Chapter 1 Statistics Introduction 11th Commerce

Statistics for Economics

Chapter 2 Meaning, Scope and Importance of statistics

 

Concept MEANING OF STATISTICS

It is not easy to define statistics in a precise manner. Statistics has been differently by different writers from time to time, emphasizing precisely the meaning, scope and limitations of the subject. Some authorities have defined Statistics as statistical data (plural Sense), whereas others as statistical methods (singular sense).

• In Plural sense, it means a collection of numerical facts.
• In singular sense, statistical deal with the collection, presentation, analysis and interpretation of the quantitative information.

Statistics as Numerical Set of Data (Plural Sense)

In the plural sense, statistics refers to aggregates of facts, affected to a marked extent by 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. For example, data relating to aggregated percentage of 5 toppers of XII^th class of a school.

Statistics as used in plural sense, must posses 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. For example, a single age of 30 years is not a statistics, but a series relating to the ages of a group of persons will be called statistics.

Note: A single figure, of course, can be called statistics when it is represented as an average or as a sum of various observations. For example, average marks (say, 75) in a class will be called statistics.

2. Affected by multiplicity of causes: Numerical figures (data) are influences by variety of factors. It is not an easy job to study the effects of any one factor separately by ignoring other factors.

For example, Statistics of production of a crop, say rice is affected by the rainfall fertilizer, seeds, method of cultivation, etc. It is not possible to study separately the effect of each of these forces on the production of rice.

3. Statistics are numerically expressed: The statistical approach to a subject is numerical. So, any facts, to be called statistics, must be numerically or quantitatively expresses.

• For example, Isha is taller than Mollie and Ananya, will not be called statistics. However, if the same facts are expressed in numbers (like, Isha: 154 cm; Mollie: 120 cm; Ananya: 60cm ), we will call them statistics.
• Quantitative characteristics like intelligence, beauty, honesty, etc, cannot be included in statistics unless they are quantified by assigning certain score as a quantitative measures of assessment.

4. Statistics should be collected with reasonable standard of accuracy: In statistics, data is collected with reasonable standard of accuracy.

• A high degree if accuracy, as observed in accountancy or mathematics, is not insisted upon in statistics, because mass of data is involved.
• The process of generalization can be achieved with a reasonable standard of accuracy only.

Statistics should be enumerated or estimated according to a reasonable standard of accuracy. Enumeration involves actual counting of the heads, whereas estimation is not the actual counting, but an observation. 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 are5,000 people in a rally, then the new channel is simply estimating the number of people.

5. Statistics are collected for a pre-determined purpose: The purpose of collecting statistical 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 of the basis of valid conclusions.
6. Statistics are collected in a systematic Manner: For accuracy or reliability of data, the figures should be collected in a systematic manner. If the figures are collected in a haphazard manner, the reliability of such data will deteriorate.
7. Statistics should be placed in relation to each other. Collection of statistical data is generally done with the motive to compare.

• If the figures collected are not comparable, then they lose a large part of their significance.
• For the purpose of comparison, it is necessary that data must be homogeneous.
• For example, it would be meaningless to compare the heights of men with heights of trees because these figures are of a heterogeneous character. Such figures do not come under the category of statistics.

Statistics as a Method (Singular Sense)

In singular sense, the term ‘statistics’ means statistical methods, i.e. it is method of dealing with numerical facts. Statistic in singular sense may be defined as the collection. Presentation, analysis and interpretation of numerical data. The given definition covers the following important features of statistical methods:

1. Collection of data: It is the main and the first step in a statistical enquiry. The technique of collection of data depends upon the objective of the study.
2. Organisation of Data: After collection, the data is organised in a proper form which involves editing and classification.
3. Presentation of Data: After classification , the data is presented in some suitable manner. In the form of text, table, diagram or graph.
4. Analysis of Data: After presentation of data, analysis is done with the help of simple mathematical techniques. These include measures of central tendency, measures of dispersion, correlation and regression etc.
5. Interpretation of Data: It is the last step in the statistical methodology.

• It involves statistical thinking, skill and experience, to derive meaning from analyzed data.
• The interpretation provides the final conclusions drawn from the analyzed data.

 

Plural sense Vs Singular Sense

1. Statistics in plural sense deals with numerical information, whereas in singular sense, statistics is a body of various methods and tools.
2. Statistics in plural sense is descriptive in nature, but in singular sense, it is basically a tool of analysis.
3. Statistics in plural sense is often in the raw state, whereas in singular sense, it helps in processing the raw data.
4. Statistics in plural sense in quantitative, but in singular sense, it is an operational technique.

 

Concept FUNCTIONS OF STATISTICS

Statistics performs many functions useful to human beings. The broad functions performed by statistics are discussed as under:

1. To simplify complex facts: It is very difficult for an individual to understand and conclude from huge numerical data. Statistical methods try to present the great mass of complex data into simple and understandable form.

For example, statistical techniques like mean, median, correlation, graphs, etc. make complex data intelligible and understandable in short period and in better way.

