CHAPTER ONE- OVERVIEWS OF STATISTICS

1.0 INTRODUCTION

DEFINITIONS OF STATISTICS
Statistics has been defined by various authors differently. Some of the definitions are extremely narrow. This
is understandable since statistics has developed over the past several decades and in the earlier days; the role
of statistics was confined to a limited sphere. Let us see some definitions, which are given below.
W.I. King has defined statistics as the method of judging collective, natural or social phenomena from the
results obtained by analysis or enumeration or collection of estimates.
Croxton and Cowden: Statistics or statistical methods may be defined as a collection, presentation, analysis
and interpretation of numerical data.
Lovett: statistics is a science that deals with collection, classification and tabulation of numerical facts as a
basis of the explanation, description and comparison of phenomena.
A definition, which seems to be more comprehensive, is given by Secrist. He defined statistics as:
“aggregate of facts, affected to a marked extent by multiplicity of causes, numerically expressed, enumerated
or estimated according to reasonable standards of accuracy, collected in a systematic manner for a pre-
determined purpose, and placed in relation to each other”.

Statistics is concerned with scientific methods for collecting, organizing, summarizing, presenting and
analyzing data as well as with drawing valid conclusions and making reasonable decision on the basis of
such analysis. In a narrowing sense, the term statistics is used to denote the data themselves or numbers
derived from the data, such as averages. Thus we speak of employment statistics, accidental statistics, etc.
Decision makers make better decisions when they use all available information in an effective and
meaningful way. The primary role of statistics is to provide decision makers with methods for obtaining and
analyzing information to help make these decisions. Statistics is used to answer long-range planning
questions, such as when and where to locate facilities to handle future sales.
It may be emphasized that this definition highlights a few major characteristics of statistics. These are given
below.
1. Statistics are aggregates of facts. This means a single figure is not statistics. For example, national
income of a country for a single year is not statistics but the same for two or more years is.
2. Statistics are affected by a number of factors. For example sale of a product depends on a number of
factors such as its price, quality, competition, the income of consumers, and so on.
3. Statistics must be reasonably accurate, wrong figures if analyzed, will lead to erroneous conclusion.
Hence, it is necessary that conclusion must be based on accurate figures.
4. Statistics must be collected in a systematic manner. If data are collected in a haphazard manner, they
will not be reliable and will lead to misleading conclusions.
5. Finally, statistics should be placed in relation to each other if one collects data unrelated to each
other, and then such data will be confusing and will not lead to any logical conclusions. Data should
be comparable overtime and space.

1.2 CLASSIFICATION OF STATISTICS

Depending on how data can be used the statisticians commonly classify this subject in to two broad
categories: the Descriptive statistics and inferential statistics.

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 Descriptive statistics: As the name suggests descriptive statistics includes any treatment designed to
describe or summarize the given data, bringing out their important features.
It is a method of organizing, summarizing and presenting data in an informative manner with summary
calculations, graphs, charts and tables. Thus statistics do not go beyond this. This means that no attempt is
made to infer anything that pertains to more than the data themselves.
Example: If someone compiles the necessary data and reports that during the fiscal year 2000-2001, there
were 1500 private limited companies in Ethiopia of which 1215 earned profits and the remaining 285
companies sustained losses, his study belongs to the domain of descriptive statistics.
Inferential statistics : is a method of decision, estimation, prediction, or generalization about a
population on the basis of a sample. It is also called inductive statistics. It is a method used to generalize
from sample to a population. Statistical population is the collection of all possible observations of specified
characteristics of interest.
Example: The average income of all families (the population) in the US can be estimated from figures
obtained from a few hundred (the sample) families.

