Functions & Importance of Statistics in Economics
Let’s understand the functions & importance of statistics in economics. But before that, you can revise the introduction to the statistics post once. Then you can read about the functions and importance of statistics in economics. Feel free to join our Facebook group.
1. Quantitative expression of economic problems
In case of any economic problems like unemployment, inflation, etc. The first task of economists is to find the size through its quantity.
For example, 20% of India’s working population is unemployed.
2. Inter-sectoral and Inter-temporal comparisons
Intersectoral means comparison across different sectors of the economy. Thus, economists try to find the size of unemployment across rural and urban sectors of the economy, that is, what percentage of the rural population is unemployed compared to the urban population.
Inter temporal comparison means change in the size of problem over time.
3. Working out cause and effect relationship
Statistics help economists to get an effective diagnosis of the problem and accordingly remedial measures can be undertaken.
For example, the unemployment rate is high in India due to the inefficient education system in India.
4. Construction of Economic Theories or Economic Models
The inverse relationship between the price of a commodity and its demand is an established statistical relationship and it is a part of the economic theory.
5. Economic Forecasting
Statistics helps in economic forecasting or predicting. For example, on studying the behavior of price level over several years, economists can make statistical forecasting about the likely trend of the price level in the near future. This helps in future planning.
6. Formulation of Policies
Statistics helps in formulating policies. For example, In India, Finance Minister decides to increase or decrease taxes as a source of government revenue on the basis of statistical studies. So, the tax rates are fixed according to the paying capacity of the people.
You can check more related post to this topics:
- Real and Nominal GDP
- Gross and net investment
- National Income
- Stock and Flow Concept
- National Income Formulas
- Value-added Method
- Income Method
- Expenditure Method
I hope it was helpful. You can read more about the concept of production function and the terms related to production.
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