Statistics

Functions Of Statistics – Business Statistics

Main functions of statistics are as follows:

(1) Expression of Facts in Numbers: One of the principal function of statistics is to express facts relating to different phenomena in numbers. Statement is vested with certainty when facts are expressed in numbers. For example, the statement that per capita income of India is increasing is not so precise. But if this statement is expressed in numbers as: India’s per capita income which was 245 in 1950-51 rose to 9000 in 1995-96, then it becomes easy to understand and interpret with certainty.

(2) Simple Presentation: Another function of statistics is to present complex data in a simple form, so that it becomes easy to comprehend. Statistics renders complex data very simple by expressing it in terms of aggregate, average, percentage, graphs and diagrams. For example, data concerning changes in prices of main commodities between 1951 and 1995 may be so voluminous and cumbersome that it would be difficult to understand them or to draw any conclusion about them. But when presented in the form of index numbers these become simple to understand.

(3) Enlarges Individual Knowledge and Experience: In the words of Bowley, “The principal function of statistics is that it enlarges individual’s knowledge and expertise”. Like other sciences, statistics enlarges an individual’s knowledge, experience and power of reasoning. One can understand clearly and precisely such concepts as national income, population, agricultural production, industrial production, and the like.

(4) It Compares Facts: Another function of statistics is to compare the data relating to facts example, if it is stated that Data have no meaning unless these are compared and inter-related. For the per capita consumption of sugar in India is 8 kg per annum, then some people may conclude that  it is very low rate of consumption while the others may conclude that it is very high. But when it is compared with the consumption of sugar in other countries, say America where it is 38 kgs and Russia where it is 46 kgs, then one can draw a more meaningful conclusion.

(5) It Facilitates Policy Formulation: To facilitate formulation of policy is another function of statistics. Precise nature of each problem can be ascertained from the analysis and interpretation of data. As a result of it, some policy may be formulated. For example, it was with the help of data that Engel formulated a law concerning family budget. Monetary and Fiscal policies of country are formulated on the basis of relevant data. 

(6) It Helps other Other Sciences in Testing their Laws: Statistics also helps in testing the laws of other sciences. Many laws of economics, namely, law of demand, law employment have been verified of supply, Keynes’ theory of with the help of statistics. On the contrary, classical theory of employment, quantity theory of money, etc. were not amenable to statistical verification and so were subjected to criticism.

(7) It Establishes Relationship between Facts: Statistics also establishes relationship between two or more than two facts. Tools of correlation of statistics tell if two facts have any relation between them or not and what kind of relation it has?

(8) It Helps in Forecasting: Statistics helps in forecasting changes in future with regard to a problem. For example, forecast can be made with regard to changes, in future, in food production, supply of power, growth of population, etc. as a result of five year plans in India, with the help of statistics. Extrapolation technique of statistics helps in making forecast on the basis of present facts.

(9) It Enables Realisation of Magnitude: Statistics enables realisation of magnitude of a problem. For example, from the statement that India’s population has been increasing rapidly, one cannot fully realize the gravity of the situation. But, if it is stated numerically that population of India increases at the rate of 1.30 crore annually which is equal to the entire population of Australia, the magnitude of the population problem can be realized properly and easily.

(10) Presentation of Data in Condensed Form: Primary data are very much complex and haphazard. Such complex data make it impossible to draw any conclusion. Thus, it becomes imperative to present them in a concise form so that conclusions could be drawn. Statistics present complex data into a condensed form.

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