Statistics in a Nutshell, 2nd Edition

Chapter 14. Business and Quality Improvement Statistics

Many of the statistics used in business and quality improvement applications are those within the common repertoire of basic statistics, including the chi-square test (covered in Chapter 5), t-tests (Chapter 6), and regression and ANOVA (Chapter 8 to Chapter 11). However, other techniques have been developed for the specific needs of business and quality improvement applications, and those techniques will be the subjects of this chapter.

Index Numbers

Index numbers are commonly used in business to measure the change in quantity or price over time for some good or combination of goods and services. One well-known example is the Consumer Price Index (CPI), which represents the average price of a quantity of consumer goods and services believed to be typical household purchases in the United States. The U.S. CPI is calculated monthly by the Bureau of Labor Statistics of the U.S. Department of Labor; it’s used as a measure of inflation and to calculate cost of living adjustments for pensions and wages. Although many criticisms have been made of the CPI, it has proven highly useful as a summary measure of the average cost of living and allows comparison across historical periods and geographic areas. Other countries that calculate a CPI or similar index include Canada, China, Israel, New Zealand, Australia, and many countries in Europe.

Calculation of indexes can be very simple (when the index reflects the change in the price or quantity ...