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Overview
● Meaning of Economics

● Economic and Non - Economics activities.

● Meaning of Statistics

● Functions of Statistics

● Importance of Statistics

● Limitation of Statistics
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Meaning of Economics
● ‘Economics’ derived from two greek words:

● ‘Oikos’ : A house

● ‘Nemein’: To manage

● ‘Economics’ : Household Management

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Definitions of Economics
Definitions of Economics

Wealth Definition Welfare Definition Scarcity Definition Growth Oriented

By By By Definition
Adam Smith Alfred Marshall [Link] Robbins By
[Link]
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Wealth Definition:
● According to Adam Smith,’Economics is the science of wealth’.

● Wealth -----> Those goods which satisfy human wants.

● Economics is concerned with the problem arising from wealth -

getting and wealth - using activities of people.

● Interested in studying the ways by which the wealth of all

nations could be increased.
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Welfare Definitions;
● According to Alfred marshall,’Economics is a study of man in the ordinary
business of life. It enquires how he gets his income and how he uses it’.
● Ordinary business of life: Study of activities of an ordinary man who
lives in society.
● The primary object and end of economics is promotion of material
welfare.
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Scarcity Definition:
● Given by Prof. Lionel Robbins.
● Economics is the science which studies human behaviour as a
relationship between ends and scarce means which have
alternatives uses.
● Based on following fundamental characteristics, which gives
rise to economics problems:
● Unlimited Wants
● Scarcity of Resources
● Alternative uses.
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Scarcity Definition
Unlimited Wants:

Human wants can never be fully satisfied. No sooner a want is

satisfied, a new want emerges.

Scarcity of Resources:

Scarcity refers to the limitation of supply in relation to demand for a

commodity.

Alternatives uses:

Resources are not only scarce, but they can also be put to various
uses.
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Growth Oriented Definition:
● According to Prof. Samuelson,’ Economics is the study of how man and society
choose, with or without the uses of money , to employ scarce productive resources,
which could have and distribute them for consumption now and in the future among
various people and groups of society.’
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Conclusion:
● 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.’
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Economic and Non-Economic Activities

Human Activities

Economic Activities Non-Economic Activities

(Undertaken to earn money) (Undertaken to get Satisfaction)
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Economic Activities:
● Refers to those activities, which are undertaken to earn a
living.
● Example: Worker working in a his shop.

Shopkeeper selling goods in his shop.

Farmer producing grains for selling.

● Every economy undertake three main economic activities:-

● Consumption
● Production
● Distribution
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Economic Activities:
Consumption:

It is an economic activity which deals with the use of goods and

services for satisfaction of human wants.
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Economic Activities:
Production:

Production refers to all activities which are undertaken to

produce goods and services for generation of income and
satisfying human wants.

It is the process of converting raw material into finished

products.
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Economic Activities:
Distribution:

Distribution is that economic activity which studies how income

generated is distributed among the factors of production.

It deals with determining how the total income arising from

production process distributed to land, labour, capital and space
entrepreneur in the form of rent,wages, interest and profit
respectively.
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Non-Economic Activities:
● Activities which are not concerned with creation of
money or wealth are known as Non-Economics activities.
● There is no expectation of any kind of monetary reward
or [Link] out of
love,sympathy,sentiments,patriotism,etc.

Examples:
1. Charitable activities like blood donation camps.
2. Free education to needy students.
3. Teacher teaching his own son.
4. Attending parties.
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Brainstorming:
Classify the following into economic & non-economic activities.

● Smita cooking food for her family.

● A person selling cold drinks on the station.
● A teacher teaching in a school
● A teacher teaching his own son.
● Social services rendered by an NGO to flood victims.
● Chef cooking food at a hotel.
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Meaning of Statistics:
● Derived from:
● Latin Word - Status
● Italian Word - Statista
Political science
● German Word - statistic
● Greek Word - statistique

● Statistics : आंकड़े
● Statistics : Studying numbers
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Meaning of Statistics:

Variable

Quantitative Variable Qualitative Variable

Which can be expressed in Which cannot be

number expressed in numbers.
Ex: Height,Weight Ex: Honest,Intelligence

● Statistics include all types of quantitative analysis

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Meaning of Statistics:
● Statistics include all types of quantitative analysis.
● Statistics is a systematic study of quantitative data .
● Statistics is the discipline that concerns the collection, organization, analysis,
interpretation and presentation of data.
● Statistical data are only which are:
● Aggregates
● Averages
● comparable
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Meaning of Statistics:

Data which are not statistics Data which are statistics

A cow has 4 legs Average height of the 26-plus male people in

india is 6 feet compared to 5 feet in nepal .

Ram has 200 rupees in his pocket. Birth rate in india is 18 per thousand
compared to 8 per thousand in USA

A young lady was run over by a speeding truck Over the past 10 years, india has won 60 test
at 100 km per hour. matches in cricket and lost 50 .
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Meaning of Statistics:

Statistics in two senses

Plural Sense Singular Sense

Statistical Data Statistical Methods

(Numerical information) (Methods of dealing with
information)
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Statistics in Plural sense:
● Refers to numerical set of data - collected in systematic manner with
definite purpose in any field of study.

