~ LE A R N·I N G OBJ EC T I V ES

2.1
2.2
Introduction
Meaning of Statistics
--- --- --- --- - 2.4 Importance of Statistics
2.3 Functions of Statistics 2.5 limitations of Statistics

2.1 INTRODU CTION

The word Statistics seems to have been derived from the Latin word 'Status' or the Italian word
'Statista' or the German word 'Statistic' or the Greek word 'Statistique', each of which means a
political state.
The word 'Statistics' conveys different meanings to different people. Some people regard
statistics as data, facts or measurem ents, while others believe it to be the study of figures. The
views commonly held about statistics are numerous, but often incomplete. For example:
1. For a cricket fan: Statistics refers to numerical informatio n or data relating to the runs
scored by a cricketer;
2. For an Environm entalist: Statistics refers to informatio n on the quantity of pollution or
other harmful gases in the atmospher e;
3. For the weather departmen t: Statistics consists of informatio n about minimum and
m aximum temperatu re, timings of sunrise, etc.
4. For a share broker: Statistics is the informatio n on changes in share prices over a period
of time; and so on.
The average person perceives statistics as a column of figures, various types of graphs, tables
and charts showing the changes in different types of data. .
• In th ly y ears scope of statistics was primarily limited to collection of data for
d e ter ~ g the e;onomic and social conditions of the people living in different parts of
the country · ti s
. . th e of statistics widened. For some time, statis cs wa
• But with the passage of time, . e scop . h b full-fledged independen t subject.
regard ed as a branch of econonucs, but now, it as ecome a

2. 1
 Statistics for Econornies

. . l only a science of the state, but it also includes, aU

• ln tlw prc,l'nt tim~ Stati~hcs is no
t\Tl'' 01 ,rwmtit,1tit•c m1alys1s.

'l'f1EW9PfflSH.;.~-
M5h•Mdffi6fuii@6t#~~ 1
Ill

.
The vanables w 1c
------■-·•
•
h' h can be expressed 1n numenca1
• • •
• terms are known as quantitative vanables.
f rt t s in coun~ heights of people, etc.
For example, marks of students, numb_er o , e~ ~ t rms are ~nown as qualitative variables.
Variables which cannot be exp_ ress~d mnumen~a a~tative variables cannot be measured in
For example, honesty, beauty, intelligence, etc. u k tatistical analysis out of them.
figures as they are vague terms a~d ~e cannot ma e s ssi ned numerical equivalents. So,
Qualitative expressions are not stat1st1cs unless th~y are_a g F mple we may assign
they can be ranked according to the quality of their attributes. or exa The ranks may be
Rank No. 1 to the most intelligent, Rank 2 to the second best, and s~ on.
used as numerical measurements for purposes of statistical analysis.

2.2 MEANING OF STATISTICS . cliff tl

. s · · h b en defined
It js not easy to define statistics in a prease manner. tab.sties as e .
eren y
by different authors from time to time, emphas1z~g · · prec1_se_
· IY the mearung
. . , scope and
limitations of the subject. Some authorities have defined Statistics as statistical data (Plural
Sense), whereas others as statistical
methods (Singular Sense). iii31fiit¥ii~••W·i1i~Hii
• In Plurnl Se11se, H means a t
collection of numerical facts. {
Plural Sense
] '
[ Singular Sense 1
• In Singular Sense, statistics deal __________,
with the collection, presentation,
analysis and interpretation of
•
Statistical Data
(Numerical information)
•
Statistical Methods
(Methods of dealing with information)
the quantitative information.
Statistics as Numerical Set of Data (Plural Sense)
In its plural sense, Statistics is defined by different authors:
Jn the words ofA. L. Bowley, Statistics are numerical statements of facts in any department of enquiry placed
11

in relation to each other''.

