Page 299 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Statistical Methods in Economics

Notes To do this, we divide each of the actual values in the series by the appropriate seasonal index.
Once the seasonal effect has been eliminated, the deseasonalized values that remain in the
series reflect only the trend, cyclical, and irregular components of the time series. With the help
of the deseasonalized values we can project the future.
• A study of the seasonal variations helps in determining the pattern of the change. It can be
known whether the change is stable or gradual or abrupt.
• The seasonal variations aid in formulating policy decisions. These are also useful in planning
future variations. For example, the manufacturer may decide to cut the prices during slack
season and providing incentives in the off-season. They may also incur huge expenditure in
advertising off-seasonal use of the product.
• The last component of a time series is the irregular variation. After eliminating the trend, cyclical,
and seasonal variations from a time series, we have an unpredictable element left in the series.
Irregular variation, generally, occurs over a short interval of time period and follows a random
pattern. For example, a strike in an industrial unit may push down its production and
consequently, the sales. Some other causes for these variations are flood draught, fire, war or
other unforeseeable events.
22.5 Key-Words

1. Conditional odds : The odds of success given some level of another variable.
2. Conditional probability : The probability of one event given the occurrence of some other event.
3. Confidence interval : An interval, with limits at either end, with a specified probability of
including the parameter being estimated.
4. Confidence limits : An interval, with limits at either end, with a specified probability of
including the parameter being estimated.
22.6 Review Questions

1. What is time series ? What is the need to analyse the time series ?
2. Define time series. What are the preliminary adjustments that should be made before analysing
time series ?
3. What are the various components of time series ? Explain.
4. What is secular trends ? Point out the significance of its study.
5. What do you mean by cyclical variation ? What are the methods of measuring such variations.
Answers: Self-Assessment
1. (i) Chronologically
(ii) Secular trend (T), Seasonal variations (S), Cyclical variations (C) and Irregular variations (I)
(iii) T + S + C + I
(iv) Cyclical variations(v)Seasonal variation
22.7 Further Readings

1. Elementary Statistical Methods; SP. Gupta, Sultan Chand & Sons,
New Delhi - 110002.
2. Statistical Methods — An Introductory Text; Jyoti Prasad Medhi, New Age
International Publishers, New Delhi - 110002.
3. Statistics; E. Narayanan Nadar, PHI Learning Private Limied, New Delhi - 110012.
4. Quantitative Methods—Theory and Applications; J.K. Sharma, Macmillan
Publishers India Ltd., New Delhi - 110002.

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