Economics is the study of how people and society choose to employ scarce resources that could have alternative uses to produce various commodities that satisfy their wants and to distribute them for consumption among various persons and groups in society.
Topics Discussed
Consumer
A consumer is one who consumes goods and services for the satisfaction of his/her wants.
Consumption
Consumption is the process of using up the utility of goods and services for the direct satisfaction of our wants. The utility value of goods means the inherent capacity of goods and services to satisfy human wants.
Producer
A producer is one who produces and/or sells goods and services for the generation of income.
Production
Production is the process of converting raw materials into useful things. Things become useful as they acquire utility value in the process of production.
Saving
It is that part of the income which is not consumed. It is an act of abstinence from consumption.
Investment
It is the expenditure by the producers on the purchase of such assets which helps to generate income.
Economic Activity
Economic activity means that activity which is related to the use of scarce resources for the satisfaction of unlimited human wants.
Economic Problem
It is the problem of choice (or the problem of allocating scarce resources to alternative uses) arising because resources are scarce and have alternative uses.
Three Distinct Components of Economics
1) Consumption
Consumption is an economic activity that is concerned with the use of goods and services for the direct satisfaction of individual and collective wants.
2) Production
Production is the process of converting raw materials into useful things. Things become useful as they acquire utility value in the process of production.
3) Distribution
Distribution of income refers to the distribution of GDP (gross domestic product) among the owners of the factors of production (land, labor, capital, and entrepreneurship).
Statistics
The systematic treatment of quantitative expression is known as Statistics. It can be defined in two ways:
In a Plural Sense
In its plural sense, statistics refers to information in terms of numbers or numerical data, such as population statistics, employment statistics, etc. However, any numerical information is not statistics.
Example: Ayush gets Rs. 500 per month as pocket allowance is not statistics (it is neither an aggregate nor an average) whereas the average pocket allowance of the students of Class 10th is Rs. 500 per month, or there are 100 students in class 11 compared to just 10 in class 12 of your school are statistics.
Features of Statistics in Plural Sense
1) Aggregate of Facts
A single number does not constitute statistics, it is the group of observations. For example: the pocket expense of Shivam during a month is Rs. 100 is not statistics. But the pocket expenses of Shivam, Rajni, Lucky, Ayush, and Pawan during a month are Rs. The statistics are 100, 90, 40, 55, and 84.
2) Numerically Expressed
Qualitative statements are not statistics unless they are supported by numbers. For instance, to say, Ishant Sharma is tall and Virat is short, has no statistical sense.
However, if it is stated that the height of Ishant Sharma is 6 ft. and 4 inches and that of Virat is 5 ft. and 9 inches, then these numerals will be called statistics.
3) Affected by Multiplicity of Causes
Statistics are not affected by any single factor but are generally not isolated facts they are dependent on, or influenced by several phenomena e.g. electricity bills are affected by consumption and rate of electricity.
4) Reasonable Accuracy
A reasonable degree of accuracy must be kept in view while collecting statistical data. This accuracy depends on the purpose of the investigation, its nature, size, and available resources.
5) Pre-determined Purpose
Statistics are collected with some pre-determined objective. Any information collected without any definite purpose will only be a numerical value and not statistics.
6) Collected Systematically
Statistics should be collected systematically. Before collecting them, a plan must be prepared. No conclusion can be drawn from statistics collected haphazardly.
In short, it is concluded that all numerical data cannot be called statistics but all statistics are called numerical data.
Statistics in a Singular Sense
In the singular sense, statistics means the science of statistics or statistical methods. It refers to techniques of methods of collection, classification, presentation, analysis, and interpretation of quantitative data.
Stages of Statistical Study
Studying statistics as a singular noun implies the knowledge of various stages of statistical study. These stages are:
- In the first stage, we collect statistical data
- Second, we organize the data in some systematic order
- Third, we present the data in the form of graphs, diagrams, or tables
- Fourth, we analyze the data in terms of averages or percentages
- Fifth, and finally, we interpret the data to find a certain conclusion
Statistical Tools
These refer to the methods of techniques used for the collection, organization, and presentation of data, as well as for the analysis and interpretation of data.
