Part A: Unit I - Statistics for Economics

Dear Students,

Now we are going to study Part A: Statistics for Economics which is related
to the topic we studied in the previous unit covered in microeconomics.

Syllabus

Unit 1: Introduction of Statistics

What is Economics?
Meaning, scope, functions, and importance of statistics in Economics

E-learning material

Introduction: The word ’Economics’ has been derived from two Greek
words

‘ Oikos’(a House) and ‘Nemein’(to manage).Thus economics means

household management.

Definition by Alfred Marshall

‘Economics is a study of a man in the ordinary business of life. It enquires

how he gets his income and how he uses it.’

Highlights:

1. Economics on one side, is the study of wealth and on the other side and
more important side, is the study of man.

2. According to Marshall, the primary objective of Economics is the

promotion of material welfare, which is part of human welfare.

3. He shifted the emphasis from wealth to Welfare

Robbin’s Definition: Economics is a science which studies human
behaviour as a relation between ends and scarce means which have
alternative uses.

- Economics is a social science as it studies human behaviour that aims

at the allocation of scarce resources in such a way that consumers can
maximize their satisfaction, producers can maximize their profits
and society can maximize its social welfare.

IMPORTANT TERMS

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

b) Producer: A producer is one who produces goods & services for the
generation of income (profit)e.g. farmer or a manufacturer.

c) Employee/Service Holder: When you are in a job, working for some other
person and you get paid for it in the form of wages or salary, you are an
employee.

d) Employer: When you employ somebody and pay them wages/ salary you are
an employer.

e) Service provider: A service provider is a person who provides some kind of

service to another for a payment. Eg. Lawyer, doctor, Banker, etc.

f) Gainfully employed: To be involved in an economic activity.

g) Economic activities: Are ones that are undertaken for a monetary gain and
contribute to National Income.
 Scope of Economics:
Economics is often discussed in three parts: consumption, production and
distribution.

a) 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. This is the study of Consumption.

b) Production: We also want to know how the producer, similarly, chooses

what to produce for the market when he knows the costs and prices. This
is the study of Production.

c) Distribution: We want to know how the national income or the total

income arising from what has been produced in the country (called the
Gross Domestic Product or GDP) is distributed through wages (and
salaries), profits and interest. This is study of Distribution.

Meaning of statistics
Layman’s language- Statistics means’ data’ or facts in figures.

Technically- statistics can be defined in Singular and Plural sense

SINGULAR SENSE: the term statistics in singular means the ‘science of

collecting, classifying and using statistics’ or a ‘statistical fact’. Statistics deals
with the collection, analysis, interpretation, and presentation of numeric
data.
These methods involve:

Stages Statistical Study Statistical Tools

I collection of data Census or Sample Techniques

II organisation of data Array of Data & Tally Bars

III presentation of data Tables Graphs and Diagrams

IV analysis of data Percentages,Averages,Correlation &

Regression Coefficient

V interpretation of Magnitude of Percentages, Averages, and

data Degree of Relationship between different
economic variables.

PLURAL SENSE: In the Plural Sense, statistics refer to aggregates of facts,

affected to a marked extent by a multiplicity of causes, numerically
expressed, enumerated, or estimated according to reasonable standards of
accuracy, collected in a systematic manner for predetermined purpose and
placed in relation to each other.

- In the plural sense, ‘statistics’ means ‘numerical facts systematically

collected’

Characteristics of statistics in the plural sense

i) The aggregate of facts: Statistics are a number of facts, single and isolated
figures are not statistics, as such figures cannot be compared.

ii) Affected by a multiplicity of causes: Numerical data are influenced by a

variety of factors. It is not an easy job to study the effects of one factor
separately by ignoring other factors.

iii) Statistics are numerically expressed: The facts must be quantitatively

expressed, qualitative characteristics like intelligence, beauty, honesty, etc
cannot be included in statistics unless they are quantified by assigning certain
code as a quantitative measure of assessment.

iv) Statistics should be collected with reasonable standards of accuracy:

High degree of accuracy is not insisted upon statistics because of mass data
involved. The process of generalization can be achieved with reasonable
standards of accuracy.

v) Statistical data are collected for a predetermined purpose: The purpose of

collecting statistical data must be decided in advance. Data collected in an
unsystematic manner and without complete awareness of the purpose will be
confusing and cannot be made based on a valid conclusion.

vi) Statistical data are collected in a systematic manner: For accuracy or

reliability of data, the figure should be collected in a systematic manner
otherwise, the reliability of such data will deteriorate.

vii) Statistical data should be placed in relation to each other: Collection of

statistical data is generally done with the motive to compare. For this purpose,
the data should be homogeneous.
 Functions of statistics
1. Statistics simplifies complexities: It is very difficult for an individual
to understand & conclude from huge numerical facts. Statistical
methods try to present the great mass of complex data into a simple
and understandable form. For Example: By finding the average of
marks scored by students in a class.

2. To present facts in a definite forms: Quantitative facts can easily be

believed and trusted in comparison to abstract and qualitative facts.
Statistics summarises the generalised facts and present them in a
definite form.

3. To make a comparison of facts: Comparison is one of the main

functions of statistics. As the absolute figures convey concrete
meanings. For comparison of data various statistical methods like
average, rates, percentage and ratios are used.

4. To facilitate planning and policy formation: On the basis of

numerical data and their analysis businessmen & administrator can
plan future activities and shape their policies.

5. To help in forecasting: As business is full of risk and uncertainty,

correct forecasting is essential to reduce the uncertainty of the
business. Statistical tools like time series analysis, business cycles,
helps in making projections for futures.

6. Formulation and testing of hypothesis: Statistical methods are

extremely useful in formulation and testing hypotheses. For example,
a hike in the price of the train tariffs affect the number of people
travelling or not this can be checked by statisticians.
 Importance of Statistics in Economics

1. Formulation of Economic Laws

2. Helps in understanding and solving an economic problem

3. Study of market structure

4. Helps in establishing mathematical relation

5. Useful to study behaviour of different economic concepts.

6. Price Analysis.

Limitation of Statistics
1. Statistics does not study qualitative phenomena.

2. Statistics does not deal with individuals

3. Statistics can be misinterpreted.

4. Statistical results are true only on average.

5. Statistical laws are not exact

6. Only experts can make the Best Possible use of Statistics

7. Statistical data should be uniform and homogenous.

LINK OF VIDEO

https://www.youtube.com/watch?v=pWLyDZ2Q6hc