STATISITCS
CHAPTER 1-
INTRODUCTION
LEARNING OBJECTIVES
Studying this chapter should enable you to:
• know what the subject of Economics is about;
• understand how economics is linked with the study of economic
activities in consumption, production and distribution;
• understand why knowledge of statistics can help in describing
consumption, production and distribution;
• learn about some uses of statistics in the understanding of
economic activities.
DEFINITIONS
OF
ECONOMICS
WEALTH WELFARE SCARCITY GROWTH
ORIENTED
DEFINITION DEFINITION DEFINITION DEFINITION
WEALTH DEFINITION
“ Economics is the science of wealth. ”
Adam Smith
WELFARE DEFINITION
“Economics is a study of man in the ordinary business
of life. It enquires how he gets his income and how he
uses it.”
Alfred Marshall
SCARCITY DEFINITION
“Economics is the science which studies human
behaviour as a relationship between ends and
scarce means which have alternative uses.”
Prof. Lionel Robbins
ACTIVITY 1
• Identify your wants. How many of them can
you fulfill?
• How many of them are unfulfilled?
• Why you are unable to fulfill them?
• What are the different kinds of scarcity that
you face in your daily life? Identify their
causes.
SCARCITY
⚫Scarcity is the root of all economic problems.
⚫The resources which the producers have are limited
and also have alternative uses.
⚫Alternative uses of resources give rise to the
problem of choice between different commodities
that can be produced by those resources.
GROWTH ORIENTED DEFINITION
“ Economics is the study of how people and society
choose to employ scarce resources that could have
alternative uses in order to produce various
commodities that satisfy their wants and to distribute
them for consumption among various persons and
groups in society.”
Samuelson
DECISION MAKERS IN AN ECONOMY
⚫When you buy goods (you may want to satisfy your
own personal needs or those of your family or those
of any other person to whom you want to make a
gift) you are called a consumer.
⚫When you sell goods to make a profit for yourself
(you may be a shopkeeper), you are called a seller.
⚫When you produce goods (you may be a farmer or a
manufacturer), you are called a producer.
DECISION MAKERS IN AN ECONOMY
⚫When you are in a job, working for some other
person, and you get paid for it (you may be employed
by somebody who pays you wages or a salary), you
are called a service holder.
⚫When you provide some kind of service to others for
a payment (you may be a lawyer or a doctor or a
banker or a taxi driver or a transporter of goods), you
are called a service provider.
⚫ALL THE ABOVE ARE GAINFULLY
EMPLOYED IN A BUSINESS ACTIVITY.
HUMAN
ACTIVITIES
ECONOMIC NON-ECONOMIC
ACTIVITES ACTIVITES
(Undertaken to earn (Undertaken to get
money) satisfaction )
ECONOMIC
ACTIVITIES
CONSUMPTION PRODUCTION DISTRIBUTION
CONSUMPTION
⚫CONSUMPTION is an economic activity which
deals with the use of goods and services for the
satisfaction of human wants.
⚫For example, eating bread, listening to music,
wearing watches etc.
PRODUCTION
⚫PRODUCTION refers to all economic activities
which which are undertaken to produce goods for the
generation of income and satisfaction of human
wants.
⚫Involves converting raw material into finished
products.
⚫For example, farmer, trader, doctor, teacher etc.
DISTRIBUTION
⚫DISTRIBUTION is an economic activity which
studies how income generated is distributed among
factors of production.
⚫Deals with determining how the total income
arising from the production process(GDP) is
distributed as rent, wages, interest and profit.
NON-ECONOMIC ACTIVITIES
⚫Activities which are not concerned with creation of
money or wealth.
⚫Inspired by sentimental reasons and performed out
of love, sympathy, patriotism etc.
⚫Examples:
❑ Housewife cooking food for her family
❑ Teacher teaching her own son
❑ Charitable activities
❑ Religious activities
STATISTICS IN ECONOMICS
⚫Economic facts in terms of numbers are also known
as data.
⚫We try to analyze data to understand and explain
the economic problems in terms of the various
causes behind them.
⚫We try to find those measures that help solve an
economic problem. In Economics, such measures are
known as policies.