Stages of Statistical study and the related statistical tools:
| Stages | Statistical Study | Statistical Tools |
| Stage 1 | Collection of data | Census or sample techniques |
| Stage 2 | Organization of data | An array of data and tally bars |
| Stage 3 | Presentation of data | Tables, graphs, and diagrams |
| Stage 4 | Analysis of data | Percentages, averages, correlation, and regression coefficients |
| Stage 5 | Interpretation of data | The magnitude of percentage, averages, and the degree of relationship between different economic variables. |
Organization of Data Class 11 Notes
Nature of Statistics
Statistics is both a science as well as an art. As a science, statistics studies numerical data scientifically or systematically.
As an art, statistics relates quantitative data to real-life problems. By using statistical data, we can analyze and understand real-life problems much better than otherwise.
Thus, the problem of unemployment in India is more meaningfully analyzed when the size of unemployment is supported with quantitative data.
Subject Matter of Statistics
The subject matter of statistics includes two components:
1) Descriptive Statistics
Descriptive statistics refers to those methods which are used for the collection, presentation as well as analysis of data.
These methods relate to such estimations as ‘measurement of dispersion’ (mean deviation, standard deviation, etc.), ‘measurement of central tendencies’ (mean, median, mode), ‘measurement of correlation’, etc.
2) Inferential Statistics
Inferential statistics refers to all such methods by which conclusions are drawn relating to the universe or population based on a given data.
Limitations of Statistics
1) Study of Numerical Facts Only
Statistics studies only such facts that can be expressed in numerical terms. It does not study qualitative phenomena like honesty, friendship, wisdom, health, etc.
2) Study of Aggregates Only
Statistics studies only the aggregates of quantitative facts. It does not study statistical facts relating to any particular unit.
For example: It may be a statistical fact that your class teacher earns Rs. 50,000 per month. Bus, as this fact relates to an individual, is not to be deemed as a subject matter of statistics.
3) Prone to Misuse
Misuse of Statistics is very common. Statistics may be used to support a pre-drawn conclusion even when it is false.
It is usually said, “Statistics are like clay which you can make a god or a devil, as you please.” Misuse of Statistics is indeed its greatest limitation.
4) Can be Used Only by Experts
Statistics can be used only by those persons who have special knowledge of statistical methods.
Those who are ignorant of these methods cannot make sensible use of statistics. In other words, statistical methods are the most dangerous tools in the hands of an inexpert.
5) Homogeneity of Data, an essential requirement
To compare data, statistics must be uniform in quality. Data of diverse qualities and kinds cannot be compared.
For Example, The production of food grain cannot be compared with the production of cloth as both are measured in different units. Comparison is possible only if their value is considered and not the volume.
6) Without reference, results may prove to be wrong
To understand the conclusions precisely, the circumstances and conditions under which conclusions have been drawn must also be studied otherwise they may prove to be wrong.
Importance of Statistics in Economics
1) Quantitative Expression of Economic Problem
Consider any economic problem, be it the problem of unemployment, the problem of price rise, or the problem of shrinking exports. The first task of economists is to understand its magnitude through its quantitative expression.
2) Working Out Cause & Effect Relationship
Economists try to find out the cause-and-effect relationship between different sets of data.
Thus, through their statistical studies, if the economists come to know that it is because of the decline in demand that investment in the economy has tended to shrink, they can suggest the government adopt such measures as would increase the level of demand in the economy.
3) Economic Forecasting
Statistics also helps to predict the future behavior of phenomena such as market situation for the future is predicted based on available statistics of past and present.
Economists might be interested in predicting the changes in one economic factor due to the changes in another factor.
4) Formulation of Policies
Many policies such as import, export, wages, production, etc. are formed based on statistics. Some laws such as Malthus’ theory of population and Engel’s law of family expenditure are based on statistics.
5) Economic Equilibrium
It is a state of balance for the producer or the consumer where the producer finds that his profits are maximum or where the consumer finds that his satisfaction is maximum.
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