Statistics For Economics Chapter 1 Introduction

1. Collection of Data.

2. Organisation of Data.

3. Presentation of Data.

4. Analysis of Data.

5. Interpretation of Data.

2. These are systematically collected.

3. These are effected by multiplicity of causes.

2. To derive conclusions statistical data can be manipulated.

3. Sometimes correct statistical information may be so presented that it creates confusion in the mind of the reader.

(ii) Incomes of individuals.

(ii) Tastes and preferences of individuals.

Following are the important statistical methods :

1. Collection of data.

2. Organisation of data.

3. Presentation of data.

4. Analysis of data.

5. Interpretation of data.

1. Presentation of facts : Statistics expresses the facts in number and in precise and definite form. It helps to understand them easily.

2. Simplification of facts : Statistics helps in simplifying the complex data into a few significant figures so as to make them understandable.

3. Comparison : Statistics makes the comparison of related facts possible. It facilitates in drawing conclusions.

4. Correlation : Statistics helps in correlating the data by establishing cause and effect relationship.

5. Forecasting : Statistics helps in forecasting future behaviour of a phenomenon. It facilitates in formulating policy and programmes.

Following are some remarks :

1. Statistics can prove or disprove anything.

2. There are three types of lies : lies, damned lies and statistics.

Following are the main reasons for distrust of statistics :

(i) Figures are manipulated by dishonest persons to present a wrong picture of the facts.

(ii) People do not really know about statistics.

(iii) People have blind faith in statistics. They are not careful while accepting the statistical figures.

I. Study of aggregates of facts: It studies only aggregates of facts. It does not study individuals facts, however important they may be.

2. Study of quantitative aspect of a problem : It studies only those problems which can be quantitatively expressed. Qualitative expressions such as beauty, honesty, intelligency, poverty etc. do not constitute the subject matter of statistics

3. True only on an average : Statistical laws are true on an average. They are not universally applicable like the laws of Physics, Chemistry etc.

1. Statistical methods : These are the procedures used in the collection, organization, summary and interpretation of data. It includes the following :

1. Collection of data.

2. Summarization of data

3. Presentation of data

4. Analysis of data

5. Interpretation of data

2. Applied statistics : Applied statistics refers to the application of statistical methods which tell us how to describe the features of data. This is the practical part of statistics.

2. Numerical statements of facts.

3. Statistics is affected to a great extent by multiplicity of causes.

4. When the data is collected, it has particular purpose behind it.

5. Statistics is capable of being placed in relation to each other to make these comparable on the basis of time, place etc.

Statistics is a science in which various statistical methods are to be studied. So it is a systematic body of the study of past and present data.

Statistics helps us in ascertaining their standard of living and taxable capacity. Statistics helps us in adjusting the supply according to demand. In the field of exchange we use statistics to study markets, laws of prices based on supply and demand. Statistics plays an important role in the measurement and distribution of national income. It is of a great help in the formulation of economic policies such as monetary policy etc.

For planning business activities like the product or products to be produced, the location and size of plant, the surveys of the consumers etc, the efficiency and ability of businessman are statistically determined.

(i) Working in a field.

(ii) Working in a factory or office.

(iii) Shopkeeper.

(iv) Treatment to a patient by a doctor.

(v) Teachers teaching in the school.

(vi) Milkman working in a dairy farm

Non-economic Activities :

(i) Teacher teaching his own son.

(ii) Nurse serving her old mother.

(iii) Cooking of food by the housewife in her home.

(iv) Social service rendered by an NGO to flood victims.

Modern economists now includes learning the basic skills involved in making useful studies for measuring poverty, how incomes are distributed, how earning opportunities are related to education, how environmental disasters affect our lives and so on.

(i) Consumption : Using of goods for satisfying human needs is called consumption.

(ii) Production : Adding or increasing the utility of a commodity is known as production.

(iii) Distribution : It means the distribution of the national income or the total income arising from what has been produced in the country (called GDP). GDP is distributed among the agents (factors) of production in the form of wages/salaries, profits, interests and rents.