/n the words of Yule and Kendall "By statistics we mean quantitative data affected to a marked extent by
multiplicity of causes."
The most comprehensive and exhaustive definition of statistics has been given by Prof.
Horace Secrist. According to him, In the plural sense, Statistics refers to aggregates offacts,
affected to a marked extent by multiplicittJ of causes, numerically expressed, enumerated or
estimated according to reasonable standards of accuracy, collected in a systematic ma1111er
for predetermined purpose and placed in relation to each other. For example, data relating to
aggregate percentage of 5 Toppers of XIth class of a school.
Statistics as used in plural sense, must possess the following characteristics:
1. Aggregates of Facts: Statistics are a number of facts. Single and isolated figures are not
statistics as such figures cannot be compared and no conclusions can be drawn from them,
 r2 , Mcanlno, <;cope ,md lmport-nH:<' of .:,t,,tl'itlc,
chaP te -

1,1t cxampk ,\ -.in~k ,1g,, nt JO \ 'l'.\t !- is CHARACTORISTICS 0~ STI\TIS'flCS IN PLURAL .&EHGtl

nol ,l st,1h:-tk-. h\ll ., " l' t 11.·~ h'l,\l tng 1t1 - . - - - _-c- - _:__ •-- - . - - - - -- ---

the ,1gc'- ol ,, ~wup 01 p1.·r-..cin~ will bl' A11qreu111es of I ,, ti

olkd ~t,1ti'-l1cs.
AlfcCtl'fl by M11ltlµll1 lly or Cnm,u
Notes:
• A single fig ure, of course, ca n be Stc1tl\tlC\ nro Nrnnctlc:,,lly f:><pr•m"d
called statistics when It Is represented Stc.1tlstlcs \hould ho colll1ctcd with rn H1,iri.,liln
as an average or as a sum of various stand,1rd o( ,iccur.icy
observations. For example, average marks
(say, 75) in a class, will be called statistics. Statl~tlcs ,.ire collected for ,1 rm• dutNmlncd purr,,,•
• It must be noted that all Statistics are Sttltlstlcs Mu collected In ,1 Sy~tcn1i1tlc M u11111r
expressed In numbers, but all numbers
are not Statistics. It Is only the aggregate Sttltlstlcs should be pl,1cod h1 rul,1tlon lo t•j1ch oth
number of facts that Is called Statistics.
2. Affected by multipl icity of causes: Numerical figlU'cs (data) arc influt•l'\Cl·cl by,\ vMlt·
of factors. It is not an easy job to study the effects of any one factor scp.trult'ly by i~ncn in
other factors.
For example, Statistics of production of a crop, say rice Is affected by the rain fall, fcrtlllzcr, seeds, mutho
of cultivation, etc. It is not possible to study separately the effect of each of these forces on tho productlo
of rice.
3. Statistics are numeri cally expressed: The statistical approach to a subjccl is numcrk ,1
So, any facts, to be called statistics, must be numeric ally or quantita tively exprcsbcd .
• For example, Isha is taller than Mollie and Ananya , will nol be cal led statii,tic
However, if the same facts are expressed in number s (like, lsha: L62 cm; Mollie: 15
cm; Ananya: 145 cm), we will call them statistics.
• Qualitative characteristics like intelligence, beauty, honesty, etc, cannot be include
in statistics unless they are quantified by assignin g certain score as a quantilaliv
measure of assessment.
4. Statistics should be collected with reasonable standard of accuracy: ln stalis lic&,
dnlt1 i
collected with reasonable standar d of accuracy.
• A high degree of accuracy, as observed in accountancy or mathem atics, is not insis te
upon in statistics, because mass of data is involve d.
• The process of generalisation can be achieved with a reasona ble s tandard of accura
only.
Statistics should be enumerated or estimated according to a reasonable standard of accuracy. Enumera
tion
involves actual counting of the heads, whereas estimation is not the actual counting, but an observat
ion.
For example, when we say that 60 students were present in the class, we are enumerating the number of
students present in the class. But when a news channel says that there are 5,000 people In a rally, then
the news channel is simply estimating the number of people.
5. Statistics are collected for a pre-determine d purpos e: The purpose of collecting s tatistical
data must be decided in advance, otherwise usefulness of the data collected would be
negligible. Data collected in an unsystematic manner and without complete awareness of
the purpose will be confusing and cannot be made on the basis of valid conclusions.
 ·
St atistics for Econ o~
,,,res

