CH= 1 INTRODUCTION. Thus, the word economics was used to mean home management with limited funds available in the most possible economical manner.

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1 Page 1 of 9 CH= 1 INTRODUCTION PART=1 ECONOMIC CONTENTS Meaning of economics o In common, what is economics? o According to economists Wealth Definition- Adam Smith: Welfare Definition- Alfred Marshall: Scarcity Definition- Lionel Robbins: Growth Definition- Paul A Samuelson: Types of economic activities/important terms of economics o Production o Consumption o Investment o Exchange/distribution o Consumer o Producer Types of economics o Micro economics o Macro-economics o Difference between micro and macro economics Economic problem o Meaning of economic problem o Why does the economic arise problem? Meaning of economics:- In common, what is economics? The term economics in English language has its origin from two Greek word; oikos (household) and nomos (to manage), meaning law of households. Thus, the word economics was used to mean home management with limited funds available in the most possible economical manner. According to economists- Economics has been defined by various economists. These definitions may be classified as under:- Wealth Definition- Adam Smith: Adam Smith, the father of modern economics in his book An enquiry into the nature and causes of wealth of nations in Economics is an enquiry into the factors that determine the wealth of a country and its growth. The important features of wealth definition are:- Considers only wealth

2 Page 2 of 9 Only these persons engaged in production of wealth are the subject- matter of economics. Wealth is an end Human beings are subservient to wealth The definition has been criticized on the many ground, like- It laid all emphasis on wealth but ignored man and his welfare. It gave restricted meaning of wealth as it included in wealth only material good like tea, biscuits, bread etc. and excluded non- material good like services of doctors, teachers etc. Welfare Definition- Alfred Marshall: Alfred Marshall in his book principle of economics published in 1890, has defined economics in these terms- Economic is a study of mankind in the ordinary business of life. It examines that part of individual and social action which is most closely connected with attainment and use of material requisites (necessary) of well being The important features of welfare definition are:- It studies human beings. It studies the economic aspect of human life and economics is a social science. It studies human welfare and material requirements for such well- being. Robbins criticized the material well being concept- Human welfare, which cannot be measured by only scale, cannot be accepted as end of economics. All material things do not increase welfare. Scarcity Definition- Lionel Robbins: Lionel Robbins in his book, An essay on nature and significance of economic science, in 1932; Economics is a science which studies human behaviour as a relationship between ends (wants) and scare means which have alternatives. The important features of Robbins definition are:- There are three main components in Robbins definition are: Multiplicity of ends: - ends means human wants. They are unlimited. Scarcity of means:-it means resource is scare in relation to wants. Alternative uses of scarce means: - resources are not scarce but they have alternative uses. This concept was criticized on the following groups:- Robbins has made economics neutral between ends

3 Page 3 of 9 Statics definition. Economics problems can also arises in case of abundance of resource. Human behaviour is not rational always. Growth Definition- Paul A Samuelson: Paul A Samuelson s definition of economics includes dynamic changes. economics is the studies of how people and society end up choosing with or without the use of money to employ scarce productive resources that could have alternative uses, to produce various commodities overtime and distribute them for consumption now or in the future among various persons and groups in society. This definition combines the essential elements of the definitions by Marshall and Robbins. In short, the growth definition of economics is most comprehensive of all the earlier definitions. The important features of growth definition are:- Dynamic because as the time element has been included in it. The scope of economics has been widened by incorporating not only scarce resources but choice making for present and future. Economics is not concerned with the identification of economic problem but it should also suggest ways and means to solve the problems of unemployment, production, inflation etc. Types of economic activities/important terms of economics:- Economic activity includes Production- Production means conversion of inputs into output. Consumption- Consumption means using of goods and services for the satisfaction of our wants. Investment- it is expenditure on the purchase of such assets which help us to generate income. Exchange- it refers to the sale and purchase of goods and services. Consumer: a person who consumes goods and services to satisfy his/her wants. Producer: - a person who produces goods and services to satisfy want of the consumer. Types/ Branches of economics:-

4 Page 4 of 9 1 Meaning of Micro economies- the term micro-economics is derived from the Greek word micros meaning Small. In micro economics we study the economic behavior of an individual firm or industry. we mainly study the following in micro economics. It includes- Consumer behavior Demand of a commodity Supply of a commodity Price of the commodity etc. 2 Meaning of macroeconomics:-the term macro-economics is derived from the Greek word macros meaning Large. Macroeconomics studies economic activities related to economy as a whole It includes:- National income Aggregate demand Aggregate supply Money and banking etc. 3. Difference between micro and macro economics Basis Micro-Economics Macro- Economics Meaning Deals with Tools Central problems Study It is the study of individual economic units It deals with individual income, individual prices and individual output etc. Its main tools are demand and supply of a particular commodity Its Central problem is price determination of commodities or factor of production. It is easy to understand and study It is the study of the economy as a whole and its aggregates It deals with national income, general price level and national output etc. Its main tools are aggregate demand and aggregate supply of the economy as a whole Its central problem is determination of level of income and employment It is complex to understand and study

