Introduction to Economics and Statistics

What economics studies (consumption, production and distribution under scarcity) and how statistics helps, with quantitative and qualitative data.

Key ideas

Scarcity is the root of every economic problem: wants are unlimited, but resources are limited and have alternative uses, so we must choose.
Economics is traditionally studied as consumption, production and distribution.
Consumers buy goods to satisfy wants; producers make goods or provide services; national income is distributed as wages, profits and interest.
Economic activities are done for a monetary gain; cooking for one’s own family is a non-economic activity.
Statistics collects, presents, analyses and interprets numerical data; it makes facts precise, condenses mass data, finds relationships and helps in policies.
Quantitative data are measured in numbers (prices, incomes); qualitative data are attributes such as gender or skill.
An average sums up many figures in one, but it can hide how unequally income is shared.

Remember

Average (mean)	total ÷ number of items
Shares of income	part = per cent × total ÷ 100; interest = 100% − wages % − profits %
Choice with a budget	money left = money − cost of what is bought; how many more = money left ÷ price (whole units only)
Quantitative	prices, incomes, marks, rainfall, ages
Qualitative	gender, skill level, health, honesty

Watch out

Rounding up when counting what can be bought: only whole items that are fully paid for count.
Calling an attribute such as skill “quantitative” because it can be graded.
Taking the average as typical when one value is far bigger than the rest.

Worked example

A farmer has 5 acres. Wheat would yield 16 quintals an acre at ₹2,700 a quintal; cotton 13 quintals an acre at ₹7,100 a quintal. (a) What would each crop earn? (b) Which crop earns more? (c) Why must the farmer choose?

Working: 5 × 16 × 2,700; 5 × 13 × 7,100

Answer: (a) wheat ₹216,000, cotton ₹461,500 (b) cotton (c) The same land has alternative uses but is limited, so growing one crop means giving up the other.