Question
Explain why the statistical relations are generally inexact.
Solution
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.