5 Page 5 of 9 Scope Its scope is limited Its scope is wide Economic Problem:- 1. Meaning - It is problem of choice arising on account the fact that resources are scarce and these have alternative uses What is scarcity- the word scarce is closely associated with the word limited. So, scarcity means resources in a county are limited in relation to its wants. The Problem of choice- choice is the consequence of scarcity.choice emerges when limited resources are to be used for the satisfaction of unlimited wants; 2. Why does an economic problem arise? Following are the main causes for the origin of economic problem in a country. Unlimited choice Limited qesources What to produce? How to Produce? Whom to Produce? Fig Three choice problems of an economy 1. Wants have two basis features- (a) Human wants are unlimited and recurring. (b) Human wants have different priorities. 2. Means also have two features (a) Means are limited (b) Means can be put to alternative uses.

6 Page 6 of 9 PART=2 STATISTICS CONTENTS- INTRODUCTION MEANING o As a plural sense (data) o As a singular sense (method) IMPORTANCE OF STATISTICS LIMITATION OF STATISTICS INTRODUCTION- In our day to day life, we make observations, collecting information, analysing the information and drawing conclusions and retesting these conclusions by further observations and thus, law are made. For ex- whether a common man knows it or not, he uses this method to some extent in day to day decision making. While buying vegetables he looks at different quantities and inquires about prices at various shops and then mentally calculates, or works out, what to buy from which shop. A shopkeeper observes from his daily experience what brands are in demand, and decides to stock these items and brands in larger o small quantities. Then, above examples shows, that we use some quantitative and qualitative information of data. So there are two types of data: qualitative and quantitative data. Quantitative data- (described by the degree of figures or magnitudes) When, information or observations is recorded in numbers or quantity, which is known as quantitative data. For ex- the population of India has increased from crore in 2001 to 121 crore in Qualitative data- (described by the degree of expression) When, information or observations are not recorded in numbers or quantity, which is known qualitative data. For ex- IQ level of different individual or beauty of the individual which cannot be expressed in numerical terms, how great was Jawaharlal Nehru? MEANING- In our daily language the word statistic is used in two distinct senses: singular and plural. In the plural sense, statistics means numerical facts systematically collected as described by oxford dictionary. In the singular sense, statistics means the science of collecting, classifying and using statistics or a statistics fact. Thus, the word statistics refers either to quantitative information or to methods of dealing with quantitative information. STATISTICS AS DATA (Plural Noun)= In its plural sense, statistics refers to information in terms of numbers or numerical data, such population statistics, employment statistics etc. According to bowley statistics are numerical statement of facts in any department of enquiry placed in relation to each other. The chief features of the above definition are: It emphasises the numerical aspect of facts. It extends the application of statistics to any department of inquiry in human or the physical world. It emphasises the analytical aspect of study. Characteristics of statistics as data: Main characteristics of statistics in terms of numerical data are as follows:

7 Page 7 of 9 Aggregate of facts- ex- there are 1000 students in our school, then it has no statistical significance. But if it is stated that there are 300 students in arts faculty, 400 in commerce faculty and 300 in science faculty in our school, it makes sense. Numerically expressed-ex- if I say ram is tall and shyam is short, has no statistical sense. But I said that height of ram is 6 ft and that of shyam is 5 ft, then this numerical value will be called statistics. Affected by multiplicity of causes-for ex 20% rise in price may have been due to several causes, like reduction in supply, increase in demand, rise in wages etc. Reasonable accuracy- high degree of accuracy as observed in accountancy or mathematics is not required in statistics, because first mass of data is involved and secondly, the process of generalisation can be achieved with a reasonable standard of accuracy only. Placed in relation to each other-for ex- if it is stated ram is 40 yesr old, mohan is 5ft tall, sohan has 60 kg of weight, then these numbers will not be called statistics, as they are not mutually related nor subject to comparison. Pre-determined purpose-for ex data on the physical personality will be irrelevant for considering ability of a person for an intellectual work. But surely, it will be relevant for selection into military service. Enumerated or estimated- for example- 1 lakh people attended the rally addressed by the prime minister in jaipur and 2 lakh in delhi. These statistics are based on estimation. Collected in a systematic manner- for ex- data regarding the marks secured by the students of a school without any reference to the class, subject, examination etc.,will lead to no conclusion. In short all numerical data cannot be called statistics but all statistics are called numerical data. STATISTICS AS A METHOD (as a singular noun) statistics, in this context, has been defined as a science which provides tools for analysis and interpretation. According to CROXTON AND COWDEN statistics is the science of collection, organizing, presentation, analysis and interpretation of numerical data. Stages of statistical study and the related statistical tools Stages Statistical study Statistical tools Stage-1 Collection of data Census or sample techniques Stage-2 Organisation of data Array of data and tally bars Stage-3 Presentation of data Table, graphs and diagrams Stage-4 Analysis of data Percentage, average,correlation and regression etc. Stage-5 Interpretation of data Magnitude of percentage,averages and degree of relationship between different economic variables Difference between statistics as data and as a method: Statistics as data Statistics as a method It is quantitative. It is an operational technique. It is often in the raw state. It helps in processing the raw data. As it is, it would not make much sense without application of the tools of analysis. Tools of analysis will be idle without facts available for making use of such tools. IMPORTANCE OF STATISTICS IN ECONOMICS: The following points highlights the significance of statistics in economics-

8 Page 8 of 9 Quantitative expression of economics problems-for ex if it is the problem of unemployment, we makes its quantitative expression stating that 20% of the India s working population is unemployed. Inter-sectoral and inter-temporal comparisons- from inter-sectoral comparisons we mean comparison across different sectors of the economy. For ex -analysis the problem of unemployment, the economist would like to know the magnitudes of unemployment across rural and urban sectors of the economy. Inter- temporal comparison means understanding of change in the magnitude of the problem. For ex- this would mean making a comparison over different plan periods of the rural and urban unemployment. Working out cause and effect relationship-for ex- this enables economist to attempt an effective diagnosis of the problem and accordingly to suggest some effective remedies. Constriction of economics theories or economics models-for ex- the well- known inverse relationship between price of a commodity and its demand is an established statistical relationship, and therefore is a part of economic theory. Economic forecasting the information on the past period is collected and used for projection into the future- Formulation of policies- how does the finance minister decide to increase or decrease taxation as a source of government revenue? Obviously through statistical studies. Economics equilibrium it is a state of balance for the producer or the consumer where the producer finds that his profit is maximum or where the consumer finds that his satisfaction is maximum. Limitations Study of numerical facts only- Statistics cannot be used to study qualitative phenomenon like morality, intelligence, beauty etc. as these cannot be quantified. Study of aggregates only- ex- there are 1000 students in our school, then it has no statistical significance. But if it is stated that there are 300 students in arts faculty, 400 in commerce faculty and 300 in science faculty in our school, it makes sense. Homogeneity of data, an essential requirement- for ex- production of food grains cannot be compared with the production of cloth. It is because cloth is measured in meters and food grains in tonnes. However, it is possible to compare their value instead of the volume. Statistical results are true only on an average:- The conclusions obtained statistically are not universal truths. For ex- if it is said that per capita income in India is rs per annum, it does not mean that the income of each and every Indian is rs per annum. Without reference, results may prove to be wrong for ex- in the business of cloth, profits earned during three years may be rs 1000, rs2000 and rs 3000 respectively. On the other hand, in the paper business profits earned during the same three year may be rs 3000, rs 2000, rs 1000 respectively. Thus, the average profit in both the business comes to rs 2000 per anuum. It may lead to the conclusion that both the businesses have similar economic status, but it may not be true. Can be used only by the expert-for ex- it can, therefore, be said that data in the hands of an unqualified person is like a medicine in the hands of a quack who may abuse it out of ignorance leading to dangerous consequences. Prone to misuse-statistics, being dependent on figures, can be manipulated and therefore can be used only when the authenticity of the figures has been proved beyond doubt.. Statistical methods are no substitute for common sense!

9 Page 9 of 9 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. Does the fault lie with the statistical method of calculating averages or with the misuse of the averages? What causes distrust? Distrust of statistics arises not because there is anything wrong with statistics as a subject matter. It arises because the users of statistics tend to manipulate it to suit or support their pre-drawn conclusion or observations. For ex- a competent doctor can cure a disease by making good use of the medicine but the same medicine in hands of an incompetent doctor becomes a poison. The fault in this case is not of the medicine but of the unqualified doctor. In the same way, statistics is never faulty but the fault lies with the users.