Who is a Consumer?
A consumer is one who consumes goods and services for the satisfaction of his
wants.
Who is a Producer?
A producer is one who produces and/or sells goods and services for the generation of income.
What is Production?
Production is the process of converting raw material into useful things. Things become useful as they acquire
utility value in the process of production.
Engaged in diverse economic activities, we are performing 'ordinary business of life',
according to Alfred Marshall, a great propounder of Modern Economics.
Scarcity is the Undercurrent of Economic Problem and therefore of Economics
Resources are always scarce in relation to our wants. Also, resources have alternative-uses: A ten-
rupee note in your pocket may be spent on a cup of coffee or a cold drink. Likewise, a worker may
render his services in factory A, rather than B and C. Because, resources are scarce and have
alternative uses, we cannot escape from the problem of allocation of limited means to alternative
uses.
What is Economic Problem?
Economics is essentially the study of economic problems that we must confront owing to the fact that
our means are scarce in relation to our wants, and that the means have alternative uses.
Three Distinct Components of Economics: Consumption, Production and Distribution
CONSUMPTION
Study behaviour of human beings as consumers or buyers of
different goods and services for the satisfaction of their wants.
As consumers, people have limited means, while their wants are
unlimited
PRODUCTION
Producers also have limited means while they have a wide range of
goods and services to choose from for their firms and factories.
DISTRIBUTION
We are interested in knowing how income (generated in the process
of production) is distributed among those who have worked as
agents of production. Agents of production are owners of factors of
production, viz. land, labour, capital and entrepreneurship.
What is Statistics?
Statistics means quantitative information or quantification of the facts and findings
STATISTICS-A PLURAL NOUN
In its plural sense, Statistics refers to information in terms of numbers or numerical data, such as
Population Statistics.
Example: Ram gets 100 per month as pocket allowance is not Statistics.
Definition of Statistics in Plural Sense:-
"Statistics are numerical statements of facts in any department of enquiry placed in relation to each
other."
- Bowley
Features or Characteristics of Statistics in the Plural Sense or as Numerical Data:-
Main characteristics of Statistics in terms of numerical data are as follows:
(1) Aggregate of Facts: A single number does not constitute Statistics. No conclusion can be drawn
from it. It is only the aggregate number of facts that is called Statistics, as the same can be compared
and conclusions can be drawn from them.
(2) Numerically Expressed: Statistics are expressed in terms of numbers Qualitative aspects like
'small' or 'big': rich or poor etc. are not called Statistics.
(3) Affected by Multiplicity of Causes: Statistics are not affected by any single factor; but are
influenced by many factors.
(4) Reasonable Accuracy: A reasonable degree of accuracy must be kept in view while collecting
statistical data.
(5) Placed in Relation to each other: Such numericals alone will be called Statistics as are mutually
related and so comparable.
(6) Pre-determined Purpose: Statistics are collected with some pre-determined objective. Any
information collected without any definite purpose will only be a numerical value and not Statistics.
STATISTICS-A SINGULAR NOUN
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.
Definition of statistics in singular sense :-
"Statistics may be defined as the collection, presentation, analysis and interpretation of numerical
data."
STATISTICAL TOOLS
Each stage of the statistical study involves the use of certain standard techniques or methods. These
techniques or methods are called statistical tools. Thus, there are statistical tools used for the
collection of data, like the 'Sample and Census techniques.
3. Scope of Statistics
Study of the scope of statistics includes:
(1) Nature of Statistics.
(2) Subject Matter of Statistics.
(3) Limitations of Statistics.
NATURE OF STATISTICS
"Statistics is both a science as well as an art." As a science, Statistics studies numerical data in a
scientific or Systematic manner. As an art, Statistics relates to quantitative data to the real life
problems.
SUBJECT MATTER OF STATISTICS
(1) Descriptive Statistics: Descriptive Statistics refers to those methods which are used for the
collection, presentation as well as analysis of data.
Example: Descriptive statistics is used when you estimate average height of the secondary students
in your school. Likewise, descriptive statistics is used when you find that marks in science and
mathematics of the students in all classes are intimately related to each other.