ta , th e
r: Fo r ac cu ra cy or re li ab ili ty of da
at ic M an ne az ar d
St at is ti cs ar e co lle ct ed in a Sy st em r. If th e fig ur es ar e co lle ct ed in a ha ph
6. ic m an ne pl an
gu re s sh ou ld be co llected in a sy st em at e. So , be fo re co lle ct ing da ta, s ui ta bl e
fi d e te rior at
lit y of su ch d a ta w ill
m an ne r, th e relia bi .
sh ou ld be prep ar ed of s ta ti st ic al da ta
is
fo r their co lle ct io n to ea ch ot he r: C ol le ct io n
cs sh ou ld be pl ac ed in re la ti on
7. St at is ti .
lly d on e w it h th e m ot iv e to co m pa re th ey lo se a la rg e pa rt
of th ei r
ge ne ra m pa ra bl e, th en
s, ar ea s,
lle ct ed ar e no t co to di ff er en t pe ri od
• If th e fi gu re s co ra bl e w it h re sp ec t
ey sh ou ld be co m pa
si gn if ic ance. So, th fo rm
co m m od iti es , etc. th at da ta m us t be ho m og en eo us (u ni
ss ar y
co m pa ri so n, it is ne ce pa re th e h ei gh ts of
m en
• Fo r th e pu rp os e of m ea ni ng le ss to co m
am pl e, it w ou ld be ge ne ou s ch ar ac te r.
Su ch
or id en tic al ). For ex re s ar e of a he te ro
s be ca us e th es e fi gu
w it h he ig ht s of tr ee st at is tic s.
s do no t co m e un de r th e ca te go ry of
fi gu re
e) de al ing
ho d (S in gu lar Se ns . it is a m et ho d of
St at is ti cs as a M et tic al m et ho ds , i.e
ea ns st atis sa tio n,
si ng ul ar se ns e, th e te rm 's ta tis tic s' m
ay be de fin ed as th e co lle ct io n, orga ni
In ar sense m rs the
it h nu m er ic al fa ct s. St at is tic s in si ngul er ic al da ta . Th e gi ven defin iti on co ve
w o f num
es en ta ti on, an al ys is an d in te rpre ta ti on :
pr
im po rt an t feat ures of statistical methods
follo w ing y
of St at ist ica l St ud
St ag es
In terpr eta tio n
An alysis of Da ta
Present ati on of Da ta

Organisation of Da ta
Collection of ofDa ta
Da ta St ag e- 5
Sta ge -3 St ag e- 4
St ag e- 1 St ag e - 2
niqu e
te p in a st at is ti ca l en qu ir y. T he te ch
d th e fi rs t s sh ou ld
C ol le ct i~ n of D at a: It is th e m ai n an e of th e st ud y. T he da ta co ll ec te d
1. obje ct iv
de pe nd s up on th e
of collection of da tad au th en ti c so urces. hi
be fr om reliable an ta is or ga ni se d in a p ro pe r f or m w ·ch
io n the da
O rg an is at io n of Data: A ft er co lle ct ,
2.
d classification.
in vo lv es ed iti ng an d a ta is p re se
bl
nted m· som e sw·t a e m an ne r'
ca tio n, th e
Data: A ft er cl as si fi
3. Pr es encta ti on of ap h.
•m th e io rm of text, table, di ag ra m or gr n e w it h th h 1 f si. m ple
al ys is is do
of da ta an e eP o
na ly si s of D at a: A ft er pr es en ta ti on ' ce nt ra l te n d en cy m ea su re s of
4. A i Th su re s of ,
m at he m at i caI t echn qu es . es e in cl ud e m ea
d .
s10n, et c.
di sp ers1.on , co rr eJa ti on an regres et ho do lo
It is th e la st st ep in th e st at is ti ca l m gy.
of Data: ed
5. In te rp ~e ta ti on
at is tic al th in ki n ki ll .
ce , to d er iv e m e an ing from an al ys
• It in vo lv es st g, s an d ex pe ri en
da ta .
. d d a ta .
rp re ta tio n pr ov id es th e fin al co ne1us 10 ns dr aw n fr om th e an a Iys e
• T he in te or methods are called
. t1. caI stud ym
St at1s . volves useofsomestandardt h . ds . Th es e tech ni qu es
q~es or metho of data.
al To ols~ Fo r ex am pl e Sample & Cens e~ n~ ar e us ed as stat istic al tools for collection
'Statistic ' us ec niques
- er 2 • Meaning, Scope and Importance of Statistics
chaPt

