ASSIGNMENT

Module I: Statistics

1. There is ongoing debate about Statistics being an ‘Art’ or a ‘Science’.

Define statistics in both aspects. Which according to you fits the subject
best?
In simple terms Statistics, is a branch of Mathematics which deals with the collection, analysis,
interpretation, and presentation of masses of numerical data. It is also termed as a collection of
quantitative data. Since the subject originated with the collection of data and then, in later years, the
techniques of analysis and interpretation were developed, the word ‘statistics’ has been used in both
the plural and the singular sense. Statistics, in plural sense, means a set of numerical figures or data. In
the singular sense, it represents a method of study and therefore, refers to statistical principles and
methods developed for analysis and interpretation of data.

Statistics as a non-experimental science can be used to study and analyse various problems of social
sciences. It may, however, be pointed out that there may be situations even in natural sciences, where
conducting of an experiment under hundred per cent-controlled conditions is rather impossible.
Statistics, under such conditions, finds its use in natural sciences, like physics, chemistry, etc.

Statistics as a scientific method can be divided into the following two categories

 Theoretical Statistics:
This section of statistics can be further divided into three categories:
a. Descriptive Statistics: All those methods which are used for the collection, classification,
tabulation, diagrammatic presentation of data and the methods of calculating average,
dispersion, correlation and regression, index numbers, etc., are included in descriptive
statistics.

b. Inductive Statistics: It includes all those methods which are used to make generalizations
about a population on the basis of a sample. The techniques of forecasting are also included in
inductive statistics.
 c. Inferential Statistics: It includes all those methods which are used to test certain hypothesis
regarding characteristics of a population.

 Applied Statistics:
It consists of the application of statistical methods to practical problems. Design of sample surveys,
techniques of quality control, decision-making in business, etc., are included in applied statistics.

We have seen above that statistics is a science. Now we shall examine whether it is an art or not. We
know that science is a body of systematized knowledge. How this knowledge is to be used for solving a
problem is work of an art. In addition to this, art also helps in achieving certain objectives and to identify
merits and demerits of methods that could be used. Since statistics possesses all these characteristics, it
may be reasonable to say that it is also an art.

Thus, we conclude that since statistical methods are systematic and have general applications.
Therefore, statistics is a science. Further since the successful application of these methods depends, to a
considerable degree, on the skill and experience of a statistician, therefore, statistics is an art also.

Personally, I would say that statistics fits best as a science, as it is a systematic process that follows a set
of established procedures and protocols and it uses scientific methods and techniques to collect,
analyze, and interpret data. However, it's also an art as it requires a certain level of creativity and
intuition to know how to collect, organize, and analyze data in a way that is meaningful and useful.
Therefore, it has elements of both science and art.
2. Discuss the scope and significance of Statistics?
Scope of Statistics:
Statistics is used to present the numerical facts in a form that is easily understandable by human mind
and to make comparisons, derive valid conclusions, etc., from these facts.
The following can be described as the main functions of statistics.

1. Present facts in Numerical figures:

First function of statistics is to present a given problem in terms of numerical figures. We know that the
numerical presentation helps in having a better understanding of the nature a of problem. Facts
expressed in words are not very useful because they are often vague and are likely to be understood
differently by different people. For example, the statement that a large proportion of total work force of
India is engaged in agriculture, is vague and uncertain. On the other hand, the statement that 70% of
the total work force is engaged in agriculture is more specific and easier to grasp. Similarly, the
statement that the annual rate of inflation in a country is 10% is more convincing than the statement
that prices are rising.

2. Present complex facts in simplified forms

Generally, a problem to be investigated is represented by a large mass of numerical figures which are
very difficult to understand and remember. Using various statistical methods, this large mass of data can
be presented in a simplified form. This simplification is achieved by the summarisation of data so that
broad features of the given problem are brought into focus. Various statistical techniques such as
presentation of data in the form of diagrams, graphs, frequency distributions and calculation of average,
dispersion, correlation, etc., make the given data intelligible and easily understandable.

3. Studies the relationship between two or more phenomena

Statistics can be used to investigate whether two or more phenomena are related. For example, the
relationship between income and consumption, demand, and supply, etc., can be studied by measuring
correlation between relevant variables.

4. Provides techniques for the comparison of phenomena

Many a times, the purpose of undertaking a statistical analysis is to compare various phenomena by
computing one or more measures like mean, variance, ratios, percentages, and various types of
coefficients.For example, when we compute the consumer price index for a particular group of
workers,then our aim could be to compare this index with that of previous year or to compare it with
the consumer price index of a similar group of workers of some other city, etc.Similarly, the inequalities
of income in various countries may be computed for the sake of their comparison.