1.3 Applications, Uses and Limitations of Statistics

1.3.1 Applications of Statistics
Statistics is of great use to human in many ways. It is associated almost with all the sciences as well as
social, economic, and political activities. The applications of statistics are so numerous and we discuss some
of them.
a. Statistics and Economics
Statistical data and statistical methods are helpful in proper understanding of the economic problems
and help in solving a variety of economic problems such as wages, prices, analysis of time series, etc.
Statistical methods are also helpful in formulating economic policies and in evaluating their effect.
b. Statistics and Business
Statistical methods are being widely used in business and trade activities like production, financial analysis,
distribution, costing, market research, man power planning, business forecasting, etc. Business executives
rely more on statistical techniques to study the need and desire of the consumers. A successful business man
must make a proper record in order to predict the future course of business and he should be accurate in
statistical and business forecasting.
c. Statistics and Industry
In industry, statistics is widely exploited in Quality Control‟. To find whether the product is confirming
to specifications or not, statistical tools like inspection plans, control charts, etc. are of great use.
d. Statistics and Natural Sciences
Statistical methods are very useful in the study of natural science like Botany, Zoology, Medicine,
Astronomy, etc. For example, in studying the efficacy of a drug in curing a certain diseases, we have to
conduct experiments and collect data about the number of persons who were cured after using the drug. The
success or failure of drug depends on the data. In Botany, if we want to study aplenty life, statistical data
about the fertility of soil, effect of temperature, etc. are needed.
e. Statistics and Physical Sciences
The physical sciences that make use of statistics in fields like Astronomy, Geology, Meteorology, etc.
In Astronomy, the „Principle of Least Squares‟ was used to develop the theory of Gaussian Normal Law of
Error‟ for the study of the movement of stars and planets.
f. Statistics and State

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In olden days, statistics was of great use in framing military and fiscal policies and it supplies
essential information on crimes, population, military strength, etc. Statistics was very useful in
administration. Nowadays, the functions of the state have increased tremendously and besides
maintaining law and order, the welfare of the state is also considered. The state collects statistics on
certain problems and with help of that, suitable policies are framed. All the departments of a government
depend upon statistics for efficient functioning.
1.3.2 Uses of Statistics
The various functions of statistics are as follows:
i. It simplifies the mass of data. With the help of statistical methods, the complex data is
simplified into diagrammatic and graphic representations, averages, etc. For example, in a factory if we
want to analyze the wages of 100 workers, it will be difficult for us to remember each one’s wages. But if
they are categorized according to their wages and sex or if average wage is found, the complexity of the data
is simplified and analysis becomes easier.
ii. It presents the facts in a definite form. Facts that are expressed in numbers are more convincing
than expressed in statements. Statistics helps to present the data or facts in precise and definite form for easy
understanding. For example, “Sales of cars in the year 2003 is likely to be more than that in 2002.” We
quantify the above statement as “Sale of cars is likely to increase from 23 million in 2002 to 43
million in 2003.”
iii. It helps in comparison of data of same kind. For example, the pass percentage of students in
university A in the year 2003 is higher than that in 2002. We can also compare the pass percentage of
students from various universities.
iv. Statistical methods are extremely helpful in formulating and testing hypothesis and to
develop new theories.
v. It helps to predict future trends and to estimate any value of the population from the sample
chosen.
1.3.3 Limitations of Statistics
Statistics is widely used in many fields and is involved in every sphere of human activity.
But there are certain limitations of statistics. They are as follows:
i. It is not suited to the study of qualitative aspects like honesty, intelligence, efficiency, etc. But it
may be possible to study such problems if they can be expressed numerically.
ii. It does not study individuals because individual item taken separately do not form a statistical data. For
example, individual mark of a student, individual figure of production of rice for a particular year, etc.
, does not constitute statistical data.
iii. Statistical tools do not provide the best solution to problems under all circumstances. It is one of
the methods of studying a problem and should be supplemented by some other methods.
iv. Statistical analysis is based on probability and chance and not on certainty. So statistical results are not
universally true and they are true only on average.
v. The most important limitation of statistics is that they are liable to be misused. Statistics is a good tool
to experts but it proves to be dangerous to inexperience people and inexpert. An incomplete information
or use of statistical by inexperienced and untrained person leads to fallacious conclusions. In this
context, to avoid misleading or false conclusions good understanding of the subjected is needed.