Concept of Economics and Significance of Statistics in Economics

Practice flashcards covering definitions of economics, components of economic activity, factors of production rewards, stages of statistical study, and the characteristics and limitations of statistics.

Economics (Alfred Marshall)

Defined as “the study of mankind/man‟s action in the ordinary business of life” involving choices and decision making with limited resources.

Economics (Robbins)

Defined as “a science that studies human behavior as a relationship between ends and scarce means which have alternate uses.”

Consumption

The process where a consumer/buyer uses different goods and services to satisfy unlimited wants using scarce resources to maximize satisfaction.

Consumption function equation

$C=f(Y)$ where $C$ represents the Consumer and $Y$ represents Income.

Production

The process of conversion of raw materials into useful goods by allocating inputs to minimize costs and maximize profits.

Production function equation

$P=f(L,N,E,K)$ where $P=$ Production; $L=$ Labour; $N=$ Land; $E=$ Entrepreneur; $K=$ Capital.

Central Problems of an economy

The three basic questions: What to produce? How to Produce? For whom to produce?

Distribution

The study of economic principles regarding how income generated in the production process is distributed amongst the factors of production.

Rent

The income earned by the factor of production: Land.

Wages

The income earned by the factor of production: Labour.

Interest

The income earned by the factor of production: Capital.

Profits

The income earned by the factor of production: Entrepreneur.

Statistics

Quantitative information or quantification of facts and findings, as well as the methods relating to collection, classification, presentation, analysis, and interpretation of data.

Statistics (Plural sense)

An aggregate or collection of numerical/quantitative expressions of facts placed in relation to each other.

Statistics (Singular sense)

The science of the collection, presentation, analysis, and interpretation of numerical data.

Aggregate of facts

A characteristic of statistics (plural sense) where a single/isolated number is not statistics because no conclusion can be drawn from it.

Primary data

Data originated by the investigator for a specific purpose which can be time-consuming and expensive to obtain.

Secondary data

Data that has already been collected and is readily available to users; it is cheaper and less time-consuming.

Organization of data

The second stage of statistical study involving editing, classification, and tabulation of data into rows and columns.

Presentation of data

The third stage of statistical study where tabulated data is shown in graphs, pie charts, etc., to facilitate analysis.

Analysis of data

The fourth stage where the outcome of the investigation is determined using tools like percentages, averages, correlation, and regression.

Interpretation of data

The final stage requiring skill and experience to draw conclusions and avoid flawed decision-making.

Census or Sample technique

Statistical tools specifically used for the first stage: Collection of Data.

Array of Data and Tally Bars

Statistical tools specifically used for the second stage: Organization of Data.

Economic forecasting

The use of past and present data records to predict future trends and assess future courses of action.

Economic equilibrium

The level at which the satisfaction of an economic unit is maximized, formed through statistical methods.

Limitation: Study of numerical facts only

A limitation of statistics where qualitative phenomenon are ignored in favor of quantitative data.

Limitation: Homogeneity of data

A requirement in statistics that data must be comparable; the field fails to compare heterogeneous data.

Limitation: Prone to misuse

The ethical risk where statistics can be used to make data that is not true appear true.