5. Enlarges Individual Experiences

An important function of statistics is that it enlarges human experience in the solution of various
problems. In the words of A.L. Bowley, “the proper function of statistics, indeed is to enlarge individual
experience.” Statistics is like a master key that is used to solve problems of mankind in every field. It
would not be an exaggeration to say that many fields of knowledge would have remained closed to the
mankind forever but for the efficient and useful techniques and methodology of the science of statistics.

6. Helps in formulation of policies

Statistical analysis of data is the starting point in the formulation of policies in various economic,
business and government activities. For example, using statistical techniques a firm can know the tastes
and preferences of the consumers and decide to make its product accordingly. Similarly, the
Government policies regarding taxation, prices, investments, unemployment, imports, and exports, etc.
are also guided by statistical studies in the relevant areas.

7. Helps in Forecasting
The success of planning by the Government or of a business depends to a large extent upon the
accuracy of their forecasts. Statistics provides a scientific basis for making such forecasts. Various
techniques used for forecasting are time series analysis,regression analysis, etc.

8. Provides techniques for the testing of hypothesis

A hypothesis is a statement about some characteristics of a population (or universe). For example, the
statement that average height of students of a college is 66 inches, is a hypothesis. Here students of the
college constitute the population. It is possible to test the validity of this statement by the use of
statistical techniques.

9. Provides techniques for making decisions under uncertainty

Many a times we face an uncertain situation where any one of the many alternatives may be adopted.
For example,a person may face a situation of rain or no rain and he wants to decide whether to take his
umbrella or not. Similarly, a businessman might face a situation of uncertain investment opportunities in
which he can lose or gain. He may be interested in knowing whether to undertake a particular
investment or not. The answer to such problems are provided by the statistical techniques of decision-
making under uncertainty.

Importance/Significance of Statistics:
It is perhaps difficult to imagine a field of knowledge which can do without statistics. To begin with, the
State started the use of statistics and now it is being used by almost every branch of knowledge such as
physics, chemistry, biology, sociology, geography, economics, business, etc.

Let us discuss the importance of statistics is the following important areas:

1. Importance to the State: We know that the subject of statistics originated for helping the ancient
rulers in the assessment of their military and economic strength. Gradually its scope was enlarged
to tackle other problems relating to political activities of the State. In modern era, the role of State
has increased, and various governments of the world also take care of the welfare of its people.
Therefore, these governments require much greater information in the form of numerical figures
for the fulfillment of welfare objectives in addition to the efficient running of their administration.

2. Importance in Economics: Statistics is an indispensable tool for a proper understanding of various

economic problems. It also provides important guidelines for the formulation of various economic
policies.Almost every economic problem is capable of being expressed in the form of numerical
figures, e.g., the output of agriculture or of industry, volume of exports and imports,prices of
commodities, income of the people, distribution of land holding, etc. Various famous laws in
economics such as, the law of diminishing marginal utility, the law of diminishing marginal returns,
the theory of revealed preference, etc.,are based on generalizations from observation of economic
behaviour of a large number of individuals. Statistical methods are also useful in estimating a
mathematical relation between various economic variables. For example, the data on prices and
corresponding quantities demanded of a commodity can be used to estimate the mathematical
 form of the demand relationship between two variables. Realizing the importance of statistics in
economics, a separate branch of economics, known as econometrics, has been developed during
the recent years. The techniques of econometrics are based upon the principles of economics,
statistics, and mathematics.

3. Importance in national income accounting: The system of keeping the accounts of income and
expenditure of a country is known as national income accounting. These accounts contain
information on various macro-economic variables like national income, expenditure, production,
savings, investments, volume of exports and imports, etc. The national income accounts of a
country are very useful in having an idea about the broad features of its economy or of a particular
region. The preparation of these accounts require data, regarding various variables, at the macro-
level. Since such information is very difficult if not impossible, to obtain, is often estimated by using
techniques and principles of statistics.