2. To present facts in definite for: Quantitative facts can easily be believed and trusted in comparison to abstract and qualitative facts. Statistics summarizes the generalized facts and presents them in a definite form.
3. To make comparison of facts: Comparison is one of the main functions of statistics as the absolute figures convey a less concrete meaning. For comparison of data, various statistical methods like average, rates, percentages, ration, etc. are used. For example, per capita income of developing countries may not be of much use unless we know the per capita income of developed countries.
4. To facilitate planning and policy formulation: On the basis if numerical data and their analysis, businessmen and administrators can plan futute activities and shape their policies.
5. To help in forecasting: As business is full of risks and uncertainties, correct forecasting is essential to reduce the uncertainties of business. Statistical tools (like interpolation, time series analyses, etc) helps in making projections for future.
6. Formulation and Testing of Hypothesis: statistics methods are extremely useful in formulating and testing hypothesis.

For example, with the help of statistical techniques, we can test the hypothesis, whether a rise in the Railway fares will affect passenger traffic or not.

7. To enlarge individual knowledge and experience: statistics enable people to enlarge their horizon. It sharpens the faculty of rational thinking and reasoning, and is helpful in propounding new theories and concepts.

 

Concept IMPORTANCE OF STATISTICS

Statistics is widely used in modern times. Initially, it was employed by the Government to collect information on public affairs. But, gradually, its use was extended to all fields. We shall discuss briefly, the importance of statistics in the following major areas:

1. Importance to the Government
2. Importance in Economics
3. Importance in Economic Planning
4. Importance in Business

 

Importance of Statistics to Government

The subject of statistics was initially used by the ancient rulers in assessment of their military and economic strength. Gradually, its scope was enlarges to tackle other problems relating to political activities of the economy.

• In the present scenario, Government collects the largest amount of statistics for various purposes.
• The role of government has increased and requires much greater information in the form of numerical figures, to fulfill the welfare objectives in addition to the efficient running of their administration.
• Popular statistical methods such as time-series analysis, index numbers, forecasting and demand analysis arc extensively used in formulating economic policies.
• In a democratic country like India, various political groups are also guided by the statistical analysis regarding their popularity in the masses.

So, it can be concluded that if is impossible to Mink about functioning of the modern government, in the absence of statistics.

 

Importance of Statistics in Economics

Statistics is an indispensable tool for a proper understanding of various economic problems.

• Every branch of economics takes support from statistics in order to prove various economic theories in it.
• Statistics provides important guidelines for the formulation of various economic policies.
• Most of the economic problems are capable of being expressed in numerical figures. For example, output of agriculture, volume of exports, prices of commodities, etc. In each case, the data is affected by a multiplicity of factors. Further, it can be shown that the other conditions prescribed for statistical data are also satisfied.

Thus, we can say that the study of various economic problems is essentially the one of a statistical nature. Some of the uses of statistics in economics are as follows:

1. Formulation of Economic Laws; The famous 'Law of Demand' and the concept of 'Elasticity of Demand' have been developed by the inductive method of generalisation, which is also based on statistical principles.

2. Helps in understanding and solving an economic problem: Statistical data and statistical methods play a vital role in understanding and solving economic problems such as poverty, unemployment, disparities in the distribution of income and wealth, etc.
3. Studies of market structures: Study of perfect competition, oligopoly, monopoly, etc. requires statistical comparison of market prices, cost and profits of individual firms.
4. Helps in establishing mathematical relation: Statistical methods can also be used to estimate mathematical relation between various economic variables. For example, data on prices and corresponding quantities demanded of a commodity, can be used to estimate mathematical form of demand relationship between the two variables.

5. Useful to study behaviour of different economic concepts: Trend-series analysis is used to study the behaviour of prices, production and consumption of commodities, money in circulation, and bank deposits and clearings.
6. Price Analysis: Statistical surveys of prices helps in studying the theories of prices, pricing policy and price trends as well as their relationship to the general problem of inflation

 

Importance of Statistics in Economic Planning

Economic Planning is indispensable for achieving faster rate of growth through the best use of nation's resources.

• At every stage of economic planning, there is a need for figures and statistical methods.
• Using statistical techniques, it is possible to assess the amounts of various resources available in the economy and accordingly determine whether the specified rate of growth is sustainable or not.
• Statistical analysis of data regarding an economy may reveal certain crucial areas, like increasing rate of inflation, which may require immediate attention,

So, it is rather impossible to think of a situation where economic planning can be done without the use of statistical techniques.

 

Importance of Statistics In Business

Statistics is important in the business due to following reasons:

1. For Establishing a Business Unit: Before starting a business, it is necessary to know its feasibility. It involves detailed information about location, size of output, availability of inputs, taxes, size of market share, turnover, etc, Statistics provide guidelines, which may prove to be helpful in making key decisions.
2. For Estimating the demand of product; After launching of the business, the next step is to estimate the present as well as the future demand of the product. Statistical methods are extremely helpful in preparing trend lines leading to reliable forecasting.
3. For Production Planning: The businessman has to plan its production so that he is able to meet the demand of its product and incurs minimum losses on account of over or under production. Careful production planning is essential for maintaining a balance between demand and supply.
4. For Making Quality Control: Statistical techniques (like preparation of control charts) can also be used to control the quality of the product manufactured by a firm.
5. For Making Marketing Strategy: Before a product is launched, market research team makes use of various statistical techniques (like pilot survey), to analyse data on population, purchasing power, habits of the consumers, competitors, pricing, etc. Such studies reveal the possible market potential for the product.
6.  Accounts writing and auditing: Every business firm keeps accounts of its revenue and expenditure.

• 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 generali7ing relationships between two or more of such variables.