1. Birth rate in India is 18 per thousand as compared to 8 per thousand in USA.

2. There are 40 students in Class XI compared to just 20 students in Class XII.

3. Over the past 5 years, India has won 40 test matches in cricket and lost 20.

quantitative data, if the variables can be measured in numerical terms. For example, daily temperature, height and weight of individuals, price and income, etc. are quantitative variables. Their values can be expressed numerically.

Qualitative Data : Sometimes, it is not possible to measure variables numerically, in the same straight forward manner as heights and weights of individuals, or prices of commodities, or income of individuals. For example, attitudes of people to a political system, intelligence of individuals and their aptitudes towards music and art, beauty of individuals or some objects (like flowers, gardens etc.) cannot be numerically measured. However, we may rank them according to the quality of their attributes.

Once four persons (husband, wife and two children) set out to cross a river. The father knew the average depth of the river. He also knew the average height of his family members. The average height of two family members was greater than the average depth of the river. So he thought that his family members could cross river safely. But one of the family members (child having less height than the depth of the river), drowned. The fault was not with the statistical method of calculating average but lack of commonsense.

Uses of Statistics :

1. Useful to politicians : The politicians and their supporters are immensely interested in knowing their prospects of winning election. By sampling few voters prior to elections, the percentage of vote, the candidates will receive in the election can be worked out.

2. Useful to insurance companies :

Statistics is also very useful to insurance companies. Insurance premium rates are determined with the help of mortality tables which are based on mortality experience statistics.

3. Useful to economists : Statistics serves as a raw material to the economists in making certain economic laws.

4. Useful to Finance Minister : The Finance Minister is responsible for preparing the annual budget of the country For preparing a sound balanced and growth oriented budget, he too will take the help of accurate and reliable data regarding the state of affairs. The accurate and reliable data are provided to him by statistics.

5. Useful to administrators : For an

effective policy formulation of the state, the administrator must have full information of facts, the number of people living within the territory, total wealth of the country, agricultural and industrial production, price fluctuations and crime etc. All these infomations is supplied by statistics.

6. Bankers : Statistics is very useful for bankers and banking industry. Every bank has a statistical department. This department helps the bank to make its own policy.

7. Helpful to an average man : Statistics is very useful to an average man. It provides him factual knowledge. The average man comes to know about the prices in different markets. He also comes to know about national products and social, political and economic conditions prevailing in his own country. All these factual knowledge comes to him through statistics.

8. Useful to businessman : It is necessary for an efficient businessman to have the full knowledge of the factors which influence his business decisions. He must know the probable demand in future. He must calculate the cost of production. He must allocate the resources in such a way to get a maximum profit. All this can be done with the help of statistics and statistical methods.

(a) Statistics and the study of consumption.

(b) Statistics and the study of production.

(c) Statistics and the study of exchange.

(d) Statistics and the study of distribution.

(a) The producer or the manufacturer has to estimate demand for his goods in the immediate as well as distant future. This is done by market research for which all the steps to statistical method have to be followed. The cost accountant uses statistical tools to help the producer to fix the prices of various commodities.

(b) The trader-wholesaler or retailer depends heavily on methods of statistical analysis for finding out solution to problems regarding buying and selling activities.

(c) Insurance companies function on the basis of estimations of mortality rates, that is, life expectations and on this basis calculation of insurance premiums is done. Accordingly they decide what proportions of their capital can be invested and what proportions kept ready for payments of matured policies.
(d) Other public utility bodies, such as the road transport companies, the railways, advertising concerns, warehouses etc., which contribute to commerce in a significant way, also make use of statistical data for their efficient functioning. For instance, they have to determine the extent of demand that would be made on their services and the rates they might fix for the same. In fact no modern organization can survive and efficiently function without analysis of the complex factors that influence commerce, and for systematic business analysis statistical tools are absolutely essential.

1. It does not study the qualitative aspect of a problem.

2. It does not study the individuals : It

is study of mass data and deals with aggregates of facts.