4. Importance in Planning: Planning is indispensable for achieving faster rate of growth through the
best use of a nation’s resources. It also requires a good deal of statistical data on various aspects of
the economy. One of the aims of planning could be to achieve a specified rate of growth of the
economy. Using statistical techniques, it is possible to assess the amounts of various resources
available in the economy and accordingly determine whether the specified rate of growth is
sustainable or not. E.g., a situation of growing unemployment or a situation of rising prices during
past few years. Statistical techniques and principles can also guide the Government in adopting
suitable policy measures to rectify such situations. In addition to this, these techniques can be used
to assess various policies of the Government in the past. Thus, it is rather impossible to think of a
situation where planning and evaluation of various policies can be done without the use of
statistical techniques. In view of this it is sometimes said that “Planning without statistics is a ship
without rudder and compass”. Hence statistics is an important tool for the quantification of various
planning policies.

5. Importance in Business: With the increase in size of business of a firm and with the uncertainties of
business because of cutthroat competition, the need for statistical information and statistical
analysis of various business situations has increased tremendously. Prior to this, when the size of
business used to be smaller without much complexities, a single person, usually owner or manager
of the firm, used to take all decisions regarding its business. For example, he used to decide, from
where the necessary raw materials and other factors of production were to be obtained, how much
of output will be produced, where it will be sold, etc. This type of decision-making was usually
based on experience and expectations of this single man and as such had no scientific basis.

With the current globalization and increasing size of business competition has increased and
uncertainties have increased. Under these circumstances its impossible for a single person to take
decisions. It is precisely this point from where the role of statistics started in business. Now a days no
business, large or small, public, or private, can prosper without the help of statistics. Statistics provides
necessary techniques to a businessman for the formulation of various policies with regard to his
business.

Some of the stages of business where statistical analysis has become necessary are briefly discussed
below:

 Discussions regarding its location and size: Before starting a business, it is necessary to know
 whether it will be worthwhile to undertake this. This involves a detailed analysis of its costs and
benefits which can be done by using techniques and principles of statistics. Furthermore, statistics
can also provide certain guidelines which may prove to be helpful in deciding the possible location
and size of the proposed business.

 Production Planning: After a business is launched, the businessman has to plan its Notes
production so that he is able to meet the demand of its product and incurs minimum losses on
account of over or under production. For this he has to estimate the pattern of demand of the
product by conducting various market surveys. Based upon these surveys, he might also forecast
the demand of the product at various points of time in future.

 Inventory Control: Sometimes, depending upon the fluctuations in demand and supply conditions,
it may not be possible to keep production in pace with demand of the product.There may be a
situation of no demand resulting in over production and consequently the firm might have to
discontinue production for some time. On the other hand, there maybe a sudden rise in the
demand of the product so that the firm is able to meet only a part of the total demand. Under such
situations the firm may decide to have an inventory of the product for the smooth running of its
business. The optimum limits of inventory, i.e., the minimum and maximum amount of stock to be
kept, can be decided by the statistics analysis of the fluctuations in demand and supply of the
product.

 Quality Control: Statistical techniques can also be used to control the quality of the product
manufactured by a firm. This consists of the preparation of control charts by means of the
specification of an average quality. A control chart shows two limits, the lower control limit, and
the upper control limit for variation in the quality of the product. The samples of output, being
produced, are taken at regular intervals and their quality is measured. If the quality falls outside the
control limits, steps are taken to rectify the manufacturing process.

 Accounts writing and auditing: Every business firm keeps accounts of its revenue and expenditure.
All activities of a firm, whether big or small, are reflected by these accounts.Whenever certain
decisions are to be taken or it is desired to assess the performance of the firm or of its particular
section or sections, these accounts are required to be summarized in a statistical way. This may
consist of the calculation of typical measures like average production per unit of labour, average
production per hour, average rate of return on investment, etc. Statistical methods may also be
helpful in generalizing relationships between two or more of such variables Further, while auditing
the accounts of a big business, it may not be possible to examine each and every transaction.
Statistics provides sampling techniques to audit the accounts of a business firm. This can save a lot
of time and money.

 Banks and Insurance Companies: Banks use statistical techniques to take decisions regarding the
average amount of cash needed each day to meet the requirements of day to day transactions.
Furthermore, various policies of investment and sanction of loans are also based on the analysis
provided by statistics.

The business of insurance is based on the studies of life expectancy in various age groups.Depending
upon these studies, mortality tables are constructed and accordingly the rates of premium to be
charged by an insurance company are decided. All this involves the use of statistical principles and
methods.
3. Discuss the various areas Business use Statistics in. Which according to you
is the most important areas, which potentially has the highest use of
statistical data?
Importance/Significance of Statistics:
It is perhaps difficult to imagine a field of knowledge which can do without statistics. To begin with, the
State started the use of statistics and now it is being used by almost every branch of knowledge such as
physics, chemistry, biology, sociology, geography, economics, business, etc.

