Chapter 1 Introduction
Economics by Alfred Marshall, “The study of man in the
ordinary business of life”.
Consumer “A consumer is one who consumes goods and
services for the satisfaction of his wants”.
Consumption “Consumption is the process of using up utility
value of goods and services for the direct satisfaction of our
wants”.
Producer “A producer is one who produces/or sells goods
and services for the generation of income”.
Production “Production is the process of converting raw
material into useful thing”.
Saving It is the part of income which is not consumed. It is
an art of abstinence from consumption.
Investment It is expenditure by the producers on the
purchase of such assets which help to generate income.
Economic Activity It is an activity which is related to the use
of scarce means. Means are always scarce in relation to our
wants.
Economic Problem It is the problem of choice arising on
account of the facts that resources are scarce and these
have alternative uses.
Components of Economics There are three components of
economics
Consumption
Production
Distribution
Statistics – A Plural Sense Statistics refers to information in terms
of numbers or numerical data, such as population statistics,
employment statistics etc.
Accqrding to Bowley, “Statistics are numerical statements of facts
in any department of enquiry placed in relation to each other.”
Features of Statistics in the Plural Sense
Aggregate of facts
Numerically expressed
Affected by multiplicity of causes
Reasonable accuracy
Placed in relation to each other
Predetermined purpose
Estimated
Statistics – A Singular Sense It refers to techniques or methods
relating to collection, classification, presentation analysis and
interpretation of quantitative data.
According to Seligman, “Statistics is the science which deals with
the methods of collecting, classifying, presenting, comparing and
interpreting numerical data collected to throw some light on any
sphere of enquiry”.
Importance of Statistics in Economics:
Quantitative expression of economic problem
Inter-sectoral and inter-temporal comparisons
Working out cause and effect relationship
Construction of economic theories or economic models
Economic forecasting
Formulation of policies
Limitations of Statistics:
Study of numerical facts only
Study of aggregates only
Results are true only on an average
Without reference, results may prove to be wrong
Can be used only by the experts
Prone to misuse
Collection of Data
Sources of Data There are two sources of data
Primary Source of Data It implies collection of data from its
source of origin.
Secondary Source of Data It implies collection of data from
some agency or institution which already happens to have
collected the data through statistical survey.
Types of Data There are two types of data
Primary Data Data collected by the investigator for his own
purpose for the first time, from beginning to end are called
primary data.
Secondary Data These data have already been collected by
somebody else, these are available in the form of published
or unpublished report.
Principal Differences between Primary and Secondary Data
Primary data are original and secondary data are already in
existence and therefore, are not original.
Primary data do not need any adjustment, secondary data
need to be adjustment to suit the objective of study in hand.
Primary data are expensive and secondary data are less
expensive.
Statistical Methods of Data Collection
(i) Direct Personal Investigation
It is the method by which data are personally collected by the
investigator from the information. Merits and demerits of this
method are follows.
(a) Merits
Originality
Reliability
Uniformity
Accuracy
Related information
Elastic
(b) Demerits
Difficult to cover wide areas
Costly
Personal bias
Limited coverage
(ii) Indirect Oral Investigation
It is the method by which information is obtained not from the
persons regarding whom the information is needed. It is collected
orally from other persons who are expected to possess the
necessary information. Merits and demerits of this method are
given below
(a) Merits
Wide coverage
Expert opinion
Simple
Less expensive
Free from bias
(b) Demerits
Less accurate
Doubtful conclusions
Biased
(iii) Information from Local Sources or Correspondents
Under this method, the investigator appoints local persons or
correspondents at different places. Merits and demerits of this
method are given below
(a) Merits
Economical
Wide coverage
Continuity
Suitable for special purpose
(b) Demerits
Loss of originality
Lack of uniformity
Personal bias
Less accurate
Delay in collection
(iv) Information Through Questionnaries and Schedules
There are two ways of collecting information on the basis of
questionnaire
(a) Mailing Method Under this method questionnaires are mailed
to the informants. The method is most suited when
The area of the study is very wide.
The informants are educated.
(b) Enumerator’s Methods Under this Method enumerator himself
fills the schedules after seeking information from the informants.
This method is mostly used when
field of investigation is large.
the investigation need specialised and skilled investigation.
the investigators are well versed in the local language and
cultural norms of the informants.
(c) Collection of Secondary Data There are two main sources of
secondary data
Published sources
Unpublished sources
(d) Published Sources Some of the published source of secondary
data are
Government publication
Semi-government publication
Reports of committees and commissions
Publications of trade associations
Publication of research institutions
Journals and papers
Publication of research scholars
International publication
(e) Unpublished Sources These data are collected by the
government organisations and others, generally for their self use
or office record.
