Meaning and Importance of Statistics in Economic Analysis

Economics deals constantly with data — national income figures, price levels, employment numbers, trade volumes — and simply listing this data on its own tells us very little. Statistics is the branch of knowledge concerned with collecting, organising, summarising, analysing and interpreting numerical data, and it gives economics the tools to turn a mass of raw figures into meaningful conclusions.

Statistical methods let an economist answer questions such as: What is the 'typical' or average income in a region? How widely do incomes vary around that average? Do two variables — say, advertising expenditure and sales — move together, and how strongly? How has the general price level changed over time? These questions recur constantly in real economic analysis, from a government estimating the rise in the cost of living to a firm judging whether higher marketing spending is actually driving revenue.

This chapter introduces the standard statistical toolkit used throughout economics — measures of central tendency and dispersion, correlation and regression, and index numbers — and closes with a brief look at Econometrics, the specialised field that applies these statistical tools together with economic theory and mathematics to test economic relationships against real data.