3. Statistical laws are true only on an

average : They are not universally applicable like the laws, of chemistry, physics and mathematics. They are true on an average because the results are affected by a large number of causes.

4. Statistics can be manipulated : The results obtained can be manipulated according to one's own interest and such manipulated results can mislead the community.

5. Statistical results lack mathematical accuracy : The results drawn from statistical analysis are normally approximates. As the statistical analysis is based on observation of mass data, number of inaccuracies may be present and it is difficult to rectify them.

I. Presentation of facts in figures :

Statistics presents the various facts and figures, in such a manner so that various complicated facts become easy, brief and concrete and they may be understood easily. In it, facts are presented through diagrams and graphs, which are useful to a common man also.

2. Establishment of relationship : With the help of statistical methods (correlation), relationship between two or more facts may be established. It may be find out that these facts have any relationship or not, what is the direction and degree of relationship between them etc.

3. Comparison : Two or more effects may be compared with the help of statistics. Various averages, rates, percentages and coefficients are used for this purpose.

4. Interpretation of problems : With the help of statistical devices, interpretation of various problems may be done. For example by collecting the data of unemployment among educated persons, the nature of employment problems among them may be interpreted.

5. Formation of laws and principles of other sciences : Statistics helps to other social and natural sciences in forming the laws and with its help the various rules and principles of those sciences may be tested.

6. Helpful in deciding the policy : With the help of statistics various policy decisions may be taken logically and successfully. For example price policy, export-import policy etc.

Stages of statistics : Following are main stages of statistics :

1. Collection of data : It refers to gather some statistical facts by different methods.

2. Organising of data: In the second stage we organise the data collected in some systematic order.

3. Presentation of data : In this stage the organised data are presented the form of graphs, diagrams, tables etc.

4. Analysis of data : In ourth stage we analyse the data in terms of averages or percentages.

5. Interpretation of data : This is the last stage of statistics. In this stage, we interpret the data to find some conclusion.

Statistical tools : Sample or census tools are used for collecting the data. For the organisation of data we use array of data and tally bars tools. Tables, graphs and diagrams are statistical tools for the presentation of data. Averages and percentages are commonly used techniques for the analysis of data. Magnitude of percentages, averages and degree of relationship between different variables are used for interpretation of data. The following table gives an overall view of various stages of statistics and related tools.

(i) Size, growth rate and distribution of population in India.

(ii) Population of protection.

(iii) Density of population

(iv) Sex composition of population.

(v) State of literacy.

1. Ram has 100 rupees in his pocket.

2. A cow has four legs.

3. A youngman was run over by a speeding truck.

C.

B.

B.

A.

C.

D.

D.

B.

C.

C.

B.

B.

A.

C.

A.

C.

C.

C.

B.

C.

C.

D.

D.

C.

D.

D.

C.

A.

A.

Statistics can only deal with quantitative data.

B.

Statistics solves economic problems.

C.

Statistics is of no use to Economics without data.

Economic Activities:

(i) Working in a field.

(ii) Working in a factory or office.

(iii) Shopkeeper.

(iv) Treatment to a patient by a doctor.

(v) Teachers teaching in the school.

(vi) Milkman working in a dairy farm.

Non-economic Activities :

(i) Teacher teaching his own son.

(ii) Nurse serving her old mother.

(iii) Cooking of food by the housewife in her home.

(iv) Social service rendered by an NGO to flood victims.

Ans. The government and the policy makers use the statistical data to formulate suitable policies of economic development. No analysis of a problem would be possible without the availability of data on various factors underlying an economic problem. For example if the government wants to make a policy to solve the problem of unemployment and poverty, reliable data are required for it. The number of persons who are waiting for a job, unemployed and semi employed persons, educated and illiterate persons, the number of people living below the poverty line, the related data may be required. If the government wants to remove poverty and disparity in income and wants to take appropriate action then proper reliable data are required. For example, if the government wants to help the people affected by Tsunami earthquakes, the bird flu dangers then data should be collected and put together about the disaster’s cost systematically and correctly.