Aggregates of facts
Characteristics of Statistics

Affected by multiplicity of causes

Statistics are numerically expressed

Statistics should be collected with reasonable standard of

accuracy

Statistics are collected for a pre-determined purpose

Statistics should be placed in relation to each other

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Characteristics of Statistics in Plural Sense:
Aggregates of facts:

Statistics are a number of facts. Single and isolated figures are not statistics as
such figures cannot be compared.

Statistics are numerically expressed:

The statistical approach to a subject is numerical. So, any facts, to be called

statistics, must be numerically or quantitatively expressed.

Multiplicity of causes:

Statistics are not affected by any single factor; but are influenced by many
[Link] they been affected by one factor alone then by removing that
factor they would lose all their significance.
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Characteristics of Statistics in Plural Sense:
Reasonable Accuracy:

A reasonable degree of accuracy must be kept in view while collecting statistical data. This
accuracy depends on the purpose of investigation,its nature, size and available resources.

Pre- determined Objective:

Statistics are collected with some pre-determined [Link] information collected

without any definite objective will only be a numerical value and not statistics.

If data pertaining to the farmers of a village is collected,there must be some

pre-determined objective. Whether the statistics are collected for the purpose of knowing
their economic position, or distribution of land among them or their total population, or
for any other purpose, all these objectives must be pre-determined.
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Characteristics of Statistics in Plural Sense:
Collected in a systematic Manner:

Statistics should be collected in a systematic manner:before collecting them, a plan must

be prepared.

No conclusion can be drawn from statistics collected in haphazard manner.

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.

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Statistics in Singular Sense:
● Statistics may be defined as the collection, presentation,
analysis and interpretation of numerical data.
● Statistics ---------> Statistical methods
Methods dealing with numerical facts.
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Stage of Statistical Study:

Presentation Interpretation of
Organisation Analysis of Data Data
Collection of of Data
of Data
Data

Stage I Stage II Stage III Stage IV Stage V

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Stage of Statistical Study:
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.
Organisation of Data:
After collection, the data is organised in a proper form which involves editing and classification.
Presentation of Data:
After classification, the data is presented in some suitable manner, in the form of text, table,
diagram or graph.
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Stage of Statistical Study:
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.
Interpretation of Data:
It is last step in the statistical methodology.
It involves statistical thinking, skill and experience, to derive meaning from analysed data.
The interpretation provides the final conclusion drawn from the analysed data.
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Functions of Statistics:

To simplify complex facts

Functions of Statistics To present facts in definite form

To make comparison of facts

To facilitate planning and policy formulation

To help in forecasting

To enlarge individual knowledge and experience

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Functions of Statistics:
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.
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Functions of Statistics:
To simplify complex facts:

● Chocolate consumed by 15 students in 1 day

[Link] students Chocolates
consumed
10 8 11 8 10
1 6
8 7 8 11 7
3 7
9 11 7 6 9
4 8

2 9

2 10

3 11
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Functions of Statistics:
To present facts in definite form:

Quantitative facts can easily be believed and trusted in comparison to abstract

and qualitative facts. Statistics summarizes the generalized facts and present
them in a definite form.

To make comparison 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 , ratio, etc. are used.

● Literacy Rate in kerala = 96.2%

● Literacy Rate in Andhra Pradesh= 66.4%
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Functions of Statistics:
To facilitate planning and policy formulation:

On the basis of numerical data and their analysis,business and administrators can
plan future activities and shape their policies.

To help in forecasting:

As business is full of risks and uncertainties,correct forecasting is essential to

reduce the uncertainties of business.

Formulation and testing of hypothesis:

Statistics methods are extremely useful in formulating and testing hypotheses.

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Functions of Statistics:
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Importance of Statistics:
Quantitative expression of economic problems:

Statistics is an essential tool for an economist to understand the problems

of an economy through quantitative data.

Intersectoral and inter-temporal comparisons:

Quantitative data is further used to make comparisons.

Inter - sectoral comparison: Across different sectors of the economy.

Inter - temporal comparison: Over different plan periods.

Past-Present-Future
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Importance of Statistics:
Economic Equilibrium:

Statistics data helps economists to understand the behaviour of the

producer and consumer in the market.

Developing Economic theories:

Facilitates economists to develop theories, as how the prices of goods vary

in relation to the demand for the product.

Forecasting:

With the help of statistical data, economists assess and ascertain the
future course of certain events which are of economic significance.
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Importance of Statistics:
Formulation of policies:

Statistical data is essential for formulating policies of economic

development.

Example:- If the government wants to formulate or modify labour laws,

then it will require statistical data on working condition, number of
working hours and minimum wages received by workers.
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Limitations of Statistics:

Statistics does not study qualitative phenomena

Limitations of Statistics Statistics does not deal with individuals

Statistics can be misused

Statistical laws are not exact

Only experts can make the best possible use of statistics

Statistical data should be uniform and homogenous

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Limitation of Statistics:
Statistics does not study qualitative phenomena:

Statistics can be applied in studying only those problems which can be stated
and expressed quantitatively.

