ECONOMICS

CLASS XI
(Statistics for Economics)

Introduction (Notes)

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.
Types of activities: Economic activities and Non-economic activities
Economic activities refer to those activities which are undertaken to earn a living or for monetary
gain. There are three main economic activities:

• Consumption: It is an economic activity that deals with the use of goods and services for the
satisfaction of human wants.
• Production: It refers to all activities which are undertaken to produce goods and services for the
market or for generation of income.
• Distribution: It is that economic activity which studies how national income is distributed
among the factors of production namely land, labour, capital and entrepreneurship.
Non-economic activities are those activities which are not concerned with the creation of money
or wealth.
Important Terms:
• Consumer: is one who avails or consumes goods and services for the satisfaction of his wants.
• Producer: is one who produces goods and services for the generation of income.
• Service holder: is a person who works for some other person and gets paid in return in the form
of wages or salary. For example: a teacher employed in a school.
• Service Provider: is a person who provides some kind of service to the other for a payment. For
example: Lawyer, Doctor etc.
Meaning of Statistics: Statistics can be defined in two ways:
A. Statistics in Singular Sense (methods of statistical enquiry)
In the singular sense, statistics refers to the collection, organization, presentation, analysis and
interpretation of numerical data.

i. Collection of data : It is the first step in a statistical enquiry. The technique of collection of data
depends on the purpose of study. Data can be collected using primary or secondary data
collection methods.
ii. Organization of data: After collection of raw data, the data is organized or classified in a proper
manner on the basis of construction such as discrete, individual or continuous series or on the
basis of characteristics like time series.
iii. Presentation of data: Data, once organized, is presented in some suitable manner such as
tabular, graphical, diagrammatic or textual form.
iv. Analysis of data: Analysis is done with the help of mathematical techniques such as measures of
central tendency, dispersion, correlation etc.
v. Interpretation of data: It is the last step in statistical methodology. It involves interpretation of
the final statistical results from analysis and drawing conclusions from the enquiry.

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 B. Statistics in the Plural Sense (features of statistical data)
In the plural sense, statistics refers to aggregates of facts affected to a marked extent by multiplicity
of causes, numerically expressed, collected in a systematic manner for a pre-determined purpose,
estimated according to reasonable standards of accuracy and placed in relation to each other.
i. Aggregate of facts: Data to be called statistics must consist of aggregate of certain facts. A
single and isolated fact or figure like, ‘Ram is 15 years old.’ is not statistics. For a data to be
counted as statistics it must be in the form of a set or aggregate of certain facts such as a series
relating to ages of 30 students in a class.

ii. Affected by multiplicity of causes: Statistical data is affected to a marked extent by a

multiplicity of causes. There are a variety of forces or factors operating on the facts and figures
in an aggregate. The influence of any particular factor cannot be isolated easily.
For example: Statistics of production of a crop like rice is affected by extent of rainfall, fertilizer,
seeds etc. It is not possible to study the effect of each of these factors separately on the
production of rice.
iii. Numerically expressed: Any fact to be called statistics has to be expressed numerically or
quantitatively. Qualitative attributes such as honesty, truth, loyalty etc. cannot be called
statistics unless assigned a numerical value as a quantitative measure of assessment.
For e.g: ‘Ram is shorter than Shyam’ cannot be called statistics but if the same is expressed
quantitatively in numbers like ‘Ram is 155 cm, Shyam is 160 cm and Anusha is 153 cm tall’, we
can call it statistics.
iv. Collected with a reasonable standard of accuracy: The standard of estimation and of accuracy
differs from enquiry to enquiry or from purpose to purpose. There cannot be one standard of
uniformity for all types of enquiries and for all purposes. The process of generalization can be
achieved only with a reasonable standard of accuracy.
For example: A single student cannot be ignored when we say that there were 50 students
present in a class. But while reporting the number of people in a rally, the reporters merely find
an estimate of the number of people.
v. Collected for a pre-determined purpose: Statistics should be collected for a pre-determined
goal or objective in mind. Without any objective, data collected will be useless. Data collected
without complete awareness of the purpose will be confusing and cannot be used for deriving
valid conclusions. Thus, the purpose of collecting data must be decided in advance.

vi. Collected in a systematic manner: For reliability or accuracy of data, the figures must be
collected in a very systematic manner. Any rough and haphazard method of collection will not
be desirable for that may lead to wrong conclusions and the reliability of such data could
deteriorate.

vii. Statistics should be placed in relation to each other: Collection of data is done for purpose of
comparison of data. If the figures collected are not comparable, then they lose a large part of
their significance. Also, data must be homogenous to make meaningful comparisons.
Functions of Statistics
i. To simplify complex facts: Statistical methods try to present huge complex numerical data into
simple and understandable form. For example: Statistical techniques like mean, median,
correlation etc. help condense huge data into a simple and easily understandable form.
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ii. To present facts in a definite form: Quantitative facts are easier to believe in comparison to
qualitative facts. Statistics summarizes the generalized facts and presents them in a definite
form. For example: Statement like ‘the annual rate of inflation is 6%‘ is more convincing and
explanatory than a general statement like ‘Prices are rising’.
iii. To make comparisons: Comparison between different sets of observation is an important
function of statistics. Various statistical methods are used to compare data like averages,
percentages, ratios etc.
iv. To facilitate planning and policy formulation: On the basis of numerical data and their analysis,
planners and businessmen can plan future activities and shape their policies.
v. To help in forecasting: Statistical tools like time series analysis and ‘what if’ analysis help in
making projections for future. This helps businessmen make contingency plans for their future
to reduce uncertainties arising out of the business cycles.
vi. Formulating and testing hypothesis: Statistical methods can be extremely useful in formulating
policies and testing hypothesis such as whether a rise in railway fares will reduce the passenger
traffic or not.
Importance of Statistics
➢ In Business
(a) For establishing a business unit : Statistics provides guidelines which may prove to be useful in
making key decisions about size of output, availability of inputs, size of market share etc.
(b) For estimating demand for a product: Statistics helps in estimating present as well as future
demand of the product.
(c) For production planning: Careful production planning helps in minimizing losses on account of
over or under production. It is essential for maintaining a balance between demand and supply.