Modern economists now includes learning the basic skills involved in making useful studies for measuring poverty, how incomes are distributed, how earning opportunities are related to education, how environmental disasters affect our lives and so on.

Human wants are unlimited and the resources to satisfy them are limited. All economic problems arise due to scarcity. The things that satisfy our wants are limited in availability. The resources which the producers have are limited in supply. These resources have alternative uses. We require food to satisfy our wants of nourishments. The farmers need resources like land, labour, capital, water, fertilizers etc. These resources are limited and have alternative uses. These resources can be used to produce food crops and non-food crops such as rubber, cotton, jute etc. They give rise to the problem of choice between different commodities.

In our daily life we have to face various forms of scarcity. Our wants are of various types. They are related to food, clothing, shelter, entertainment, education, travelling etc. We face problems in satisfying them because they need scarce resources. We have to choose the wants which have more intensity. First we satisfy essential wants and satisfy them

Economics is an important subject to study the problem of an economy. Marshall says, 'Economics is the study of man in the ordinary business of life'. When we buy goods to satisfy our wants we are consumers, when we purchase the goods from the market they are sold by the seller. The goods and services are produced by the producers or manufacturers. Services are provided by the service holders. All these activities are closely related to human life. These activities are ordinary business of life. Economics studies the economic and productive activities which affect the human life. We have limited resources which have alternative uses. The same resources can be used in production and consumption both. We study economics to discuss the problems of production, distribution, consumption, welfare and standard of living of the people.

Statistics is widely used in modern times. Initially it was employed by the state to collect information on public affairs but it was not used in biology, meteorology, space research, economics, business, geography etc. Now-a-days, situations have altogether changed. Statistics is useful to bankers, workers, labour unions, trade associations, insurance companies, auditors, social workers; chambers of commerce, politicians etc. as it is clear from the following facts:

Uses of Statistics :

1. Useful to politicians : The politicians and their supporters are immensely interested in knowing their prospects of winning election. By sampling few voters prior to elections, the percentage of vote, the candidates will receive in the election can be worked out.

2. Useful to insurance companies:

Statistics is also very useful to insurance companies. Insurance premium rates are determined with the help of mortality tables which are based on mortality experience statistics.

3. Useful to economists : Statistics serves as a raw material to the econo mists in making certain economic laws.

4. Useful to Finance Minister:The Finance Minister is responsible for preparing the annual budget of the country. For preparing a sound balanced and growth oriented budget, he too will take the help of accurate and reliable data regarding the state of affairs. The accurate and reliable data are provided to him by statistics.

5. Useful to administrators:For an effective policy formulation of the state, the administrator must have full information of facts, the number of people living within the territory, total wealth of the country, agricultural and industrial production, price fluctuations and crime etc. All these infomations is supplied by statistics.

6. Bankers : Statistics is very useful for bankers and banking industry. Every bank has a statistical department. This department helps the bank to make its own policy.

7. Helpful to an average man:Statistics is very useful to an average man. It provides him factual knowledge. The average man comes to know about the prices in different markets. He also comes to know about national products and social, political and economic conditions prevailing in his own country. All these factual knowledge comes to him through statistics.

8. Useful to businessman:It is necessary for an efficient businessman to have the full knowledge of the factors which influence his business decisions. He must know the probable demand in future. He must calculate the cost of production. He must allocate the resources in such a way to get a maximum profit. All this can be done with the help of statistics and statistical methods.

It is true that statistical methods are no substitute for commonsense. This statement is a caution to the students of statistics. It urges the students not to use statistics devoid of their commonsense. The statement can be proved true with the help of following story:

Once four persons (husband, wife and two children) set out to cross a river. The father knew the average depth of the river. He also knew the average height of his family members. The average height of two family members was greater than the average depth of the river. So he thought that his family members could cross river safely. But one of the family members (child having less height than the depth of the river), drowned. The fault was not with the statistical method of calculating average but lack of commonsense.

Economics is a social science dealing with the study of economic problems.

It is an activity which is related to the use of scarce means.

A consumer is one who consumes goods and services for the satisfaction of his wants.

