The study of economics depends heavily on statistical tools and methods. In this article, we will explore the interrelationship between economics and statistics.
Statistics is an indispensable tool for the understanding of various economic problems. It gives a quantitative aspect to qualitative statements. It is only when economic facts are expressed in statistical terms that they become more exact. A statistical statement holds more meaning and is more convincing than a simple statement without numerical facts and figures.
For example, the statistical statement “population increased by 2% during the last decade” is more meaningful than the simple statement “population increased considerably during the last few years”. Economic statements are incomplete if not
backed by appropriate statistical data. Interrelations between various economic factors are studied with the help of statistics.
Relationship between Economics and Statistics
Assessing the performance of an economy: Statistics provides the basis for analyzing the performance of an economy and comparing it with other economies. For example, data on national income for different years can be used to assess the
economic performance of the concerned economy over a period of time. Similarly, variables such as savings, investments, the relative importance of different sectors to national income, and the contribution of each sector to national income can be assessed with the help of statistical data and facts.
Analyzing economic problems: The magnitude of economic problems such as unemployment, poverty, illiteracy, and population can be judged with the help of statistical data. It is only when the gravity of the problems is understood with the help of statistical data that suitable policies can be formulated to control and remove them.
Analyzing the relationship between economic variables: Relationship between two or more economic variables can be assessed with the help of statistical data. Such an assessment is helpful in establishing a cause and effect relationship and, thereby, in taking suitable corrective measures. For example, if with the help of statistical data it is established that a rise in prices aggravates poverty, appropriate measures can be taken to control rising prices.
The base for economic theories and models: No economic theory or model can be constructed without relevant statistical experiments. The various laws and theories of economics such as the law of demand and the law of supply are based on statistical data.
Formulation of policies: Statistics helps the government and the policymakers in formulating various policies for economic development. For example, if the government aims at encouraging the production level, then it formulates a policy based on the average production levels for the past few years. Similarly, policies on poverty and unemployment are based on relevant statistical data.
Facilitates research: Statistical data forms the base for research and studies. Various statistical tools and techniques are employed in research and studies such as analyzing the effect of one variable on another.
Forecasting: Economic forecasting such as price trends and market situations has statistics as the base. This helps in the formulation of future plans and policies.
Relation with the four basic aspects of economics: Statistics is closely related to the four basic aspects of economics namely, consumption, production, distribution, and exchange.
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