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Unit 1: Statistics

2. Presents complex facts in a simplified form: Generally a problem to be investigated is Notes
represented by a large mass of numerical figures which are very difficult to understand
and remember. Using various statistical methods, this large mass of data can be presented
in a simplified form. This simplification is achieved by the summarisation of data so that
broad features of the given problem are brought into focus. Various statistical techniques
such as presentation of data in the form of diagrams, graphs, frequency distributions and
calculation of average, dispersion, correlation, etc., make the given data intelligible and
easily understandable.
3. Studies relationship between two or more phenomena: Statistics can be used to investigate
whether two or more phenomena are related. For example, the relationship between
income and consumption, demand and supply, etc., can be studied by measuring correlation
between relevant variables. Furthermore, a given mathematical relation can also be fitted
to the given data by using the technique of regression analysis.

4. Provides techniques for the comparison of phenomena: Many a times, the purpose of
undertaking a statistical analysis is to compare various phenomena by computing one or
more measures like mean, variance, ratios, percentages and various types of coefficients.
For example, when we compute the consumer price index for a particular group of workers,
then our aim could be to compare this index with that of previous year or to compare it
with the consumer price index of a similar group of workers of some other city, etc.
Similarly, the inequalities of income in various countries may be computed for the sake of
their comparison.
5. Enlarges individual experiences: An important function of statistics is that it enlarges
human experience in the solution of various problems. In the words of A.L. Bowley, “the
proper function of statistics, indeed is to enlarge individual experience.” Statistics is like
a master key that is used to solve problems of mankind in every field. It would not be an
exaggeration to say that many fields of knowledge would have remained closed to the
mankind forever but for the efficient and useful techniques and methodology of the
science of statistics.

6. Helps in the formulation of policies: Statistical analysis of data is the starting point in the
formulation of policies in various economic, business and government activities. For
example, using statistical techniques a firm can know the tastes and preferences of the
consumers and decide to make its product accordingly. Similarly, the Government policies
regarding taxation, prices, investments, unemployment, imports and exports, etc. are also
guided by statistical studies in the relevant areas.
7. Helps in forecasting: The success of planning by the Government or of a business depends
to a large extent upon the accuracy of their forecasts. Statistics provides a scientific basis
for making such forecasts. Various techniques used for forecasting are time series analysis,
regression analysis, etc.
8. Provides techniques for testing of hypothesis: A hypothesis is a statement about some
characteristics of a population (or universe). For example, the statement that average
height of students of a college is 66 inches, is a hypothesis. Here students of the college
constitute the population. It is possible to test the validity of this statement by the use of
statistical techniques.
9. Provides techniques for making decisions under uncertainty: Many a times we face an
uncertain situation where any one of the many alternatives may be adopted. For example,
a person may face a situation of rain or no rain and he wants to decide whether to take his
umbrella or not. Similarly, a businessman might face a situation of uncertain investment
opportunities in which he can lose or gain. He may be interested in knowing whether to

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