STATISTICS
PLURAL SINGULAR
SENSE SENSE
NUMERICAL STATISTICAL
DATA METHODS
STATISTICS IN THE PLURAL SENSE
⚫Statistics in the plural sense may be defined as an
aggregate 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.
Aggregates of facts
Affected by a
multiplicity of causes
STATISITCS IN THE
PLURAL SENSE
Numerically
expressed
Collected with
reasonable standards
of accuracy
Collected for a pre-
determined purpose
Collected in a
systematic manner
Placed in relation to
each other
STATISTICS IN THE SINGULAR SENSE
⚫Statistics in the singular sense may be defined as
the collection, presentation, analysis and
interpretation of data.
Collection of
data
STATISITCS IN THE
SINGULAR SENSE
Organization of
data
Presentation of
data
Analysis of data
Interpretation of
data
ACTIVITY 2
• Think of two examples of qualitative and
quantitative data.
• Which of the following would give you
qualitative data;
beauty,
intelligence,
income earned,
marks in a subject,
ability to sing,
learning skills?
FUNCTIONS OF STATISITCS
⚫To simplify complex facts
⚫To present facts in a definite form
⚫To make comparison of facts
⚫To facilitate planning and policy formation
⚫To help in forecasting
IMPORTANCE OF STATISTICS
⚫Importance to the Government
⚫Importance in Economics
⚫Importance in Economic Planning
⚫Importance in Business
IMPORTANCE OF STATISTICS TO
GOVERNMENT
⚫Govt. collects large amount of statistics for various
purposes
⚫Govt. requires greater information as numerical
figures for administration and welfare purposes
⚫Statistical methods such as Index Numbers, Time
Series Analysis, Forecasting etc. used in policy
formulation
⚫Used by political groups
IMPORTANCE OF STATISTICS IN ECONOMICS
⚫Formulation of Economic Laws
⚫Understanding and solving economic problems
⚫Study of market structures
⚫Establishing mathematical relations
⚫Study behaviour of different economic concepts
⚫Price analysis
IMPORTANCE OF STATISTICS IN ECONOMIC
PLANNING
⚫Figures and statistical methods used in Economic
Planning
⚫Assess the amount of resources available in the
economy and determine if growth rate is stable or
not
⚫Reveal certain crucial areas like increasing rate of
inflation
IMPORTANCE OF STATISTICS IN BUSINESS
⚫For establishing a business unit (location, size of output,
inputs, taxes, market share, turnover etc.)
⚫For estimating the demand of a product
⚫For production planning (to maintain a balance between
demand and supply)
⚫For making quality control (control charts to control the
quality of the product)
⚫For making marketing strategy (pilot survey to analyze
data on population, purchasing power, habits,
competitors etc.)
⚫Accounts writing and auditing
LIMITATIONS OF STATISTICS
1. Statistics does not study qualitative
phenomena: such as honesty, beauty, welfare etc.
Thus, qualitative characteristics may not be
suitable for statistical analysis.
2. Statistics does not deal with individuals: it
deals with only with aggregate of facts. The marks
of one student may not constitute statistics, but the
average marks of the whole class has statistical
significance.
LIMITATIONS OF STATISTICS
3. Statistics can be misused: by any person who
may want to draw any conclusion that he feels like.
4. Statistical results are true only on average:
Statistics as a science is not as accurate as other
sciences.
5. Statistical laws are not exact: they are only
probabilistic in nature and inferences based on
them are only approximate.
LIMITATIONS OF STATISTICS
6. Only experts can make the best possible use
of Statistics: statistical techniques are not that
simple to be used by a layman, can be used only by
experts as they are complicated in nature.
7. Statistical data should be uniform and
homogeneous: heterogeneous data are not
comparable.
DISTRUST OF STATISITCS
⚫Distrust of Statistics means lack of confidence in
statistical methods and statements.
⚫People have distrust with regard to the usefulness
and reliability of statistics.
⚫There is improper use of statistical tools by
inexperienced and dishonest persons.
QUESTIONS
Q.1. Mark the following statements as true or false.
(i) Statistics can only deal with quantitative data.
False Statistics deals with both quantitative data as well as with
qualitative data. Although, the qualitative aspects can neither be
easily measured nor can be expressed in quantitative terms, but
statistics describes the attributes of these variables.
