NCERT Textbook - Introduction (Statistics for Economics) Commerce Notes | EduRev

 Page 1


told this subject is mainly around
what Alfred Marshall (one of the
founders of modern economics) called
“the study of man in the ordinary
business of life”. Let us understand
what that means.
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 manufacturing
company),or provide services (you may
Introduction
1. WHY ECONOMICS?
You have, perhaps, already had
Economics as a subject for your earlier
classes at school. You might have been
Studying this chapter should
enable you to:
• know what the subject of
economics is about;
• understand how economics is
linked with the study of economic
activities in consumption,
production and distribution;
• understand why knowledge of
statistics can help in describing
consumption, production and
distribution;
• learn about some uses of
statistics in the understanding of
economic activities.
CHAPTER
1
2020-21
Page 2


told this subject is mainly around
what Alfred Marshall (one of the
founders of modern economics) called
“the study of man in the ordinary
business of life”. Let us understand
what that means.
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 manufacturing
company),or provide services (you may
Introduction
1. WHY ECONOMICS?
You have, perhaps, already had
Economics as a subject for your earlier
classes at school. You might have been
Studying this chapter should
enable you to:
• know what the subject of
economics is about;
• understand how economics is
linked with the study of economic
activities in consumption,
production and distribution;
• understand why knowledge of
statistics can help in describing
consumption, production and
distribution;
• learn about some uses of
statistics in the understanding of
economic activities.
CHAPTER
1
2020-21
2 STATISTICS FOR ECONOMICS
In real life we cannot be as lucky as
Aladdin. Though, like him we have
unlimited wants, we do not have a
magic lamp. Take, 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.
This is a basic teaching of Economics.
Activities
• Can you think for yourself of
some other examples where a
person with a given income has
to choose which things and in
what quantities he or she can
buy at the prices that are being
charged (called the current
prices)?
• What will happen if the current
prices go up?
Scarcity is the root of all economic
problems. Had there been no scarcity,
there would have been no economic
problem. And you would not have
studied Economics either. 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. Can you think of some
more instances of scarcity?
The resources which the producers
have are limited and also have
alternative uses. Take the case of food
be a doctor, porter, taxi driver or
transporter of goods) 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 an employee.
When you employ somebody, giving
them a wage, you are an employer.
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.
Activities
• List different activities of the
members of your family. Would
you call them economic
activities? Give reasons.
• Do you consider yourself a
consumer? Why?
We cannot get something for
nothing
If you ever heard the story of Aladdin
and his Magic Lamp, you would agree
that Aladdin was a lucky guy.
Whenever and whatever he wanted, he
just had to rub his magic lamp and a
genie appeared to fulfill his wish. When
he wanted a palace to live in, the genie
instantly made one for him. When he
wanted expensive gifts to bring to the
king when asking for his daughter’s
hand, he got them at the bat of an
eyelid.
2020-21
Page 3


told this subject is mainly around
what Alfred Marshall (one of the
founders of modern economics) called
“the study of man in the ordinary
business of life”. Let us understand
what that means.
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 manufacturing
company),or provide services (you may
Introduction
1. WHY ECONOMICS?
You have, perhaps, already had
Economics as a subject for your earlier
classes at school. You might have been
Studying this chapter should
enable you to:
• know what the subject of
economics is about;
• understand how economics is
linked with the study of economic
activities in consumption,
production and distribution;
• understand why knowledge of
statistics can help in describing
consumption, production and
distribution;
• learn about some uses of
statistics in the understanding of
economic activities.
CHAPTER
1
2020-21
2 STATISTICS FOR ECONOMICS
In real life we cannot be as lucky as
Aladdin. Though, like him we have
unlimited wants, we do not have a
magic lamp. Take, 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.
This is a basic teaching of Economics.
Activities
• Can you think for yourself of
some other examples where a
person with a given income has
to choose which things and in
what quantities he or she can
buy at the prices that are being
charged (called the current
prices)?
• What will happen if the current
prices go up?
Scarcity is the root of all economic
problems. Had there been no scarcity,
there would have been no economic
problem. And you would not have
studied Economics either. 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. Can you think of some
more instances of scarcity?
The resources which the producers
have are limited and also have
alternative uses. Take the case of food
be a doctor, porter, taxi driver or
transporter of goods) 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 an employee.
When you employ somebody, giving
them a wage, you are an employer.
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.
Activities
• List different activities of the
members of your family. Would
you call them economic
activities? Give reasons.
• Do you consider yourself a
consumer? Why?
We cannot get something for
nothing
If you ever heard the story of Aladdin
and his Magic Lamp, you would agree
that Aladdin was a lucky guy.
