and statistical inference 81 The definition of probability 81 Probability theory: the building blocks 84 Bayes’ theorem 91 Decision analysis 93 Summary 98 Key terms and concepts 98 Problems 99 Answers to exercises 105 vii STFE_A01.qxd 26/02/2009 09:01 Page viii Contents 3 Probability distributions 108 Learning outcomes 108 Introduction 109 Random variables 110 The Binomial distribution 111 The Normal distribution 117 The sample mean as a Normally distributed variable 125 The relationship between the Binomial and Normal distributions 131 The Poisson distribution 132 Summary 135 Key terms and concepts 136 Problems 137 Answers to exercises 142 4 Estimation and confidence intervals 144 Learning outcomes 144 Introduction 145 Point and interval estimation 145 Rules and criteria for finding estimates 146 Estimation with large samples 149 Precisely what is a confidence interval? 153 Estimation with small samples: the tdistribution 160 Summary 165 Key terms and concepts 165 Problems 166 Answers to exercises 169 Appendix: Derivations of sampling distributions 170 5 Hypothesis testing 172 Learning out comes 172 Introduction 173 The concepts of hypothesis testing 173 The Prob-value approach 180 Significance, effect size and power 181 Further hypothesis tests 183 Hypothesis tests with small samples 187 Are the test procedures valid? 189 Hypothesis tests and confidence intervals 190 Independent and dependent samples 191 Discussion of hypothesis testing 194 Summary 195 Key terms and concepts 196 Reference 196 viii STFE_A01.qxd 26/02/2009 09:01 Page ix Contents Problems 197 Answers to exercises 201 6 The χ2 and F distributions 204 Learning outcomes 204 Introduction 205 The χ2distribution 205 The F distribution 220 Analysis of variance 222 Summary 229 Key terms and concepts 230 Problems 231 Answers to exercises 234 Appendix: Use of χ2and F distribution tables 236 7 Correlation and regression 237 Learning outcomes 237 Introduction 238 What determines the birth rate in developing countries? 238 Correlation 240 Regression analysis 251 Inference in the regression model 257 Summary 271 Key terms and concepts 272 References 272 Problems 273 Answers to exercises 276 8 Multiple regression 279 Learning outcomes 279 Introduction 280 Principles of multiple regression 281 What determines imports into the UK? 282 Finding the right model 300 Summary 307 Key terms and concepts 308 Reference 308 Problems 309 Answers to exercises 313 9 Data collection and sampling methods 318 Learning outcomes 318 Introduction 319 Using secondary data sources 319 Using electronic sources of data 321 ix