Statistics does not deal with individuals:

Statistics deals only with aggregates of facts and no importance is attached to

individual items.

Statistics can be misused:

Statistics can be misused by ignorant or wrongly motivated persons. Any

person can misuse statistics and draw any type of conclusion he likes.
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Limitation of Statistics:
Only experts can make the best possible use of statistics:

The techniques of statistics are not so simple to be used by any

[Link] techniques can only be used by the expert as they are
complicated in nature.

Statistical data should be uniform and homogeneous:

It is essential that data must be uniform and homogeneous.

Heterogeneous data are not comparable.
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Distrust of Statistics:
● Distrust of statistics means lack of confidence in statistical
methods and statements.
● Some people have misgivings about statistics and make
observation like the following:
● Statistics is a rainbow of lies.
● Statistics are tissues of falsehood.
● Statistics can prove anything.
● Statistics cannot prove anything.
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How to Remove Distrust?
● Following are some essential remedies of the distrust of
Statistics:

Consideration of statistical limitations:

While making use of statistics, limitations of statistics must be taken

care of.

No Bias:

The user should be impartial .He should make use only of the
relevant data and draw conclusion without any bias or prejudice.

Application by Experts:

Statistics should be used only by the experts to minimise the

possibility of misuses
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Ques.1. Mark the following statements as true or false.
(i) Statistics can only deal with quantitative data.

Ans.1.(i).[Link] cannot deal with qualitative [Link] deals with

quantitative data.
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Ques.1. Mark the following statements as true or false.
(ii) Statistics solves economic problems.

Ans.1.(ii). [Link] 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.
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Ques.1. Mark the following statements as true or false.
(iii) Statistics is of no use to Economics without data.

Ans.1.(iii). True. At every stage of economic planning, there is a need for

figures and statistical methods. So, statistics is of no use to Economics
without data.
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Ques.2. Make a list of activities in a bus stand or a marketplace. How
many of them are economic activities?
Ans.2. Various activities in a bus stand or a market place are:
● Selling of goods and services
● Buying of goods and services
● People purchasing bus tickets
● Production process carried out by a firm.
● Hawkers selling vegetables and fruits
● Beggars asking for money
Out of the above mentioned activities,except beggar asking for money all
activities are economic activities. This is because all other activities are
undertaken to earn a living.
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Ques.3. ‘The Government and policy makers use statistical data to formulate
suitable policies of economic development’. Illustrate with two examples.

Ans.3. The statistical data is of prime importance for the government and the policy
makers. 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 accordingly.
The statistical data also help the government to ascertion various needs and priorities
for the pursuit of the common goal of economic development.
Example:
1. 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 .
2. Preparation of government budget. The previous data of government
expenditures and government revenues are taken into consideration for
estimating the allocation of funds among various projects.
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Ques.4. “You have unlimited wants and limited resources to satisfy them.” Explain

[Link] wants are never ending ,i.e. They can never be fully satisfied. As soon
as one want is satisfied,another new want emerges. Wants of the people are
unlimited and keep on multiplying and cannot be satisfied due to limited resources.

Examples:

1. Suppose you have have 20,000 and you want to purchase one computer and a
LED TV.
2. Suppose the government wants to increase production of sugar to satisfy
increasing human wants. Now, this is possible only by reducing the
production of some other goods as every economy has limited resources.

These examples clearly demonstrate a fundamental economic condition:’As our

resources are limited, we are always forced to make choice between alternate
commodities.’
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Ques.5. How will you choose the wants to be satisfied?
[Link] wants are unlimited, but the resources to satisfy them are limited and
have alternative uses. So, we cannot satisfy all our wants.

Humans wants differ in priorities,i.e. All wants are not of equal [Link]
every individual, some wants are more important and urgent as compared to
[Link] a result, we allocate our scarce resources in order of preferences to
satisfy some of our wants. So, we make choice between the alternative uses of
the given resources.
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Ques.6. What are your reasons for studying Economics?

Ans.6. Economics is studied because it enables us to understand different aspects

of the economy. However, the main reason for study of economics can be
simplified to a simple word-Scarcity.

We all know, human wants are more than the available [Link], there is a
need to allocate the scarce resources for the satisfaction of never ending human
wants. Hence, Economics is concerned with selection of resources under
conditions of scarcity.

We study Economics to analyse 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 group in society.
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[Link] methods are no substitute for common sense. Comment with
examples from your daily life.

Ans.7. Statistical data should not be believed blindly as it can be misinterpreted or

misused. The statistical data may involve personal biasness or may undergone
manipulations. For example, once a family of four persons(husband, wife and two
children)set out to cross a river. The father knew the average depth of the river. So,
he calculated the average height of his family members. Since the average height of
his family members was greater than the average depth of the river, he thought they
could cross safely. Consequently some members of the family(children) drowned
while crossing the river.

In the given case, the fault is not with the statistical method of calculating averages,
but with the misuse of average. The statistics has been be misused by the father as
he drawn wrong conclusion. So, it is rightly said “ Statistical methods are no subtitles
for common sense.