Whenever and whatever he wanted, he
just had to rub his magic lamp and a
genie appeared to fulfill his wish. When
he wanted a palace to live in, the genie
instantly made one for him. When he
wanted expensive gifts to bring to the
king when asking for his daughter’s
hand, he got them at the bat of an
eyelid.
2020-21
INTRODUCTION 3
that you eat every day. It satisfies your
want of nourishment. Farmers
employed in agriculture raise crops that
produce your food. At any point of
time, the resources in agriculture like
land, labour, water, fertiliser, etc., are
given. All these resources have
alternative uses. The same resources
can be used in the production of non-
food crops such as rubber, cotton, jute
etc. Thus, alternative uses of resources
give rise to the problem of choice
between different commodities that
can be produced by those resources.
Activities
• Identify your wants. How many
of them can you fulfill? How
many of them are unfulfilled?
Why you are unable to fulfill
them?
• What are the different kinds of
scarcity that you face in your
daily life? Identify their causes.
Consumption, Production and
Distribution
If you thought about it, you might
have realised that Economics involves
the study of man engaged in economic
activities of various kinds. For this, you
need to know reliable facts about all
the diverse economic activities like
production, consumption and
distribution. Economics is often
discussed in three parts: consumption,
production and distribution.
We want to know how the consumer
decides, given his income and many
alternative goods to choose from, what
to buy when he knows the prices. This
is the study of Consumption.
We also want to know how the
producer, similarly, chooses what and
how to produce for the market. This is
the study of Production.
Finally, we want to know how the
national income or the total income
arising from what has been produced
in the country (called the Gross
Domestic Product or GDP) is
distributed through wages (and
salaries), profits and interest (We will
leave aside here income from
international trade and investment).
This is the study of Distribution.
Besides these three conventional
divisions of the study of Economics
about which we want to know all the
facts, modern economics has to
include some of the basic problems
facing the country for special studies.
For example, you might want to
know why or to what extent some
households in our society have the
capacity to earn much more than
others. You may want to know how
many people in the country are really
poor, how many are middle-class, how
many are relatively rich and so on. You
2020-21
Page 4


told this subject is mainly around
what Alfred Marshall (one of the
founders of modern economics) called
“the study of man in the ordinary
business of life”. Let us understand
what that means.
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 manufacturing
company),or provide services (you may
Introduction
1. WHY ECONOMICS?
You have, perhaps, already had
Economics as a subject for your earlier
classes at school. You might have been
Studying this chapter should
enable you to:
• know what the subject of
economics is about;
• understand how economics is
linked with the study of economic
activities in consumption,
production and distribution;
• understand why knowledge of
statistics can help in describing
consumption, production and
distribution;
• learn about some uses of
statistics in the understanding of
economic activities.
CHAPTER
1
2020-21
2 STATISTICS FOR ECONOMICS
In real life we cannot be as lucky as
Aladdin. Though, like him we have
unlimited wants, we do not have a
magic lamp. Take, 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.
This is a basic teaching of Economics.
Activities
• Can you think for yourself of
some other examples where a
person with a given income has
to choose which things and in
what quantities he or she can
buy at the prices that are being
charged (called the current
prices)?
• What will happen if the current
prices go up?
Scarcity is the root of all economic
problems. Had there been no scarcity,
there would have been no economic
problem. And you would not have
studied Economics either. 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. Can you think of some
more instances of scarcity?
The resources which the producers
have are limited and also have
alternative uses. Take the case of food
be a doctor, porter, taxi driver or
transporter of goods) 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 an employee.
When you employ somebody, giving
them a wage, you are an employer.
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.
Activities
• List different activities of the
members of your family. Would
you call them economic
activities? Give reasons.
• Do you consider yourself a
consumer? Why?
We cannot get something for
nothing
If you ever heard the story of Aladdin
and his Magic Lamp, you would agree
that Aladdin was a lucky guy.
Whenever and whatever he wanted, he
just had to rub his magic lamp and a
genie appeared to fulfill his wish. When
he wanted a palace to live in, the genie
instantly made one for him. When he
wanted expensive gifts to bring to the
king when asking for his daughter’s
hand, he got them at the bat of an
eyelid.
2020-21
INTRODUCTION 3
that you eat every day. It satisfies your
want of nourishment. Farmers
employed in agriculture raise crops that
produce your food. At any point of
time, the resources in agriculture like
land, labour, water, fertiliser, etc., are
given. All these resources have
alternative uses. The same resources
can be used in the production of non-
food crops such as rubber, cotton, jute
etc. Thus, alternative uses of resources
give rise to the problem of choice
between different commodities that
can be produced by those resources.
Activities
• Identify your wants. How many
of them can you fulfill? How
many of them are unfulfilled?
Why you are unable to fulfill
them?
• What are the different kinds of
scarcity that you face in your
daily life? Identify their causes.