plural sense Vs Singular Sense

1. Statistics in plural sense deals with numerical infom,ation, whereas in singul
statistics is a body of various melhods and tools.
2. Statistics in plural sense is descriptive in nature, but in singular sense, it is basic
of analysis.
3. Statistics in plural sense is often in the raw state, whereas in singular sense, it
processing the raw data.
4. Statistics in plural sense is quantitative, but in singular sense, it is an ope
technique.
17
II Empirical Analysis and Quantitative Analysis
Empirical Analysis refers to a method in which a subject is studied on the basis ofobservation
or experiments. In empirical analysis, knowledge is acquired as a result of actual experienc1
Under natural sciences such as physics, chemistry and biology this method is commonly useG
and relevant laws and statements can be tested and experimented in laboratories.
As against this, economics is a social science, wherein human behaviour is the subjec
of study and empirical analysis cannot be used to study economics and other socia
sciences. The problem of social sciences can be effectively studied through the technique
of quantitative analysis. -I
Quantitative Analysis is an attempt to level 'precision' to the facts, so that they can be easil~
compared. Under it, first of all, facts are expressed in the form of quantities (like 25, 30, 35) and
then such numerical data is classified, tabulated and analysed to draw reasonable conclusions.

2.3 FUNCTIONS OF STATISTICS

Statistics performs many functions useful to human beings. The broad functions perforri
statistics are discussed as under:
1. To simplify complex facts: It is very difficult for an individual to understand and con
from huge numerical data. Statistical methods try to present the great mass of co
data into simple and understand able form.
For example, statistical techniques like mean, median, correlation, graphs, etc. make comple
intelligible and understandable in short period and in better way.
2. To present facts in definite form: Quantitative facts can easily be believed and trus~
compariso n to abstract and qualitative facts. Statistics summarizes the generalized
and presents them in a definite form.
For example, statement like annual rate of inflation in a country is 10%, is more convincing than stateri
like prices are rising.
3. To make compariso n of facts: Comparison is one of the main functions of statistic
the absolute figures convey a less concrete meaning. For example, per capita inco9
developing countries may not be of much use unless we know the per capita incoml
developed countries.
• Statistics facilitates Inter-sectoral and Inter-temporal comparison.
 Stati stics for Eco nollli

rent sect ors of the econ omy . For exalt\

• Inter-sectoral mea ns com pari son acro ss diffe
men t acro ss rura l and urba n sec:
econ omis ts may try to find the size of unem ploy
of the econ omy .
son acro ss diff eren t time peri ods .
• Inte r-tem pora l com pari son mea ns com pari
met hod s like aver age, rate s, perc enta
• For com pari son of data , vari ous stati stica l
ratio , etc. are used .
. . . . j
ion: Stati~~cs help m ~nalys1s of caus es 1
0
4. To facilitate plan ning and poli cy form ulat
of poli oes for solv ing them . On the bJ
econ omic prob lem and facilitates form ulat ion
of num eric al data and their anal ysis, busi ness
men and adm inis trato rs can plan fuj
activ ities and shap e thei r polic ies.
5. To help in forecasting: As busi ness is full
of risk s and unce rtain ties, corr ect fore cas~
. Stat istic al tool s (like inte rpol atio n, I
esse ntial to redu ce the unce rtain ties of busi ness
ns for futu re.
serie s anal ysis , etc.) help in mak ing proj ectio
Stat istic s met hod s are extr eme ly use£
6. Form ulat ion and Tes ting of Hyp othe sis:
form ulat ing and testi ng hypo thes is.
a rise /
iques, we can test the hypothesis, whe ther
For example, with the help of statistical techn
or not.
Railway fares will affect passenger traffic
expe rien ce: Stat istic s enab le peo ple to e~
7. To enla rge indi vidu al kno wled ge and
nal thin king and reas onin g, and is hel~
thei r hori zon. It shar pen s the facu lty of ratio
prop oun ding new theo ries and conc epts .

I~ =====---JI
FUNCTIONS OF STATISTICS

,-----µ J
~
To facilitate Toe
To present To make Form ulatio n
To Simplify planning To help in in~
facts in Comparison and Testing of
complex facts and polic y Forecasting knol
definite form of facts Hypo thesi s
form ulatio n exA

2.4 IMPORTANCE OF STATISTICS

Statistics is wid ely used in mod em times Initi 11 .
collect information bli . . a y, it was emp loy ed by the Gover
nde d to all fields
d. b . fl _on pu c affairs. But, gradually, its use was exte .
followm· g ma1. or areas:
iscu) ss ne y, the unp orta nce of statistics in the
ia Imp orta nce to the Gov ernm ent
1

