Everyday decisions are made based on incomplete information. For example, in any business, decisions are made regularly in an environment where decision makers cannot be certain of the future behavior of those factors that will eventually affect the outcome resulting from various options under consideration.
In submitting a bid for a contract, a manufacturer will not be completely certain of total future costs involved nor have knowledge about bids to be submitted by competitors. In spite of this uncertainty, a bid must be made. An investor, deciding how to balance a future market movements are unknown. This investor does not know with certainty whether the market will be buoyant, steady, or depressed.
Journey to Making Decisions
To think statistically will involve a journey from problem definition to the transformation of data to information, and then the transformation of information to knowledge. Finally, knowledge should lead to better decision making.
DATA, INFORMATION, KNOWLEDGE
2. Information: processed and summarized data yielding facts and ideas.
3. Knowledge: selected and organized information that provides understanding, recommendations, and the basis for decision.
After a problem is identified and defined, data produced by various processes is collected according to a design. These data are analyzed by using one or more statistical procedures. From this analysis, information is obtained and converted to knowledge using understanding based on specific experience, theory, literature, and additional statistical procedures. Knowledge then leads to decision making.
DESCRIPTIVE AND INFERENTIAL STATISTICS
Descriptive statistics include graphical and numerical procedures that summarize and process data and are used to transform data to information. Inferential statistics provide the bases for predictions, forecasts, and estimates that are used to transform information to knowledge.
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