1.3. What is Statistics?

At this stage you are probably ready to know more about Statistics. You might very well want to know what the subject ‘Statistics’ is all about. Statistics deals with the collection, analysis, interpretation and presentation of numerical data. It is a branch of mathematics and also used in the disciplines such as accounting, economics, management, physics, finance, psychology and sociology. Here we are concerned with data from the field of Economics.

Statistics is essential for understanding data in various fields including economics. It focuses on how to gather numerical data, analyze and interpret it, and present it in a meaningful way. In economics, statistics helps in understanding trends and patterns based on numerical information.

Think of statistics as a toolbox. Just like a toolbox contains different tools for various tasks - hammers for nails, screwdrivers for screws - statistics provides different methods for gathering and interpreting data, making it easier to understand complex economic phenomena.

Most Economics data are quantitative. For example, a statement in Economics like “the production of rice in India has increased from 39.58 million tonnes in 1974–75 to 106.5 million tonnes in 2013–14, is a quantitative data. In addition to quantitative data, Economics also uses qualitative data.

In economics, data is primarily quantitative, which involves numbers representing amounts, such as the production of crops. However, qualitative data is also important as it describes qualities or characteristics that may not be measured numerically, such as preferences or satisfaction. Understanding both types of data helps give a fuller picture of economic situations.

Imagine you’re planning to buy a new phone. The price (quantitative data) helps you decide if you can afford it, while reviews about its performance (qualitative data) inform you whether it’s a good choice. Both types of data guide your decision.

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 qualitative and quantitative facts of an economic problem.

Statistics assists economists in identifying and understanding economic problems by analyzing numerical data. It helps in determining relationships and patterns, which are essential for diagnosing issues and proposing solutions. This involves collecting data, processing it, and then using it to derive insights.

Think of a doctor diagnosing a patient. The doctor looks at various tests (statistics), examines symptoms (qualitative data), and uses both to understand what the patient might be suffering from. Similarly, economists use statistics to understand economic health.

Statistical methods help formulate appropriate economic policies that solve economic problems. For example, in the present time of rising global oil prices, it might be necessary to decide how much oil India should import in 2025.

Statistics allows economists to forecast future trends based on current and historical data. This predictive power is crucial for planning and can significantly influence economic decisions, such as governmental policy regarding imports or production levels. It provides a scientific basis for expecting what might happen based on evidence.

Consider a farmer who uses weather data to predict the best time to plant crops. Just as the farmer bases his actions on careful observation and data, economists use statistics to anticipate future economic conditions and make informed decisions.

Today, we increasingly use Statistics to analyse serious economic problems such as rising prices, growing population, unemployment, poverty etc., to find measures that can solve such problems. Further, it also helps to evaluate the impact of such policies in solving the economic problems.

Statistics is vital in modern economics for analyzing pressing issues and assessing the effectiveness of policies. By examining economic data, governments and organizations can decide the best course of action to address challenges in society, such as unemployment or poverty. Properly applied statistics not only helps in planning solutions but also in measuring success after implementation.

Think of a city planner using data to decide where to build new schools. By analyzing population growth statistics, the planner can determine areas of need and ensure resources are allocated effectively, improving education access in the community.

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