➢ In Economic Planning/Government
(a) Using statistics, 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.
(b) Statistical analysis of data regarding an economy may reveal certain crucial areas such as
increasing rate of inflation which may need immediate attention.
(c) Index numbers, time series analysis are extensively used for minimum wage legislations and
other policy formulations.

➢ In Economics
(a) Formulation of economic laws: The laws of economics such as ‘Law of Demand’ and ‘Elasticity
of Demand’ have been developed using generalizations of statistical data and principles.
(b) Helps in establishing mathematical relations: Statistical methods can be used to determine
relations between different economic variables like price of a commodity and the quantity
demanded of a commodity.
(c) Study various market structures: Statistical comparison of prices, costs, profits of firms can give
an insight into the features of various market types like monopoly, oligopoly, perfect
competition etc.
Limitations of Statistics
i. Statistics does not study qualitative phenomena: It can only be applied to those problems
which can be stated and expressed quantitatively. Qualitative characteristics such as honesty,
poverty, welfare, beauty etc. cannot be directly measured quantitatively.
ii. Statistics does not deal with individual facts: It deals only with aggregate of facts and gives no
importance to individual items. For example: Marks of one student does not constitute statistics
but the average marks of a class of students have statistical relevance.
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iii. Statistics can be misused: Statistics can be misused by wrongly motivated persons as data can
be manipulated to draw any type of conclusions. For example: Governments often manipulate
poverty figures to show lesser number of people below the poverty line.
iv. Statistical results are only true on an average: Unlike other natural sciences whose results are
universally true, statistical laws are not always as accurate. Statistical estimates are only true on
an average and not on an individual basis.
v. Statistical laws are not exact: Since statistical laws are based on probability, the inferences
derived are often approximations and not exact like inferences based on scientific laws.
Distrust of Statistics
It refers to the lack of confidence in statistical methods and statements
Causes: Due to improper use of statistical tools by irresponsible persons having incomplete
knowledge of statistical methods, use of unrealistic assumptions, deliberate misuse of statistics and
ignoring limitations of statistics.
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 subjected to manipulations for one’s own
selfish motives. Statistical data and methods are also 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.
A classic example exhibiting this concept was that of a family of four persons (husband, wife and
two children) who once 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. This
example proves that common sense must supersede statistical methods.

Summary
• Our wants are unlimited but the resources used in the production of goods that satisfy our wants
are limited or scarce and have alternative uses. Scarcity is the root cause of all economic
problems.
• Purchase of goods by consumers to satisfy their various needs is Consumption.
• Manufacture of goods by producers for the market or generation of income is Production.
• Division of the national income into wages, profit, rent and interest is Distribution.

Reference –
Unit 1: Introduction - Statistics for Economics Class XI by Sandeep Garg

Please click on the following links for videos on this chapter.

1. Introduction :
www.youtube.com/watch?v=Gtes5t3dfH4&list=PLWPirh4EWFpG0bSU53w0wTCzBylkeUlEO
2. Meaning of Statistics : www.youtube.com/watch?v=YGObRCEZiC8
3. Functions & Scope of Statistics : www.youtube.com/watch?v=jtI-7wsuYYY
4. Importance and Limitations of Statistics :
www.youtube.com/watch?v=j4WALevrfg4&list=PLWPirh4EWFpG0bSU53w0wTCzBylkeUlEO&index=6

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 Statistics for Economics

Production
It refers to all activities which are
undertaken to produce goods and
services for the market or
generation of income.

Distribution
Consumption It is that economic activity
which studies how national
Economic
It is an economic activity income is distributed among
that deals with the use of Activities the factors of production
goods and services for (into wages, profit, rent and
the satisfaction of human interest).
wants.

Statistics

Statistics in singular sense Statistics in plural sense

(methods of statistical analysis) (features of statistical data)

• Collection of data • Aggregate of facts

• Organisation of data • Numerically expressed
• Presentation of data • Affected by multiplicity of causes
• Analysis of data • Collected for a pre-determined purpose
• Interpretation of data using statistical • Collected systematically
tools. • Collected with a reasonable amount of
accuracy.
• Placed in relation to each other.

Functions of Statistics

• To simplify complex facts. Limitations of Statistics

• To present facts in a definite form.
• Statistics does not study qualitative
• To make comparisons.
phenomena.
• To facilitate planning and policy
• Statistics does not deal with
formulation.
individual facts.
• To help in forecasting.
• Statistics can be misused.
• Formulating and testing hypothesis.
• Statistical results are only true on an
average.
• Statistical laws are not exact.

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