Consumption, Production and
Distribution
If you thought about it, you might
have realised that Economics involves
the study of man engaged in economic
activities of various kinds. For this, you
need to know reliable facts about all
the diverse economic activities like
production, consumption and
distribution. Economics is often
discussed in three parts: consumption,
production and distribution.
We want to know how the consumer
decides, given his income and many
alternative goods to choose from, what
to buy when he knows the prices. This
is the study of Consumption.
We also want to know how the
producer, similarly, chooses what and
how to produce for the market. This is
the study of Production.
Finally, we want to know how the
national income or the total income
arising from what has been produced
in the country (called the Gross
Domestic Product or GDP) is
distributed through wages (and
salaries), profits and interest (We will
leave aside here income from
international trade and investment).
This is the study of Distribution.
Besides these three conventional
divisions of the study of Economics
about which we want to know all the
facts, modern economics has to
include some of the basic problems
facing the country for special studies.
For example, you might want to
know why or to what extent some
households in our society have the
capacity to earn much more than
others. You may want to know how
many people in the country are really
poor, how many are middle-class, how
many are relatively rich and so on. You
2020-21
4 STATISTICS FOR ECONOMICS
may want to know how many are
illiterate, who will not get jobs, requiring
education, how many are highly
educated and will have the best job
opportunities and so on. In other
words, you may want to know more
facts in terms of numbers that would
answer questions about poverty and
disparity in society. If you do not like
the continuance of poverty and gross
disparity and want to do something
about the ills of society you will need
to know the facts about all these things
before you can ask for appropriate
actions by the government. If you know
the facts it may also be possible to plan
your own life better. Similarly, you hear
of — some of you may even have
experienced disasters like Tsunami,
earthquakes, the bird flu — dangers
threatening our country and so on that
affect man’s ‘ordinary business of life’
enormously. Economists can look at
these things provided they know how
to collect and put together the facts
about what these disasters cost
systematically and correctly. You may
perhaps think about it and ask
yourselves whether it is right that
modern economics now includes
learning the basic skills involved in
making useful studies for measuring
poverty, how incomes are distributed,
how earning opportunities are related
to your education, how environmental
disasters affect our lives and so on?
Obviously, if you think along these
lines, you will also appreciate why we
needed Statistics (which is the study of
numbers relating to selected facts in a
systematic form) to be added to all
modern courses of modern economics.
Would you now agree with the
following definition of economics that
many economists use?
“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 and to
distribute them for consumption
among various persons and
groups in society.”
2. STATISTICS IN ECONOMICS
In the previous section you were told
about certain special studies that
concern the basic problems facing a
country. These studies required that we
know more about economic facts. Such
economic facts are also known as
economic 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.
So, do you realise, then, that no
analysis of an economic problem would
2020-21
Page 5


told this subject is mainly around
what Alfred Marshall (one of the
founders of modern economics) called
“the study of man in the ordinary
business of life”. Let us understand
what that means.
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 manufacturing
company),or provide services (you may
Introduction
1. WHY ECONOMICS?
You have, perhaps, already had
Economics as a subject for your earlier
classes at school. You might have been
Studying this chapter should
enable you to:
• know what the subject of
economics is about;
• understand how economics is
linked with the study of economic
activities in consumption,
production and distribution;
• understand why knowledge of
statistics can help in describing
consumption, production and
distribution;
• learn about some uses of
statistics in the understanding of
economic activities.
CHAPTER
1
2020-21
2 STATISTICS FOR ECONOMICS
In real life we cannot be as lucky as
Aladdin. Though, like him we have
unlimited wants, we do not have a
magic lamp. Take, 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.
This is a basic teaching of Economics.
Activities
• Can you think for yourself of
some other examples where a
person with a given income has
to choose which things and in
what quantities he or she can
buy at the prices that are being
charged (called the current
prices)?
• What will happen if the current
prices go up?
Scarcity is the root of all economic
problems. Had there been no scarcity,
there would have been no economic
problem. And you would not have
studied Economics either. 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. Can you think of some
more instances of scarcity?
The resources which the producers
have are limited and also have
alternative uses. Take the case of food
be a doctor, porter, taxi driver or
transporter of goods) 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 an employee.
When you employ somebody, giving
them a wage, you are an employer.
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.
Activities
• List different activities of the
members of your family. Would
you call them economic
activities? Give reasons.
• Do you consider yourself a
consumer? Why?
We cannot get something for
nothing
If you ever heard the story of Aladdin
and his Magic Lamp, you would agree
that Aladdin was a lucky guy.
Whenever and whatever he wanted, he
just had to rub his magic lamp and a
genie appeared to fulfill his wish. When
he wanted a palace to live in, the genie
instantly made one for him. When he
wanted expensive gifts to bring to the
king when asking for his daughter’s
hand, he got them at the bat of an
eyelid.