(b) Imp orta nce in Economics

( c) Imp orta nce in Economic Plan ning
(d) Imp orta nce in Business
 chap ter 2 • Mea ning , Sco pe and Imp orta nce of Statistics

imp orta nce of Stat istic s to the Gov ernm

ent
'fhe subj ect of statistics was initially used by
the ancient rulers in asscs::;mcnt of their milit.i
and economic stre ngth . Gra dua lly, its scop
e was enla rged to tackle othe r problems rcla
olitical activities of the economy. tmg (a
p • In the pres ent scenario, Gov ernm ent coll
ects the larg est amo unt of stahstics for vari
pur pos es . ous
• The role of gov ernm en t has incr ease d and
requ ires muc h grea ter info rma tion in the form
of nwn eric al figures, to fulf ill the welfare obje
ctives in add itio n to the efficient run ning of
their adm inis trat ion.
• Pop ular statistical met hod s suc h as time-ser
ies analysis, inde x num bers, forecasting and
dem and ana lysi s are extensively use d in form
ulat ing economic policies .
For exam ple, statistical inve stiga tion s prov
ide data abou t paying capacity of the peop
the gove rnm ent in deci ding the rates of dire le, which help s
ct and indirect taxe s.
• In a democratic country like India, vari ous poli
tical gro ups are also gui ded by the statistic
analysis reg ard ing thei r pop ular ity in the mas al
ses.
So, it can be concluded that it is impossible to thin
k about functioning of the modern government,
the absence of statistics. in
Importance of Sta tisti cs in Economics
Statistics is an ind ispe nsa ble tool for a pro per
und erst and ing of var iou s eco nom ic pro blem
• Eve ry bra nch of eco nom ics take s sup por t s.
from statistics in ord er to pro ve var iou s eco
theo ries in it. nom ic
• Statistics pro vid es imp orta nt guid elin es
for the form ulat ion of var iou s eco nom ic poli
• Mo st of the eco nom ic pro blem s are cap cies.
able of bein g exp ress ed in num eric al figu
For exa mp le, out put of agri cult ure, vol ume res.
of exp orts , pric es of com mod itie s, etc. In eac
case, the dat a is affe cted by a mul tipl icit y of h
factors. Fur ther , it can be sho wn tha t the oth
con diti ons pre scri bed for stat istic al data are er
also sati sfie d.
Thus, we can say that the stud y of var iou s eco
nom ic pro blem s is esse ntia lly the one of a stat
natu re. Some of the uses of statistics in economi istical
cs are as follows:
1. Formulation of Economic Laws: The fam
ous 'Law of Dem and' and the con cep t of 'Ela
of Dem and ' hav e bee n dev elo ped by the Ind sticity
ucti ve met hod of gen eral isat ion, whi ch is
bas ed on stat isti cal prin cipl es. also
2. Hel ps in und ers tan din g and solv ing an
eco nom ic problem: Stat istic al dat a and stat
met hod s pla y a vita l role in und erst and ing istic al
and solv ing eco nom ic pro blem s suc h as pov
une mp loy men t, disp arit ies in the dist ribu erty,
tion of inco me and wea lth, etc.
3. Stu dy of market structures: Stu dy of per
fect com peti tion , olig opo ly, mon opo ly, etc.
stat isti cal com par ison of ma rke t pric es, cos requ ires
t and pro fits of ind ivid ual firms. Stat istic s
faci lita tes inte r-se ctor al and inte r-te mp ora also
l com par ison .
4. Helps in establishing mathematical rela
tion: Sta tist ical met hod s can also be use d to
esti mat e mat hem atic
al rela tion and cau se and effe ct rela tion ship
bet wee n var iou s eco nom ic
var iabl es. For example, effe ct of cha nge in
pric es on qua ntit ies dem and ed of a com mod
sho ws the mat hem atic al form of dem and ity,
rela tion ship bet wee n the two vari able s.
 Statistics for Econ .
ornics

