007. Levels of Measurements

Variables can be classified on the basis of their level of measurement. Variables can be (1) nominal, (2) ordinal, (3) interval, or (4) ratio.

1. A Nominal Measurement is created when names are used to establish categories into which variables can be exclusively recorded. It carries no indication of order of preference, but merely establishes a categorical arrangement into which each observation can be placed.

Example 1.7. Sex can be classified as “male” and “female”, soft drink could be classified as Coke, Pepsi, or 7-Up. Each drink could be recorded in one of these categories to the exclusion of the others.

2. An Ordinal scale produces a distinct ordering or arrangement of the data. That is, the observations are ranked on the basis of some criterion.

Example 1.8. Opinion polls often use an ordinal scale such as “strongly agree”, “agree” “no opinion”, “disagree”, and “strongly disagree”. Numbers can be used to order the rankings. The magnitude of the numbers is not important. The arithmetic differences between the values are meaningless. A product ranks “2” is not twice as good as one with a ranking of “1”.

3. Variables on an Interval Scale are measured numerically, and, like ordinal data, carry an inherent ranking or ordering. The differences between the values are important. Thus, the arithmetic addition and subtraction are meaningful. The value of zero is arbitrarily chosen in an interval scale as reference point.

Example 1.9. The Fahrenheit scale for temperatures. The same difference of 10 degrees exists as between 90 and 100 degrees Fahrenheit as 70 degrees hotter than 60 degrees, or to say it’s 10 degrees colder than 10 degrees. Thus, 80 degrees is not twice as hot as 40 degrees and the ratio 80/40 has no meaning.

4. The Ratio scale is based on a numbering system in which zero is meaningful. The arithmetical operations of multiplication and division also take on a rational interpretation. A Ratio scale is used to measure many types of data found in business analysis (costs, profits, etc.). Measurements such as weight, time, and distance are also measured on a ratio scale since zero is meaningful.

Example 1.10. A firm with 40 percent market share has twice as much of the market as a firm with 20 percent market share. An item that weight 100 pounds is one-half as heavy as an item weighing 200 pounds.

< Предыдущая		Следующая >