(2) Inferential Statistics: Inferential Statistics refers to all such methods by which conclusions are
drawn relating to the universe or population on the basis of a given sample.
Example: If your class teacher estimates average weight of the entire class (called universe or
population) on the basis of average weight of only a sample of students of the class, he is using
inferential statistics.
Limitations of Statistics:
Newshome said that, "Statistics must be regarded as an instrument of research of great value but
barring severe limitations which are not possible to overcome." Following are some notable
limitations of Statistics:
(1) Study of Numerical Facts only: Statistics studies only such facts as can be expressed in numerical
terms. It does not study qualitative phenomena like honesty, friendship, wisdom, health, patriotism,
justice, etc.
(2) Study of Aggregates only: Statistics studies only the aggregates of quantitative facts. It does not
study statistical facts relating to any particular unit.
(3) Homogeneity of Data an essential Requirement: To compare data, It is essential that statistics are
uniform in quality. Data of diverse qualities and kinds cannot be compared. For example, production
of food grains cannot be compared with the production of cloth.
(4) Results are True only on an Average: Most statistical findings are true only as averages. They
express only the broad tendencies. Unlike the laws of natural sciences, statistical observations are
not error-free. They are not always valid under all conditions. For instance, if it is said that per capita
income in India is 50,000 per annum.
(5) Without Reference: Results may Prove to be Wrong; In order to understand the conclusions
precisely, it is necessary that the circumstances and conditions under which these conclusions have
been drawn are also studied. Otherwise, they may prove to be wrong.
(6) Can be used only by the Experts: Statistics can be used only by those persons who have special
knowledge of statistical methods. Those who are ignorant about these methods cannot make sensible
use of statistics.
(7) Prone to Misuse: Misuse of Statistics is very common. Statistics may used to support a pre-drawn
conclusion even when it is absolutely false. It is usually said, "Statistics are like clay by which you
can make a god or a devil, as you please." Misuse of statistics is indeed its greatest limitation.
4. Functions and Importance of Statistics in Economies
(1) Quantitative Expression of Economic Problems: Consider any economic problem, be it the
problem of unemployment, the problem of price rise or the problem of shrinking exports.
(2) Inter-sectoral and Inter-temporal Comparisons: From inter-sectoral comparisons we mean,
comparisons across different sectors of the economy. Inter-temporal comparison means
understanding of change in the magnitude of the problem over time.
(3) Working out Cause and Effect Relationship: Economists try to find out cause and effect
relationship between different sets of data. Thus, through their statistical studies, if the economists
come to know that it is because of the decline in demand that investment in the economy has tended
to shrink, they can suggest the government to adopt such measures as would increase the level of
demand in the economy.
(4) Construction of Economic Theories or Economic Models: It is an established statistical
relationship between different sets of statistical data, offering conclusions of economic significance.
(5) Economic Forecasting: Economists do forecasting through statistical Studies. By the term
forecasting we do not mean some astrological predictions. We only mean to assess and ascertain the
future course of certain events which are of economic significance.
(6) Formulation of Policies: It is through statistical investigations that the finance minister gets a
feedback on the tax paying capacity of the people, and revenue needs of the government.
Accordingly, tax rates are fixed to get maximum possible revenue with minimum possible discomfort
to the people.
7) Economic Equilibrium: It is a state of balance for the producer or the consumer where the producer
finds that his profits are maximum or where the consumer finds that his satisfaction is maximum.
Distrust of Statistics:-
Some people have misgivings about Statistics and make observations like the following:
(i) Statistics is a rainbow of lies.
(ii) Statistics are tissues of falsehood.
(iii) Statistics can prove anything.
(iv) Statistics cannot prove anything.
(v) Statistics are like clay of which you can make a god or a devil, as you please.
According to Disraeli, "There are three kinds of lies-lies, damned lies and Statistics."
What Causes Distrust?
Main causes for the distrust of Statistics are as under:
(i) Different kinds of Statistics are obtained in respect of a given problem.
(ii) Statistics can be altered to match the predetermined conclusions.