Let us discuss the importance of statistics is the following important areas:

 Importance to the State: We know that the subject of statistics originated for helping the ancient
rulers in the assessment of their military and economic strength. Gradually its scope was enlarged
to tackle other problems relating to political activities of the State. In modern era, the role of State
has increased, and various governments of the world also take care of the welfare of its people.
Therefore, these governments require much greater information in the form of numerical figures
for the fulfillment of welfare objectives in addition to the efficient running of their administration.

 Importance in Economics: Statistics is an indispensable tool for a proper understanding of various

economic problems. It also provides important guidelines for the formulation of various economic
policies.Almost every economic problem is capable of being expressed in the form of numerical
figures, e.g., the output of agriculture or of industry, volume of exports and imports,prices of
commodities, income of the people, distribution of land holding, etc. Various famous laws in
economics such as, the law of diminishing marginal utility, the law of diminishing marginal returns,
the theory of revealed preference, etc.,are based on generalizations from observation of economic
behaviour of a large number of individuals. Statistical methods are also useful in estimating a
mathematical relation between various economic variables. For example, the data on prices and
corresponding quantities demanded of a commodity can be used to estimate the mathematical
form of the demand relationship between two variables. Realizing the importance of statistics in
economics, a separate branch of economics, known as econometrics, has been developed during
the recent years. The techniques of econometrics are based upon the principles of economics,
statistics, and mathematics.

 Importance in national income accounting: The system of keeping the accounts of income and
expenditure of a country is known as national income accounting. These accounts contain
information on various macro-economic variables like national income, expenditure, production,
savings, investments, volume of exports and imports, etc. The national income accounts of a
country are very useful in having an idea about the broad features of its economy or of a particular
region. The preparation of these accounts require data, regarding various variables, at the macro-
level. Since such information is very difficult if not impossible, to obtain, is often estimated by using
techniques and principles of statistics.
 Importance in Planning: Planning is indispensable for achieving faster rate of growth through the
best use of a nation’s resources. It also requires a good deal of statistical data on various aspects of
the economy. One of the aims of planning could be to achieve a specified rate of growth of the
economy. Using statistical techniques, it is possible to assess the amounts of various resources
available in the economy and accordingly determine whether the specified rate of growth is
sustainable or not. E.g., a situation of growing unemployment or a situation of rising prices during
past few years. Statistical techniques and principles can also guide the Government in adopting
suitable policy measures to rectify such situations. In addition to this, these techniques can be used
to assess various policies of the Government in the past. Thus, it is rather impossible to think of a
situation where planning and evaluation of various policies can be done without the use of
statistical techniques. In view of this it is sometimes said that “Planning without statistics is a ship
without rudder and compass”. Hence statistics is an important tool for the quantification of various
planning policies.

 Importance in Business: With the increase in size of business of a firm and with the uncertainties of
business because of cutthroat competition, the need for statistical information and statistical
analysis of various business situations has increased tremendously. Prior to this, when the size of
business used to be smaller without much complexities, a single person, usually owner or manager
of the firm, used to take all decisions regarding its business. For example, he used to decide, from
where the necessary raw materials and other factors of production were to be obtained, how much
of output will be produced, where it will be sold, etc. This type of decision-making was usually
based on experience and expectations of this single man and as such had no scientific basis.

With the current globalization and increasing size of business competition has increased and
uncertainties have increased. Under these circumstances its impossible for a single person to take
decisions. It is precisely this point from where the role of statistics started in business. Now a days no
business, large or small, public, or private, can prosper without the help of statistics. Statistics provides
necessary techniques to a businessman for the formulation of various policies with regard to his
business.

Some of the stages of business where statistical analysis has become necessary are briefly discussed
below:

 Discussions regarding its location and size: Before starting a business, it is necessary to know
whether it will be worthwhile to undertake this. This involves a detailed analysis of its costs and
benefits which can be done by using techniques and principles of statistics. Furthermore, statistics
can also provide certain guidelines which may prove to be helpful in deciding the possible location
and size of the proposed business.

 Production Planning: After a business is launched, the businessman has to plan its Notes
production so that he is able to meet the demand of its product and incurs minimum losses on
account of over or under production. For this he has to estimate the pattern of demand of the
product by conducting various market surveys. Based upon these surveys, he might also forecast
the demand of the product at various points of time in future.