In order to assess the reliability, suitability and adequacy of
the data, the following points must be kept in mind
Ability of the collecting organisation
Objective and scope
Method of collection
Time and condition of organisation
Definition of the unit
Accuracy
(v) Census ‘Method
Census method is that method in which data are collected
covering every item of the universe or population relating to the
problem under investigation. Merits and demerits of this method
are given follows
(a) Merits
Reliable and accurate
Less biased
Extensive information
Study of diverse characteristic
Study of complex investigation
Indirect investigation
(b) Demerits
Costly
Large manpower
Not suitable for large investigation
(vi) Sample Method
It is that method in which data is collected about the sample on a
group of items taken from the populations for examination and
conclusions are drawn on their basis. Merits and demerits of this
method are given below
(a) Merits
Economical
Time saving
Identification of error
Large investigation
Administrative convenience
More scientific
(b) Demerits
Partial
Wrong conclusions
Difficulty in selecting representative sample
Difficulty in framing a sample
Specialised knowledge
Methods of Sampling
(i) Random Sampling Random sampling is that method of
sampling in which each and every item of the universe has equal
chance of being selected in the sample.
Random sampling may be done in any of the following ways
Lottery method
Tables of random number
(ii) Purposive or Deliberate Sampling It is that method in which
the investigator himself makes the choice of the samples items
which in his opinion are the best representative of the universe.
(iii) Stratified or Mixed Sampling According to this method of
sampling population is divided into different strata having
different characteristics and some of the items are selected from
each strata, so the entire population gets represented.
(iv) Systematic Sampling According to this methods, units of the
population are numerically, geographically and alphabetically
arranged. Every nth item of the numbered is selected as a sample
item.
(v) Quota Sampling In this method, the population is divided into
different groups or classes according to different characteristics
of the population.
(vi) Convenience Sampling In this method, sampling is done by
the investigator in such a manner that suits his convenience.
Reliability of Sampling Data
It depends mainly on the following factors
Size of the sample
Method of sampling
Bias of correspondents and enumerators
Training of enumerators
Important agencies at the national level which collect process and
tabulate the statistical data. NSSO (National Sample Survey
Organisation), RGI (Registrar General of India), DGCIS
(Directorate General of Commercial Intelligence and Statistics)
and Labour Bureaus.
Organisation of Data
Organisation of Data
Organisation of data refers to the arrangement of figures in such
a form that comparison of the mass of similar data may be
facilitated and further analysis may be possible.
Classification
Classification is the process of arranging things in groups or
classes according to their resemblances and affinities and gives
expression to the unity of attributes that may exist amongst a
diversity of individuals.
Objectives of Classification
Simplification and Briefness
Utility
Distinctiveness
Comparability
Scientific arrangement
Attractive and effective
Characteristic of a Good Classification
Comprehensiveness
Clarity
Homogeneity
Suitability
Stability
Elastic
Basis of Classification
Geographical Classification This classification of data is
based on the geographical or locational differences of the
data.
Chronological Classification When data are classified on the
basis of time, it is known as chronological classification.
Qualitative Classification This classification is according to
qualities or attributes of the data.
This classification may be of two types
Simple classification
Manifold classification
Quantitative or Numerical Classification Data are classified
in to classes or groups on the basis of their numerical
values. Quantitative classification is also called classification
by variables.
Concept of Variable A characteristic or a phenomenon which
is capable of being measured and changes its value
overtime is called a variable.
The variable may be either discrete or continuous
Discrete Variable These are those variables that
increase in jumps or in compete numbers.
Continuous Variable Variable that assume a range of
values or increase not in jumps but continuously or in
fractions are called continuous variables.
Raw Data A mass of data in its crude form is called raw data.
Types of Statistical Series Statistical series are of two
types
Individual Series These are those series in which the items
are listed singly. These series may be presented in two ways
According to serial numbers
Ascending or descending order of data
Frequency Series Frequency series may be of two types
Discrete Series or Frequency Array It is that series in
which data are presented in way that exact
measurement of items are clearly shown. In this series
there are no class intervals and a particular item in the
series.
Frequency Distribution It is that series in which items
cannot be exactly measured. The items assume a
range of values and are placed within the limits is
called class interval.
Frequency distribution is also known as continuous series or
series with class-intervals, or series of grouped data.
Types of Frequency Distribution
Exclusive Series It is that series in which every class-interval
excludes items corresponding to its upper limit.
Inclusive Series An inclusive series is that series which
includes all items upto its upper limit.
Open End Series An open end series is that series in
which lower limit of the first class-interval and the upper
limit of last class- interval is missing like as below – 5, 20
and above
Cumulative Frequency Series It is that series in which the
frequencies are continuously added corresponding to each
class-interval in the series.
There are two ways of converting this series into cumulative
frequency series
Cumulative frequencies may be expressed on the basis
of upper class limits of the class-intervals.
Cumulative frequencies may b expressed on the basis
of lower class limits of the class-intervals.
Mid Values Frequency Series Mid value frequency series are
those series in which we have only mid values of the class
intervals and the corresponding frequencies.
Univariate Distribution The frequency distribution of a single
variable is called a univariate distribution.
Bivariate Distribution A bivariate distribution is the
frequency distribution of two variables.