Subject matter of Economic Theory
Principles and laws relating to :
- Public Finance etc.
are the subject matter of economic theory.
Transformation of input into output is called production.
The act of consuming some thing.
Economic behaviour involves the exchange of one scarce resource for another. When people engage in paid work, they exchange their scarce time, effort, and skill for income, and, when people make purchases, they exchange their scarce income for scarce goods and services.
Distribution is the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labour, land, organisation and capital).
What is Economics ?
- Economics is a Social Science.
- It studies the Economic behaviour of Man.
- It studies the relationship between ends and scarce resources, which have alternative uses.
- Adam Smith is considered as the father of Economics.
Why there are economic problems ?
Scarcity is the root cause of all economic problems. Economic problems arise because:
- Human wants are unlimited
- Resources are limited to satisfy these wants
- Resources have alternative applicability
What is Statistics ?
It is a Science and branch of Mathematics. It deals with :
- Collection of Data
Why statistics along with Economics ?
- Economic behaviour of Man cannot be studied in a laboratory by conducting experiments.
- We make use of tools of statistics to formulate economic laws based on hypothesis.
- Tools and techniques of statistics are used to test the hypothesis.
Use of Statistics
- In the field of research.
- In the field of business and industry.
- For economists.
- For administration.
- For financial institutions.
- For planners
Use of Statistics in Economics
- For the systematic and scientific analysis of economic variables.
- For economic and development planning.
- For decision making in economics.
- Framing economic policies.
- For economic forecasting.
- For government intervention in right direction.
Functions of Statistics
- It simplifies complexities.
- It presents the data in a definite form.
- It presents the data in a precise form.
- It helps condensation of data.
- It enables comparison of data.
Distrust of Statistics
- Lack of confidence in Statistical statements and statistical methods.
- Statistics can prove anything.
- Whether statistics is good or bad depend on its use.
Limitations of Statistics
- Statistics Studies Only Quantitative Data.
- It does not study individual cases.
- Statistical results are true only on an average
- It does not reveal the entire story of the problem.
- Its methods can be used only by an Expert.