INTRODUCTION OF STATISTICS

Economics by Alfred Marshall, “The study of man in the ordinary business of life”.
Consumer “A consumer is one who consumes goods and services for the satisfaction of his wants”.
Consumption “Consumption is the process of using up utility value of goods and services for the direct satisfaction of our wants”.
Producer “A producer is one who produces/or sells goods and services for the generation of income”.
Production “Production is the process of converting raw material into useful thing”.
Saving It is the part of income which is not consumed. It is an art of abstinence from consumption.
Investment It is expenditure by the producers on the purchase of such assets which help to generate income.
Economic Activity It is an activity which is related to the use of scarce means. Means are always scarce in relation to our wants.
Economic Problem It is the problem of choice arising on account of the facts that resources are scarce and these have alternative uses.

Components of Economics There are three components of economics

Consumption
Production
Distribution

Statistics – A Plural Sense Statistics refers to information in terms of numbers or numerical data, such as population statistics, employment statistics etc.

According to Bowley, “Statistics are numerical statements of facts in any department of enquiry placed in relation to each other.”

Features of Statistics in the Plural Sense

Aggregate of facts
Numerically expressed
Affected by multiplicity of causes
Reasonable accuracy
Placed in relation to each other
Predetermined purpose
Estimated

Statistics – A Singular Sense It refers to techniques or methods relating to collection, classification, presentation analysis and interpretation of quantitative data.

According to Seligman, “Statistics is the science which deals with the methods of collecting, classifying, presenting, comparing and interpreting numerical data collected to throw some light on any sphere of enquiry”.

Importance of Statistics in Economics:

Quantitative expression of economic problem
Inter-sectoral and inter-temporal comparisons
Working out cause and effect relationship
Construction of economic theories or economic models
Economic forecasting
Formulation of policies

Limitations of Statistics:

Study of numerical facts only
Study of aggregates only
Results are true only on an average
Without reference, results may prove to be wrong
Can be used only by the experts
Prone to misuse

Exercise Questions

Q1. Make a list of activities that constitute the ordinary business of life. Are

these economic activities?

Ans. The activities that constitute the ordinary business of life are:

→ Buying of goods and services.

→ Rendering services to a company by employees and workers.

→ Selling of goods and services.

Yes, the above mentioned activities are regarded as economic activities as it involve the

exchange of money to earn livelihood.

Q2. ‘The Government and policy makers use statistical data to formulate

suitable policies of economic development’. Illustrate with two examples.

Ans. The statistical data is important for Government and policy makers to formulate suitable

policies of economic development. It not only helps in analysing and evaluate the

outcomes of the past policies but also assist them to take corrective measures and to

formulate new policies accordingly. It is clear from examples –

(i) It can be ascertained easily by using statistical techniques whether the policy of family

planning is effective in checking the problem of rapidly growing population.

(ii) In preparing annual government budget, previous data of government expenditures

and government revenues are taken into consideration for estimating the allocation of

funds among various projects.

Q3. “You have unlimited wants and limited resources to satisfy them.” Explain by giving two examples.

Ans. Every individual have unlimited wants but the resources for satisfying the wants are

limited. Scarcity is the root of all economic problems. Had there been no scarcity, there

would have been no economic problem. This can be understood by examples -(i) A

children pocket money is a limited so he/she have to choose only those things that you

want the most. You can’t purchase almost all the things you wants.

(ii) A land available should be put in use either in agricultural or industrial. We can’t use

same land for both activities.

Q4. How will you choose the wants to be satisfied?

Ans.

Ans. Any individual fulfills his/her wants according to his/her needs, satisfactions and priority

attached to different wants. Moreover, the choice of want also depends on the need of the

hour and availability of the goods and also on the availability of means (money) to

purchase that want.

Q5. What are your reasons for studying Economics?

Ans. The reasons for studying economics are:

→ To study the Theory of consumption: We want to know how the consumer decides,

given his income and many alternative goods to choose from, what to buy when he knows

the prices.

→ To study the Theory of Production: We also want to know how the producer, similarly,

chooses what to produce for the market when he knows the costs and prices.

→ To study the Theory of Distribution: We want to know how the national income or the

total income arising from what has been produced in the country is distributed through

wages (and salaries), profits and interest.

→ The study of economics also helps us to understand and analyse the root cause of basic

problems faced by an economy like, poverty, unemployment, income disparity, etc. and

helps to take various corrective measures.

Q6. Statistical methods are no substitute for common sense. Comment.

Ans. This is true that Statistical methods are no substitute for common sense. Statistical data

should not be believed blindly as it can be misinterpreted or misused. The statistical data

may involve personal bias or may undergone manipulations. Also, statistical data and

methods fail to reveal the errors committed by an investigator while surveying and

collecting data. This can be understood by a story.

It is said that a family of four persons (husband, wife and two children) once set out to

cross a river. The father knew the average depth of the river. So he calculated the average

height of his family members. Since the average height of his family members was greater

than the average depth of the river, he thought they could cross safely. Consequently some

members of the family (children) drowned while crossing the river. Thus, the common

sense must be used while applying statistical methods.

Assertion and Reason based questions and Statement based questions

1. Assertion (A): Statistics is of no use to Economics without data.

Reason (R): No analysis of an economic problem would be possible without data on various factors underlying an economic problem. And, that, in such a situation, no policies can be formulated to solve it.