 Inventory Control: Sometimes, depending upon the fluctuations in demand and supply conditions,
it may not be possible to keep production in pace with demand of the product.There may be a
situation of no demand resulting in over production and consequently the firm might have to
 discontinue production for some time. On the other hand, there maybe a sudden rise in the
demand of the product so that the firm is able to meet only a part of the total demand. Under such
situations the firm may decide to have an inventory of the product for the smooth running of its
business. The optimum limits of inventory, i.e., the minimum and maximum amount of stock to be
kept, can be decided by the statistics analysis of the fluctuations in demand and supply of the
product.

 Quality Control: Statistical techniques can also be used to control the quality of the product
manufactured by a firm. This consists of the preparation of control charts by means of the
specification of an average quality. A control chart shows two limits, the lower control limit, and
the upper control limit for variation in the quality of the product. The samples of output, being
produced, are taken at regular intervals and their quality is measured. If the quality falls outside the
control limits, steps are taken to rectify the manufacturing process.

 Accounts writing and auditing: Every business firm keeps accounts of its revenue and expenditure.
All activities of a firm, whether big or small, are reflected by these accounts.Whenever certain
decisions are to be taken or it is desired to assess the performance of the firm or of its particular
section or sections, these accounts are required to be summarized in a statistical way. This may
consist of the calculation of typical measures like average production per unit of labour, average
production per hour, average rate of return on investment, etc. Statistical methods may also be
helpful in generalizing relationships between two or more of such variables Further, while auditing
the accounts of a big business, it may not be possible to examine each and every transaction.
Statistics provides sampling techniques to audit the accounts of a business firm. This can save a lot
of time and money.

 Banks and Insurance Companies: Banks use statistical techniques to take decisions regarding the
average amount of cash needed each day to meet the requirements of day to day transactions.
Furthermore, various policies of investment and sanction of loans are also based on the analysis
provided by statistics.

The business of insurance is based on the studies of life expectancy in various age groups.Depending
upon these studies, mortality tables are constructed and accordingly the rates of premium to be
charged by an insurance company are decided. All this involves the use of statistical principles and
methods.

According to my personal opinion, a state has a potential to highest use of statistical data:

Importance to the State: We know that the subject of statistics originated for helping the ancient rulers
in the assessment of their military and economic strength. Gradually its scope was enlarged to tackle
other problems relating to political activities of the State. In modern era, the role of State has increased,
and various governments of the world also take care of the welfare of its people. Therefore, these
governments require much greater information in the form of numerical figures for the fulfillment of
welfare objectives in addition to the efficient running of their administration.
4. It is states that ‘Planning without statistics is a ship without rudder and
compass’. Explain this statement stating the main areas of statistics?
It is perhaps difficult to imagine a field of knowledge which can do without statistics. To begin with, the
State started the use of statistics and now it is being used by almost every branch of knowledge such as
physics, chemistry, biology, sociology, geography, economics, business, etc.

Let us discuss the importance of statistics is the following important areas:

a. Importance to the State: We know that the subject of statistics originated for helping the ancient
rulers in the assessment of their military and economic strength. Gradually its scope was enlarged to
tackle other problems relating to political activities of the State. In modern era, the role of State has
increased, and various governments of the world also take care of the welfare of its people. Therefore,
these governments require much greater information in the form of numerical figures for the fulfillment
of welfare objectives in addition to the efficient running of their administration.

b. Importance in Economics: Statistics is an indispensable tool for a proper understanding of various

economic problems. It also provides important guidelines for the formulation of various economic
policies.Almost every economic problem is capable of being expressed in the form of numerical figures,
e.g., the output of agriculture or of industry, volume of exports and imports,prices of commodities,
income of the people, distribution of land holding, etc. Various famous laws in economics such as, the
law of diminishing marginal utility, the law of diminishing marginal returns, the theory of revealed
preference, etc.,are based on generalizations from observation of economic behaviour of a large
number of individuals. Statistical methods are also useful in estimating a mathematical relation between
various economic variables. For example, the data on prices and corresponding quantities demanded of
a commodity can be used to estimate the mathematical form of the demand relationship between two
variables. Realising the importance of statistics in economics, a separate branch of economics, known as
econometrics, has been developed during the recent years. The techniques of econometrics are based
upon the principles of economics, statistics, and mathematics.

c. Importance in national income accounting: The system of keeping the accounts of income and
expenditure of a country is known as national income accounting. These accounts contain information
on various macro-economic variables like national income, expenditure, production, savings,
investments, volume of exports and imports, etc. The national income accounts of a country are very
useful in having an idea about the broad features of its economy or of a particular region. The
preparation of these accounts require data, regarding various variables, at the macro-level. Since such
information is very difficult if not impossible, to obtain, is often estimated by using techniques and
principles of statistics.