Consumption is the process of using up utility value of goods and services for the direct satisfaction of our wants. Utility value of goods means inherent capacity of goods and services to satisfy human wants.

A producer is one who produces and/or sells goods and services for the generation of income.

Production is the process of converting raw material into useful things. Things become useful as they acquire utility value in the process of production.

It is that part of income which is not consumed. It is an act of abstinence from consumption.

Investment is expenditure by the producers on the purchase of such assets which help to generate income.

(i) Land, (ii) Labour (iii) Capital and (iv) Entrepreneur.

It is the problem of choice arising on account of the fact that resources are scarce and they have alternative uses.

In its plural sense, statistics refers to information in terms of numbers or numerical data such as population statistics, employment statistics etc.

In the singular sense, statistics means science of statistics or statistical methods. It refers to techniques or methods relating to collection, classification, presentation, analysis and interpretation of quantitative data.

No, any numerical information is not statistics.

The stages are:

1. Collection of Data.

2. Organisation of Data.

3. Presentation of Data.

4. Analysis of Data.

5. Interpretation of Data.

In statistics universe or population refers to an aggregate of items to be studied for an investigation.   

Statistics may be defined as the collection, presentation, analysis and interpretation of numerical data.

During the ancient times, statistics was called as science of state, or the science of kings as it was used by the States or kings.

If the variable can be measured in numerical terms, it is called quantitative data, e.g. daily temperature, heights and weights of individuals are quantitative variables.

Statistical tools are those tools through which statistical methods are applied.

Organization of data means classifications of data and the presentation in the form of tables, graphs etc

It implies the drawing of meaningful conclusions on the basis of the data analyzed in the earlier stage. These conclusions prove helpful in taking certain decisions.

1. Statistics is aggregate of facts.

2. These are systematically collected.

3. These are effected by multiplicity of causes.

Statistics is the base upon which the structure of economic planning is built. Economic planning is based on quantitative information and data relating to economic resources, price rise, national income etc.

Banks create credit on the basis of theory of probability which is a part of study of statistics. A banker needs pa&t information to decide about the amount or reserves that should be kept as safe limit for his day to day transactions.

1. Everyone has a tendency to believe if the facts are given in statistical   figure.

2. To derive conclusions statistical data can be manipulated.

3. Sometimes correct statistical information may be so presented that it creates confusion in the mind of the reader.

Statistics is a science as well as an art. As a science it studies data. As an art it is the use of data in the solution of various problems,

(i) Prices of goods.

(ii) Incomes of individuals.

(i) Intelligence of individuals.

(ii) Tastes and preferences of individuals.

By distrust of statistics, we mean lack of confidence in statistical statements and statistical methods.

Its primary function is to simplify the complex data so as to make them understandable.

Collection, summarisation, presentation, analysis and interpretation of data.

As per Oxford Dictionary, statistics can be defined in plural meaning as “numerical facts systematically collected”, i.e. it deals with the collection, classification, analysis and interpretation of numerical facts or data, conclusions and drawn. Examples are as follows: Pocket expenses of Anil, Prakash, Shyam and Sunil during a month are Rs. 50, 55, 80 and 70 respectively. For the family budget for a month relating to various items of consumption, we need prices of various goods, performance of students in an examination in terms of marks secured etc. are all numerical statements.

The use of statistical method is so widespread that it has become a very important tool in the affairs of the world. It is indispensable to the various fields of investigations, especially in the sciences, such as Botany, Sociology, Economics, Medicine etc. In experimental science one is able to generate his own data under controlled laboratory conditions using high precision instruments. Hence, statistics is defined as science.

We know that the quantity demanded decreases as its price increases. But the change in the quantity demanded may also occur if income changes. Size of the family, tastes of people, etc. also affect the quantity demanded. If we are considering the relationship between quantity demanded with price alone (ignoring the effect of other variables), the relationship is bound to be in error. The error in the relationship is due to omitted variables. Hence statistical relations may be exact or inexact depending upon the nature of variable use or assumptions on which it is based.