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The Complete Idiot's Guide to Statistics, 2nd Edition

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Statistics, statistics everywhere, but not a single word can we understand! Actually, understanding statistics is a critically important skill that we all need to have in this day and age. Every day, we are inundated with data about politics, sports, business, the stock market, health issues, financial matters, and many other topics. Most of us don’t pay much attention to most of the statistics we hear, but more importantly, most of us don’t really understand how to make sense of the numbers, ratios, and percentages with which we are constantly barraged. In order to obtain the truth behind the numbers, we must be able to ascertain what the data is really saying to us. We need to determine whether the data is biased in a particular direction or whether the true, balanced picture is correctly represented in the numbers. That is the reason for reading this book.

Statistics, as a field, is usually not the most popular topic or course in school. In fact, many people will go to great lengths to avoid having to take a statistics course. Many people think of it as a math course or something that is very quantitative, and that scares them away. Others, who get past the math, do not have the patience to search for what the numbers are actually saying. And still others don’t believe that statistics can ever be used in a legitimate manner to point to the truth. But whether it is about significant trends in the population, average salary and unemployment rates, or similarities and differences across stock prices, statistics are an extremely important input to many decisions that we face daily. And understanding how to generate the statistics and interpret them relating to your particular decision can make all the difference between a good decision and a poor one.

For example, suppose that you are trying to sell your house and you need to set a selling price for it. The mean selling price of houses in your area is $250,000, so you set your price at $265,000. Perhaps $250,000 is the price roughly in the middle of several house prices that have ranged from $200,000 to $270,000, so you are in the ballpark. However, a mean of $250,000 could also occur with house prices of $175,000, $150,000, $145,000, $100,000, and $780,000. One high price out of five causes the mean to increase dramatically, so you have potentially priced yourself out of most of the market. For this reason, it is important to understand what the term “mean” really represents.
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