2020-21
INTRODUCTION 3
that you eat every day. It satisfies your
want of nourishment. Farmers
employed in agriculture raise crops that
produce your food. At any point of
time, the resources in agriculture like
land, labour, water, fertiliser, etc., are
given. All these resources have
alternative uses. The same resources
can be used in the production of non-
food crops such as rubber, cotton, jute
etc. Thus, alternative uses of resources
give rise to the problem of choice
between different commodities that
can be produced by those resources.
Activities
• Identify your wants. How many
of them can you fulfill? How
many of them are unfulfilled?
Why you are unable to fulfill
them?
• What are the different kinds of
scarcity that you face in your
daily life? Identify their causes.
Consumption, Production and
Distribution
If you thought about it, you might
have realised that Economics involves
the study of man engaged in economic
activities of various kinds. For this, you
need to know reliable facts about all
the diverse economic activities like
production, consumption and
distribution. Economics is often
discussed in three parts: consumption,
production and distribution.
We want to know how the consumer
decides, given his income and many
alternative goods to choose from, what
to buy when he knows the prices. This
is the study of Consumption.
We also want to know how the
producer, similarly, chooses what and
how to produce for the market. This is
the study of Production.
Finally, we want to know how the
national income or the total income
arising from what has been produced
in the country (called the Gross
Domestic Product or GDP) is
distributed through wages (and
salaries), profits and interest (We will
leave aside here income from
international trade and investment).
This is the study of Distribution.
Besides these three conventional
divisions of the study of Economics
about which we want to know all the
facts, modern economics has to
include some of the basic problems
facing the country for special studies.
For example, you might want to
know why or to what extent some
households in our society have the
capacity to earn much more than
others. You may want to know how
many people in the country are really
poor, how many are middle-class, how
many are relatively rich and so on. You
2020-21
4 STATISTICS FOR ECONOMICS
may want to know how many are
illiterate, who will not get jobs, requiring
education, how many are highly
educated and will have the best job
opportunities and so on. In other
words, you may want to know more
facts in terms of numbers that would
answer questions about poverty and
disparity in society. If you do not like
the continuance of poverty and gross
disparity and want to do something
about the ills of society you will need
to know the facts about all these things
before you can ask for appropriate
actions by the government. If you know
the facts it may also be possible to plan
your own life better. Similarly, you hear
of — some of you may even have
experienced disasters like Tsunami,
earthquakes, the bird flu — dangers
threatening our country and so on that
affect man’s ‘ordinary business of life’
enormously. Economists can look at
these things provided they know how
to collect and put together the facts
about what these disasters cost
systematically and correctly. You may
perhaps think about it and ask
yourselves whether it is right that
modern economics now includes
learning the basic skills involved in
making useful studies for measuring
poverty, how incomes are distributed,
how earning opportunities are related
to your education, how environmental
disasters affect our lives and so on?
Obviously, if you think along these
lines, you will also appreciate why we
needed Statistics (which is the study of
numbers relating to selected facts in a
systematic form) to be added to all
modern courses of modern economics.
Would you now agree with the
following definition of economics that
many economists use?
“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 and to
distribute them for consumption
among various persons and
groups in society.”
2. STATISTICS IN ECONOMICS
In the previous section you were told
about certain special studies that
concern the basic problems facing a
country. These studies required that we
know more about economic facts. Such
economic facts are also known as
economic 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.
So, do you realise, then, that no
analysis of an economic problem would
2020-21
INTRODUCTION 5
be possible without data on various
factors underlying an economic
problem? And, that, in such a situation,
no policies can be formulated to solve it.
If yes, then you have, to a large extent,
understood the basic relationship
between Economics and Statistics.
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. 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.
The chief characteristic of such
information is that they describe
attributes of a single person or a group
of persons that is important to record
as accurately as possible even though
they cannot be measured in
quantitative terms. Take, for example,
‘gender’ that distinguishes a person as
man/woman or boy/girl. It is often
possible (and useful) to state the
information about an attribute of a
person in terms of degrees (like better/
worse; sick/ healthy/ more healthy;
unskilled/ skilled/ highly skilled, etc.).
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.
You will study in the subsequent
chapters that statistics involves
collection of data. The next step is to
present the data in tabular,
diagrammatic and  graphic forms. The
data, then, are summarised by
calculating various numerical indices,
such as mean, variance, standard
deviation, etc., that represent the broad
characteristics of the collected set of
information. Finally, the data are
analysed and interpreted.
Activities
• Think of two examples of
qualitative and quantitative
data.
• Which of the following would
give you qualitative data;
beauty, intelligence, income
earned, marks in a subject,
ability to sing, learning skills?
4. WHAT STATISTICS DOES?
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. Once the
causes of the problem are identified, it
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