Business Statistics Module - 1 Introduction-Meaning, Definition, Functions, Objectives and Importance of Statistics

Business Statistics
Module -1
Introduction-Meaning,definition,functions,objectives and importance of statistics-
Introduction
The term statistics seems to have been derived from the Latin word Status or
the word Statista or the German word Statistik or the French word
Statistique.Each word means a Political state.
Meaning
The term statistics is used as a pulral noun as well as a singular noun .In
plural sense statistics means numerical data.
Statistics means a group of related numerical data the techniques and
methods used in the collection,classification,presentation, analysis and
interpretation of data for making appropriate and timely decisions.
Definition
According to A.L.Bowley ,”Statistics are numerical of facts in any
department of enquiry placed in relation to each other”
According to Croxton and Cowden”Statistic is the
collection,presentation,analysis and interpretation of numerical data”
Objectives of statistics/functions of Statistics
Statistics as a discipline is considered indispensable in almost all spheres of

human knowledge. There is hardly any branch of study which does not use
statistics. Scientific, social and economic studies use statistics in one form or
another. These disciplines make-use of observations, facts and figures,
enquiries and experiments etc. using statistics and statistical methods.
Statistics studies almost all aspects in an enquiry. It mainly aims at
simplifying the complexity of information collected in an enquiry. It presents
data in a simplified form as to make them intelligible. It analyses data and
facilitates drawal of conclusions. Now let us briefly discuss some of the
important functions of statistics.
1. Presents facts in. simple form:

Statistics presents facts and figures in a definite form. That makes the
statement logical and convincing than mere description. It condenses the
whole mass of figures into a single figure. This makes the problem intelligible.
2. Reduces the Complexity of data:

Statistics simplifies the complexity of data. The raw data are unintelligible.
We make them simple and intelligible by using different statistical measures.
Some such commonly used measures are graphs, averages, dispersions,
skewness, kurtosis, correlation and regression etc. These measures help in
interpretation and drawing inferences. Therefore, statistics enables to enlarge
the horizon of one’s knowledge.
3. Facilitates comparison:
Comparison between different sets of observation is an important function of
statistics. Comparison is necessary to draw conclusions as Professor
Boddington rightly points out.” the object of statistics is to enable comparison
between past and present results to ascertain the reasons for changes, which
have taken place and the effect of such changes in future. So to determine the
efficiency of any measure comparison is necessary. Statistical devices like
averages, ratios, coefficients etc. are used for the purpose of comparison.
4. Testing hypothesis:
Formulating and testing of hypothesis is an important function of statistics.
This helps in developing new theories. So statistics examines the truth and
helps in innovating new ideas.
5. Formulation of Policies :
Statistics helps in formulating plans and policies in different fields. Statistical
analysis of data forms the beginning of policy formulations. Hence, statistics is
essential for planners, economists, scientists and administrators to prepare
different plans and programmes.
6. Forecasting :
The future is uncertain. Statistics helps in forecasting the trend and
tendencies. Statistical techniques are used for predicting the future values of a
variable. For example a producer forecasts his future production on the basis
of the present demand conditions and his past experiences. Similarly, the
planners can forecast the future population etc. considering the present
population trends.
7. Derives valid inferences :

Statistical methods mainly aim at deriving inferences from an enquiry.
Statistical techniques are often used by scholars planners and scientists to
evaluate different projects. These techniques are also used to draw inferences
regarding population parameters on the basis of sample information.
Importance of Statistics
1. Quantitative expression of economic problems: Statistics is an
essential tool for an economist to understand the problems of an economy
through quantitative data.
2. Inter-sectoral and inter-temporal comparisons.
This quantitative data is further used to make inter-sectoral comparison ,i.e.
across different sectors of the economy and inter-temporal comparisons
,i.e. over different plan periods of the rural and urban unemployment.
3. Cause and effect relationship: Different sets of data are used to find
the cause and effect relationship. This enables policy makers to formulate
policy to solve the problem of an economy.
4. Economic equilibrium: Statistical data helps economists to understand
the behaviour of the producer and consumer in the market.
5. Developing economic theories: This also facilitates economists to
develop theories as how the prices of goods vary in relation to the demand for
the product.
6. Forecasting: Statistical data are useful to forecast the changes in the
factors which influence other factors. This information enables economists to
formulate polices and suggestions to overcome the problem.
7. Formulation of policies: Statistical data is essential for
formulating policies of economic development.
Limitations of statistics
(1) Statistics laws are true on average. Statistics are aggregates of facts, so a
single observation is not a statistic. Statistics deal with groups and
aggregates only
.
(2) Statistical methods are best applicable to quantitative data.
(3) Statistics cannot be applied to heterogeneous data.
(4) If sufficient care is not exercised in collecting, analyzing and interpreting the
data, statistical results might be misleading.
(5) Only a person who has an expert knowledge of statistics can handle
statistical data efficiency.
(6) Some errors are possible in statistical decisions. In particular, inferential
statistics involves certain errors. We do not know whether an error has been
committed or not.
Distrust of Statistics
By distrust of statistics we mean lack of confidence in statistical statements

and statistical methods. In other words, distrust of statistics implies that people
look upon statistics with doubt and suspicion. It is often believed that:
 Statistics can prove anything.

 There are three types of lies—-lies, damn lies and statistics.
The following are main reasons for distrust of statistics:
1. Figures are convincing and, therefore, people are easily led to believe them.
2. They can be manipulated in such a manner as to establish foregone
conclusions.
3. Even if correct figures are used, these may be presented in such a manner
that the reader is misled.

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Business Statistics

Statistics as a discipline is considered indispensable in almost all spheres of

1. Presents facts in. simple form:

2. Reduces the Complexity of data:

7. Derives valid inferences :

(3) Statistics cannot be applied to heterogeneous data.

By distrust of statistics we mean lack of confidence in statistical statements

 Statistics can prove anything.

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