STATISTICS
1) Define Statistics (1 mark)
Statistics can be defined as the collection, presentation, classification, analysis, and interpretation of
quantitative data.
2) Characteristics of Statistics (4 mark)
a) Statistics are aggregate of facts
b) Statistics are affected to a marked extent by multiplicity of causes.
c) Statistics are numerically expressed.
d) Statistics are enumerated or estimated according to a reasonable standard of accuracy
e) Statistics are collected in a systematic manner.
f) Statistics are collected for a pre-determined purpose.
g) Statistics should be placed in relation to each other.
3) Importance of Statistics in Economics? ( 3 mark)
The field of Statistics deals with collection, organisation, analysis, interpretation and presentation of data.
Statistics plays a vital role in understanding economic data such as the relationship between the quantity
and price, supply and demand, economic output, GDP, per capita income of nations etc.
4) Draw backs of statistics? (4 mark )
(1) Statistics laws are true on average. Statistics are aggregates of facts, so a single observation is not a
statistic. Statistics deal with groups and aggregates only.
2) Statistical methods are best applicable to quantitative data.
(3) Statistics cannot be applied to heterogeneous data.
(4) If sufficient care is not exercised in collecting, analyzing and interpreting the data, statistical results
might be misleading.
(5) Only a person who has an expert knowledge of statistics can handle statistical data efficiently.
(6) Some errors are possible in statistical decisions. In particular, inferential statistics involves certain
errors. We do not know whether an error has been committed or not.
5) Define Economic Problem? What are the cause? ( 4 mark)
Economic Problem
An economic problem generally means the problem of making choices that occurs because of the scarcity
of resources. It arises because people have unlimited desires but the means to satisfy that desire is
limited. Therefore, satisfying all human needs is difficult with limited means.
Causes of Economic Problem
Scarcity of resources: Resources like labour, land, and capital are insufficient as compared to the demand.
Therefore, the economy cannot provide everything that people want.
Unlimited Human Wants: Human beings’ demands and wants are unlimited which means they will never
be satisfied. If a person’s one want is satisfied, they will start having new desires. People’s wants are
unlimited and keep multiplying, therefore, cannot be satisfied because of limited resources.
Alternative Uses: Resources being scarce, the same resources are used for different purposes. and it is
therefore essential to make a choice among resources. For instance, petrol is used in vehicles and is also
used for generators, running machines, etc. Therefore, the economy should now make a choice within
the alternative uses.
6) “ For Whom to Produce”- Explain ( 4 marks)
This involves deciding who is the end consumer of the goods or services that are produced. Every good
produced is made for a specific section of society as every product cannot satisfy all the sections of
society due to difference in the paying capacity of the consumer. Inequality in the distribution of income
can be noticed in society because of which there is a difference in the paying capacity of the consumer.
For example, the production of graded rice is for people with higher paying capacity and the production of
non-graded rice is for lower-income people. Luxury goods and services are for people with high income.
The distribution of final goods and services is equal to the distribution of income among the factors of
production( land, labour, capital, entrepreneurship). This has two aspects:
Personal Distribution: This refers to the distribution of income by a different group of individuals in
society.
Functional Distribution: This refers to the distribution of income among different factors of
production.
7) Define Economics? ( 1 mark)
Economics is the study of scarcity and its implications for the use of resources,
production of goods and services, growth of production and welfare over time, and a
great variety of other complex issues of vital concern to society.
8) Define an Economy ( 1 mark)
An economy is a broad collection of interconnected production,
consumption, and trade activities that aid in distributing scarce
resources.
9) Define PPC (1 mark)
Definition. production possibilities curve (PPC) (also called a production possibilities
frontier) a graphical model that represents all of the different combinations of two goods
that can be produced; the PPC captures scarcity of resources and opportunity costs.
10) Why PPC is concave to the origin? Show with the help of schedule? ( 4 mark)
Production Possibility Curve (PPC) is concave to the origin because of the increasing
opportunity cost. As we move down along the PPC, to produce each additional unit of one
good, more and more units of other good need to be sacrificed. That is, as we move
down along the PPC, the opportunity cost increases. And this causes the concave shape
of PPC.
In the above graph, AE represents the PPC for capital goods and consumer goods.
Suppose the initial production point is B, where 1 unit of capital goods and 48 units of
consumer goods are produced. To produce one additional unit of capital good, 4 units of
consumer good must be sacrificed (point c). Thus at point c, the opportunity cost of one
additional capital good is 4 units of consumer goods. On the other hand, at point D, the
opportunity cost of producing one additional unit of capital good is 9 units of consumer
goods. Thus, as we move down the PPC from point C to point D, the opportunity cost
increases. This confirms the concave shape of PPC.
11) Define Opportunity cost? ( 1 mark)
Opportunity costs represent the potential benefits that an individual, investor, or business misses
out on when choosing one alternative over another. Because opportunity costs are unseen by
definition, they can be easily overlooked.
12) Define MOC/MRT ( 1 mark)
13) Show the relationship between TU & MU (3 marks)
14) Explain law of DMU (4 marks)