analy sis is Usec1

omic conc epts:. Trenf d-ser ies di
tudy beha viour of diffe rent econ. .
5. Usefu) to s h on and cons umpt ion o com.m o ties, money in
to study the beha viour of price s, prod uc_
circulation, and bank depo sits and clear ings.
the theor ies of pri~es, pricing
6. Price Anal ysis: Statistical surve ys of price s help ~ study ing
al ~r~b-lem of inflation.
polic y and price trend s as well as their relati onsh ip to the g~er
omic ~ctiv t~tes :.
Sta ti.sties is ofgrea t significance considering the vario us Econ
• In the study of 'Con sump tion': Statistics help to find out
the ways _m whic h diff~r~nt ~oup s
ies. Such statis tics is very
of peop le spen d their incom e on necessities, comf orts and l~ur
oty of the peop le. . .
helpf ul for deter minin g stand ard of livin g and taxab le capa
• In the study of 'Prod uctio n': Statis tics help to meas
ure and c?mp are ~r?du ctiv1 ty of
prise ). StatiS tics also helps
diffe rent factors of prod uctio n (land , labou r, capit al and enter
to adjus t the supp ly accor ding to dema nd.
tion throu g~ mark et f~rce~ of
• In the study of 'Exchange': In excha nge, price deter mina
y of pnce deter mma tion.
dema nd and supp ly is studi ed. Statistics help to study the theor
natio nal in~om e ~ene rat~d is
• In the study of 'Dist ribut ion': In distri butio n, we study how
data helps m solvm g vano us
distri buted amon g diffe rent factors of produ ction . Statis tical
incom e and weal th.
prob lems that arise due to uneq ual distri butio n of natio nal
Impo rtanc e of Stati stics in Economic Plann ing
of grow th throu gh the best us
Econ omic Plan ning is indis pensa ble for achie ving faste r rate
of natio n's resou rces.
es and statis tical meth ods.
• At every stage of econ omic plann ing, there is a need for figur
amou nts of vario us resou rces
• Usin g statis tical techn iques , it is possi ble to asses s the
the speci fied rate of grow
avail able in the econ omy and accor dingl y deter mine whet her
is susta inabl e or not.
revea l certa in cruci al areas , like
• Statis tical analy sis of data regar ding an econ omy may
atten tion.
incre asing rate of inflat ion, whic h may requi re imm ediat e
plann ing can be done witho ut the use
So, it is rather impossible to think of a situation where economic
of statistical techniques.
Impo rtanc e of Statistics in Business
ns:
Stati stics is impo rtant in the busin ess due to follo wing reaso
ess, it is nece ssary to know its
1. For Esta blish ing a Busi ness Unit: Befo re start ing a busin
size of outp ut, avail abili ty of
feasi bility . It invol ves detai led infor mati on abou t locat ion,
ide guid eline s, whic h may
inpu ts, taxes , size of mark et share , turno ver, etc. Stati stics prov
prov e to be help ful in maki ng key decis ions.
is laun ched , mark et resea rch team
2. For Mak ing Mar ketin g Strategy: Befo re a prod uct
y), to analy se data on popu lation,
make s use of vario us statis tical techn iques (like pilot surve
prici ng, etc. Such studi es reveal
purc hasin g pow er, habit s of the cons umer s, comp etito rs,
the poss ible mark et pote ntial for the prod uct.
g of the busin ess, the next step is
3. For E~tirnating the dem and of product: Afte r laun chin
the prod uct. Stati stica l methods
to estim ate the pres ent as well as the futur e dem and of
are extre mely help ful in prep aring trend lines lead ing
to relia ble forec astin g.
 • Meaning, Scope and Importance of Statistics
ct,apter 2

for production Planning: The businessman has to plan its production so that he is able to
4, t the demand of its product and incurs minimum losses on account of over or d
rnee fu1 d . . . . un er
roduction. Care pro uchon p 1an.rung 1s essential for maintaining a balance between
~eJlland and sup~ly. . . . .
l\1aking Quall ty Control: Statistical techniques (like preparation of control charts) can
5· ~: : be used to control the quality of the product manufactured by a firm.
_ Accounts w riting and auditing: Every business firm keeps accounts of its revenue and
6
eXPend.iture.
• For taking certain decisions in a business, these accounts are required to be summarized
in a statistical way .
• This may consist of the calculation of typical measures like average production per
unit of labour, average production per hour, average rate of return on investment, etc.
• Statistical methods may also be helpful in generalizing relationships between two or
more of such v ariables.