(ii) Statistics solves economic problems.
True Statistics acts as a tool in the hands of economists that
enables them to understand and evaluate an economic problem.
The causes of a problem are identified through statistical tools
and methods and policies and rectification measures are
formulated accordingly.
QUESTIONS
(iii) Statistics is of no use to economics without data.
True Data enable economists to present economic
facts in a precise and concise form. Data itself is self
explanatory. By looking at the figures an economist
would not only understand the quantitative aspects
but also can assess the implicit qualitative aspects.
QUESTIONS
Q2 : Make a list of activities that constitute the ordinary
business of life. Are these economic activities?
The following are the activities that constitute the ordinary business of
life:
1. Buying of goods and services.
2. Rendering services to a company by employees and workers.
3. Selling of goods and services.
4. Production process carried out by a firm.
Yes, the above mentioned activities are regarded as economic
activities. This is because, these activities involve the use of scarce
resources to carry out production, consumption, saving, investment,
etc. These activities involve the exchange of money to earn livelihood.
QUESTIONS
Q3 : 'The Government and policy makers use statistical
data to formulate suitable policies of economic
development'. Illustrate with two examples.
The statistical data is of prime importance for the government
and the policy makers. The statistical data not only help them to
analyze and evaluate the outcomes of the past policies but also
assist them to take corrective measures and to formulate new
policies accordingly. Further, the statistical data also help the
government to ascertain various needs and priorities for the
pursuit of the common goal of economic development. For
example, if Indian Government aims at encouraging the
production level, then it formulates its economic policy based on
the average production level of the past three years.
QUESTIONS
Q4 : "You have unlimited wants and limited resources
to satisfy them." Explain by giving two examples.
'Scarcity of resources' implies that there are unlimited wants to
be fulfilled by limited resources in the face of unlimited wants.
For example, an economy has to make a choice between the
production of capital and consumer goods. While the production
of bread will make the economy devoid of the capital for further
production, whereas, the production of capital goods will not
provide sufficient food for the population.
The same problem of scarcity can be felt at an individual level.
For example, with a given amount of money say, Rs 40,000, one
cannot buy a Mobile phone and a laptop simultaneously. Thus,
the individual needs to make a choice between the alternatives
according to his/her priority.
QUESTIONS
Q5 : "How will you choose the wants to be
satisfied?
An individual fulfills his/her wants according to
his/her needs, satisfactions and priority attached to
different wants. Those wants will be fulfilled first that
provides the highest satisfaction to the individual and
to which the individual has attached the top most
priority. Further, 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 realize a
particular want.
QUESTIONS
Q6 : Statistical methods are no substitute for
common sense. Comment.
Statistical data should not be believed blindly as it can be
misinterpreted or misused. The statistical data may be
politically influenced, may involve personal bias or may
undergone data mining (manipulations). Moreover,
statistical data and methods fail to reveal the errors
committed by an investigator while surveying and
collecting data. For example, according to a survey that was
conducted on the Death Rate, it was found that the number
of deaths per 1,000 people was more in doctors accessible
regions compared to the death rate in the remote areas.
CASE STUDY
1. Analyse the following picture carefully and answer the questions that follow:
1.In the above study, in which sense (singular./plural) is statistics being used?
2.Which features of statistics are being highlighted here?
3.What can you infer about the trends in covid cases in Delhi from the above?
CASE STUDY BASED
QUESTIONS
ASSERTION REASONING
BASED QUESTIONS
ASSERTION REASONING
QUESTIONS
Read the following statements carefully and choose the correct
alternative:
Assertion (A): Gardening is always an economic activity.
Reasoning (R): An economic activity is one where people work to earn
money.
1. Both A and R are true and R is the correct explanation of A.
2. Both A and R are true but R is NOT the correct explanation of A.
3. A is true but R is false.
4. A is false but R is true..
ASSERTION REASONING
QUESTIONS
Read the following statements carefully and choose the correct
alternative:
Assertion (A): Economics involves the study of how people make
choices.
Reasoning (R): Resources are scarce.
1. Both A and R are true and R is the correct explanation of A..
2. Both A and R are true but R is NOT the correct explanation of A.
3. A is true but R is false.
4. A is false but R is true.
