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Make a list of activities that constitute the ordinary business of life. Are these economic activities?

The list of activities that the ordinary business of life are Consumer, Seller, Producer, Service holder and Service provider and all these activities put together will be called gainfully employed. Also these are called economic activities.


‘The Government and policy makers use the statistical data to formulate suitable policies of economic development’. Illustrate with two examples:

The formulation of plans and policies requires the knowledge of future trends (one of the statistical tools).

For example,

An economic planner has to decide in 2005 that how much the economy should produce in 2010. In other words, one must know could be the expected level of consumption in 2010 in order to decide the production plan of the economy for 2010. In this situation, one might make subjective judgement based on the guess about consumption in 2010.


Alternatively, one might use statistical tools to predict consumption in 2010. That could be based on the data of consumption of past years or of recent years obtained by surveys. Thus, statistical methods help formulate appropriate economic policies that solve economic problems.

Further statistics also helps evaluate the impact of such policies in solving the economic problems.


For example, it can be ascertained easily economic planner has to decide in 2005 how much the economy should produce in 2010.


In other words, one must know what could be the expected level of consumption in 2010 in order to decide the production plan of the economy for 2010. In this situation, one might make subjective judgement based on the guess about consumption in 2010.

Alternatively, one might use statistical tools to predict consumption in 2010. That could be based on the data of using statistical techniques whether the policy of family planning is effective in checking the problem of ever-growing population.


You have unlimited wants and limited resources to satisfy them. Explain by giving two examples:

We all know the story called ‘Aladdin and his magic lamp’. But in real life, we cannot be as lucky as Aladdin. Though, like him, we have unlimited wants, we do not have a Magic lamp.

For example,

The pocket money that you get to spend. If you had more of it then you could have purchased almost all the things you wanted. But since your pocket money is limited, you have to choose only those things that you want the most. Scarcity is the root of all economic problems. In our daily life, we face various forms of scarcity. The long queues at railway booking counters, crowded buses and trains, shortage of essential commodities, the rush to get a ticket to watch a new film, etc., are all manifestations of scarcity. We face scarcity because the things that satisfy our wants are limited in availability.


How will you choose the wants to be satisfied?

Economics is the study of how people and society choose to employ scarce resources that could have alternative uses that satisfy their wants and to distribute them.


What are your reasons for studying economics?

To understand how economics is linked with the study of economic activities in consumption, production and distribution. To learn about some uses of statistics in the understanding of economic activities.


Statistical methods are no substitute for common sense. Comment:

There is an interesting story which is told to make fun of statistics. It is said that a family of four persons (husband, wife and two children) 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.

Here, father has done a mistake. Because in the above case, each member of the family should be taller than the depth of the river. So that each member may not drown while crossing the river.In this case, we must use our common sense instead of using statistical methods.


What is mean by statistics?

In our daily language the word Statisticsis used in two distinct senses: singular and plural. In the plural sense, statistics’ means ‘numerical facts systematically collected’ as described by Oxford Dictionary.

Thus, the simple meaning of statistics in plural sense is data. Do you know that the term statistics in singular means the ‘science of collecting, classifying and using statistics’ or a ‘statistical fact’? By data or statistics, we mean both quantitative and qualitative facts that are used in Economics.

Such qualitative information or statistics is often used in Economics and other social sciences and collected and stored systematically like quantitative information (on prices, incomes, taxes paid etc.), whether for a single person or a group of persons. Chapters that statistics involves collection and organisation of data.

The next step is to present the data in tabular, diagrammatic and graphic forms.

The data, then, is summarised by calculating various numerical indices such as mean, variance, standard deviation etc. that represent the broad characteristics of the collected set of information.



How statistics does involve in Economics?

Certain special studies that concern the basic problems facing a country.
These studies required that we know more about economic facts in terms of numbers. Such economic facts are also known as data.
The purpose of collecting data about these economic problems is to understand and explain these problems in terms of the various causes behind them. In other words, we try to analyse them.
For example, when we analyse the hardships of poverty, we try to explain it in terms of the various factors such as unemployment, low productivity of people, backward technology, etc.
But, what purpose does the analysis of poverty serve unless we are able to find ways to mitigate it.
We may, therefore, also try to find those measures that help solve an economic problem.
In Economics, such measures are known as policies.



Why we need Economics?

Consumer, Seller, Producer, Service holder and Service provider are Economic terms. We use these terms in our real life regularly. The functions of these terms are as follows: When you buy goods (you may want to satisfy your own personal needs or those of your family or those of any other person to whom you want to make a gift) you are called a consumer.
  When you sell goods to make a profit for yourself (you may be a shopkeeper), you are called a seller.
  When you produce goods (you may be a farmer or a manufacturer), you are called a producer.
  When you are in a job, working for some other person, and you get paid for it (you may be employed by somebody who pays you wages or a salary), you are called a service holder.
  When you provide some kind of service to others for a payment (you may be a lawyer or a doctor or a banker or a taxi driver or a transporter of goods), you are called a service provider.
  In all these cases you will be called gainfully employed in an economic activity.
  Economic activities are ones that are undertaken for a monetary gain. This is what economists mean by ordinary business of life.



What does statistics do?

Statistics is an indispensable tool for an economist that helps him to understand an economic problem.
Using its various methods, effort is made to find the causes behind it with the help of the qualitative and the quantitative facts of the economic problem.
Once the causes of the problem are identified, it is easier to formulate certain policies to tackle it.
But there is more to Statistics. It enables an economist to present economic facts a precise and definite form that helps in proper comprehension of what is stated. When economic facts are expressed in statistical terms, they become exact. Exact facts are more convincing than vague statements.
Statistics also helps in condensing the mass of data into a few numerical measures (such as mean, variance etc., about which you will learn later). These numerical measures help summarise data.
Quite often, Statistics is used in finding relationships between different economic factors.
An economist may be interested in finding out what happens to the demand for a commodity when its price increases or decreases? Or, would the supply of a commodity be affected by the changes in its own price? Or, would the consumption expenditure increase when the average income increases? Or, what happens to the general price level when the government expenditure increases?
Such questions can only be answered if any relationship exists between the various economic factors that have been stated above.
Whether such relationships exist or not can be easily verified by applying statistical methods to their data.
In some cases the economist might assume certain relationships between them and like to test whether the assumption she/ he made about the relationship is valid or not.
The economist can do this only by using statistical techniques.

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