2
.s LIMITATIONS OF STATISTICS
The main lirnitations of statistics are:
1. Statistics does not study qualitative phenomena: Statistics can be applied in studying
only those problems which can b e stated and expressed quantitatively.
• Qualitative characteristics such as h onesty, p overty, welfare, beauty, health, etc. cannot
d irectly be measured quantitatively .
• As a result, qualitative characteristics are n ot suitable for statistical analy sis.
2. Statistics does not deal with individuals: Statistics d eals only with aggregates of facts
and no importance is attached to individual items. For example, marks of one student of
a class does not constitute statistics, but the average m arks h ave statistical relevance.
3. Statistics can be Misused: Statistics can be misu sed b y ignorant or wrongly motivated
persons. Any person can misu se statistics and draw any type of conclusion he likes.

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There is an interesting story which will justify this viewpoint:
Once a family of four persons (husband , wife and two children) 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.
In the given case, the fault is not with the statistical method of calculating averages, but with the
misuse of average. The Statistics has been be misused by the father as he has drawn wrong
conclusions. So, it is rightly said "Statistical methods are no substitute for common sense».

4. Statistical results are true only on average: Statistical results are tru e on an average as the
results are affected by a large number of causes. In other words, statistical laws are not
universally true. For example, if average marks of fifty students of class XI are 76, it does
not mean that every student of the class h as secured 76 m arks.
 Statistics for Eco
2.10 norn;es

a_re ~rob abili stic in n a ture, inferences

S. Stati stica l laws are not exact: As stati stica l laws
mfer ence s base d on math ematicaj
base d on them are only appr oxim ate and not exac t like
or scien tific Jaws.
es of Stati stics are
. Onl y Expe rts can mak e the Best Poss ible use of Stat istic s: The tech niqu
6 iq ues can on ly be used by the exper1s
not so simp le to be used by an y laym an. TI1es e techn
as they are com plica ted in na ture.
be unif onn and hom ogen eous : It is ess entia l tha
t data mus t be
7. Stati stica l data shou ld not com para ble. For exam ple, it
unifo rm and hom ogen eous. H e terog eneo us data are
the heig hts of men beca use these
wou ld be of no use to com pare the heig hts of trees with
data are of heteroge neou s natu re.
a prob lem: Stati stica l met hods are only
8. Stat istic s is only one of the meth ods of stud ying
a meth od to solv e any prob lem.
a mea ns to unde rstan d any give n prob lem rather than
Thes e meth ods shou ld be used to
Ther e are othe r meth ods also for stud ying a prob lem.
stati stics . So, it is righ tly said that
supp leme n t the conc lusio ns deri ved with the help of
'Statistics is only a means and not the end'.
Distr ust of Stat istic s
methods and state ment s.
Dist rust of statis tics means lack of confidence in statis tical
erab le distr ust exist s in the min ds of
• Insp ite of the serv ices prov id ed by statistics, cons id
peop le with rega rd to its relia bilit y and usef ulne ss.
tools by unsc rupu lous , irres pons ible,
• The reason for th.is distr ust is impr oper use of statis tical
inexp erien ced and dish on est p erso ns.

The 'Distrust of Stati stics ' refers to lack of confi

denc e in the statis tical meth ods and
ed impo rtant results in almo st ever y
statements'. Undoubtedly, statistical tools have yield
ove a thing. It is mere ly a tool.
field of knowledge. Statistics does not prove or dispr
Causes of Distrust
ns: (i) Inco mple te Know ledg e of
The distrust of statistics occurs due to following reaso
(iii) Delib erate Misu se of Stati stics ;
Stati stica l Meth ods; (ii) Unrealistic Assu mptio ns;
ication of Stati stica l Meth ods.
(iv) Ignoring Limitations of Statistics; (v) Wrong Appl
Removal of Distrust
utions shou ld be taken : (i) Limit ation s
To over come the problems of distrust, following preca
rts shou ld make use of the statis tics;
of statis tics shou ld be kept in mind; (ii) Only Expe
(iv) Grea t care and caut ion shou ld be
(iii) Data shou ld be used after a careful enquiry;
be impartial.
exer cised while using statistics; (v) The user shou ld
Con clus ion
fault does not lie with statistics. Thes e
From the abov e observations, it has beco me clear that
used for the bette rmen t of the society.
tech niqu es are innoc ent techniques which may be
of cuttin g fruits and vege table s. Fault
A knife may be used in cutting one's throat instead
arly, if the statis tician misu ses data,
is not with knife but with a pers on who hand les it. Simil
on the data.
then the fault pure ly lies on the statistician and not