Statistics for Economics 2021

Statistics
Question 1.

Mark the following statements as true or false.

(i) Statistics can only deal with quantitative data.
(ii) Statistics solves economic problems.
(iii) Statistics is of no use to Economics without data.
Answer:
(i) False Statistics deals with both quantitative data as well as with qualitative data.
Qualitative data describes the attributes.
(ii) True Economists use Statistics as a tool to understand and evaluate an economic
problem by analysing past data. Statistical tools help economists to identify causes of
an economic problem and devise policies accordingly.
(iii) True Data is the raw material for economic analysis. Statistical analysis of economic
variables cannot be undertaken without having any data.

Question 2.
Make a list of activities that constitute the ordinary business of life. Are these economic
activities?
Answer:
The following are the activities that constitute the ordinary business of life

 Buying of goods and services.

 Rendering services to a company by employees and workers.
 Selling of goods and services.
 Production process carried out by a firm.

Yes, the above mentioned activities are regarded as economic activities. This is
because, these activities are undertaken for monetary gain and are thus economic
activities.

Question 3.

The government and policy makers use statistical data to formulate suitable policies of
economic development‟. Illustrate with two examples.
Answer:
The statistical data provide the base for the government and the policy makers to
formulate policies. The statistical data not only help them to analyse and evaluate the
outcomes of the past policies but also assist them to take corrective measures and to
formulate new policies. Statistical data also help the government to ascertain the
relationship between economic variables and form policies accordingly

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For example, if Indian Government aims at increasing the national output, then it
formulates its investment expenditure policy based on the capital output ratio in the past
few years. Another example could be the preparation of monetary policy. The previous
data of inflation and economic growth are taken into consideration for estimating the
money supply required in the next period.

Question 4.
“You have unlimited wants and limited resources to satisfy them.” Explain by giving two
examples.
Answer:
The problem of scarcity is the most basic economic problem. Human wants are
unlimited and resources to satisfy these wants are limited and these limited resources
have alternative uses. „Scarcity of resources‟ implies that there are unlimited wants to
be fulfilled by limited resources which leads to lesser supply of resources as compared
to demand for them.

The basic concern of an economy is to allocate the scarce resources to the best
possible use in order to satisfy maximum wants. The limited resources have alternative
uses which along with problem of scarcity makes it necessary for an economy to make
a choice among various alternatives.

For example, an economy endowed with a given level of resources has to make a
choice between the production of capital goods and consumer goods. The choice of the
economy (i.e., what to produce and in what quantities) depends on the need of the
economy. While the production of consumer goods will hamper the capital formation in
the country for future production, the production of capital goods will not provide
sufficient goods for consumption to the present population.

The same problem of scarcity can be felt at an individual level, e.g., with a given amount
of money say, ? 10,000, one cannot buy a refrigerator and a washing machine
simultaneously. Thus, the individual needs to make a choice between the alternatives
according to his/her priority.

Question 5.

How will you choose the wants to be satisfied?

Answer:

An individual may have unlimited wants but these wants are in an order of priority
according to their intensity. The wants of highest intensity will be fulfilled first as they

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provide the highest satisfaction or utility to the individual and hence, the individual
attaches the top most priority to these wants.

Further, the choice of want also depends on the need or priority in the given situation,
availability of the goods and services which can satisfy the wants and the purchasing
power to realise a particular want. Thus, depending on all these conditions, we can say
that an individual having a limited budget will fulfil a particular need that would provide
him/her the highest possible satisfaction in the given income and given prices of the
goods and services required to satisfy the wants. satisfaction in the given income and
given prices of the goods and services required to satisfy the wants.

Question 6.

What are your reasons for studying Economics?

Answer:

Human wants are unlimited and resources to satisfy these wants are limited and these
limited resources have alternative uses. The basic concern of economics is to allocate
the scarce resources to the best possible use in order to derive maximum benefit from
the scarce resources. Due to the scarcity of resources having alternative uses, an
economy needs to allocate the scarce resources to the areas with maximum possible
and optimum returns. The following are the reasons that make the study of economics
important

(i) To Study the Consumer Behaviour The theory of consumer behaviour in Economics
deals with the study of the behaviour of the consumers in different types of market
situations. This theory helps us understand how a rational consumer makes his/her
decisions to get the maximum possible satisfaction in the given income and given prices
of the goods and services.

(ii) To Study the Production Theory The theory of production studies the production
decisions of the producers in different types of market. The theory explains how a
producer takes production decisions related to maximisation of output in given cost or
the minimisation of cost for a given level of output. The theory highlights how a producer
combines different inputs (given their prices) in order to minimise the cost of production
and to maximise the profits.

(iii) To Study the Distribution of Income The study of Economics makes us aware about
the distribution of national income. In other words, it tells us how the income arising

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from the total production in an economy is distributed in the form of wage, rent, interest
and profit to different factor owners (like labour, land, capital and entrepreneur).

(iv) To Study the Macroeconomic Problems Faced by an Economy Economics proves to

be the most powerful tool to understand and analyse the root cause of basic
macroeconomic problems faced by an economy like poverty, unemployment, inflation,
recession etc. Economics helps us not only in understanding the interrelationship
among these problems but also to take various corrective measures.

Question 7.

Statistical methods are no substitute for common sense. Comment.

Answer:

It is absolutely true that statistical methods are no substitute for common sense.
Statistical data should not be believed blindly as they can be misinterpreted or misused.
The statistical data may involve personal bias or may be subject to manipulations for
one‟s own selfish motive.

Statistical data and methods are subject to the errors committed by an investigator
while surveying and collecting data. Thus, one should use his/her common sense while
working with the statistical methods.

This point can be understand with the help of an example A person who wanted to
cross a river with his family but did not know how to swim. He knew the average depth
of the river to be 125 cm. His height was 175 cm, that of his wife was 152 cm and his
two children measured 120 cm and 90 cm respectively in height.

He calculated the average height of his family and found it to be around 134 cm. He
analysed that the average depth of the river was less than the average height of his
family and concluded that they all could cross the river safely on foot. This resulted in
drowning of his children. This example proves that common sense must supersede
statistical methods.