d. Importance in Planning: Planning is indispensable for achieving faster rate of growth through the
best use of a nation’s resources. It also requires a good deal of statistical data on various aspects of the
economy. One of the aims of planning could be to achieve a specified rate of growth of the economy.
Using statistical techniques, it is possible to assess the amounts of various resources available in the
economy and accordingly determine whether the specified rate of growth is sustainable or not. E.g., a
situation of growing unemployment or a situation of rising prices during past few years. Statistical
techniques and principles can also guide the Government in adopting suitable policy measures to rectify
such situations. In addition to this, these techniques can be used to assess various policies of the
Government in the past. Thus, it is rather impossible to think of a situation where planning and
evaluation of various policies can be done without the use of statistical techniques. In view of this it is
sometimes said that “Planning without statistics is a ship without rudder and compass”. Hence
statistics is an important tool for the quantification of various planning policies.

e. Importance in Business: With the increase in size of business of a firm and with the uncertainties of
business because of cutthroat competition, the need for statistical information and statistical analysis of
various business situations has increased tremendously. Prior to this, when the size of business used to
be smaller without much complexities, a single person, usually owner or manager of the firm, used to
take all decisions regarding its business. For example, he used to decide, from where the necessary raw
materials and other factors of production were to be obtained, how much of output will be produced,
where it will be sold, etc. This type of decision-making was usually based on experience and
expectations of this single man and as such had no scientific basis.

With the current globalization and increasing size of business competition has increased and
uncertainties have increased. Under these circumstances its impossible for a single person to take
decisions. It is precisely this point from where the role of statistics started in business. Now a days no
business, large or small, public, or private, can prosper without the help of statistics. Statistics provides
necessary techniques to a businessman for the formulation of various policies with regard to his
business.
5. Discuss the limitations of Statistics?
Like every other science, statistics also has its limitations. In order to have maximum advantage from the use
of statistical methods, it is necessary to know their limitations. According to Newshome, “It (statistics) must
be regarded as an instrument of research of great value, but having severe limitations, which are not possible
to overcome and as such they need our careful attention.”

The science of statistics suffers from the following limitations:

1. Deals with Numerical Factors Only:
Broadly there are two types of facts,
(a) Qualitative Facts (b) Quantitative Facts
Quantitative facts are capable of being represented in the form of numerical figures and therefore, are also
known as numerical facts. These facts can be analysed and interpreted with the help of statistical methods.
Qualitative facts, on the other hand, represent only the qualitative characteristics like honesty, intelligence,
colour of eyes, beauty, etc. and statistical methods cannot be used to study these types of characteristics.
Sometimes, however, it is possible to make an indirect study of such characteristics through their conversion
into numerical figures. For example, we may assign a number 0 for a male and 1 for a female, etc.

2. Statistics only deals with groups and not individuals

Statistical studies are undertaken to study the characteristics of a group rather than individuals. These studies
are done to compare the general behaviour of the group at different points of time or the behaviour of
different groups at a particular point of time. For example, the economic performance of a country in a year
is measured by its national income in that year and by comparing the national income of various years.

3. Results are true only on the average

Statistical results give the behaviour of the group on the average and these may not hold for an individual of
that very group. Thus, the statement that average wages of workers of a certain factory is 1,500 p.m. does
not necessarily mean that each worker is getting this wage. In fact, some of the workers may be getting more
while others less than or equal to 1,500. Further, when value of a variable is estimated by using some
explanatory variable, the estimated value represents the value on the average for a particular value of the
explanatory variable. In a similar way, all the laws of statistics are true only on the average.

4. Results are only approximately true

Most of the statistical studies are based on a sample taken from the population. Under certain circumstances
the estimated data are also used. Therefore, conclusions about a population based on such information are
bound to be true only approximately. Further, if more observations are collected with a view to improve the
accuracy of the results, these efforts are often offset by the errors of observation. In the words of Bowley,
“When observations are extended, many sources of inaccuracy are found to be present, and it is very
frequently impossible to remove them completely. Statistical results are, therefore, very general estimates
rather than exact statements.” Thus, whether statistical results are based on sample or census data, are
bound to be true only approximately.

5. Constitute only one set of method to study a problem

A given problem can often be studied in many ways. Statistical methods are used to simplify the mass of data
and obtain quantitative results by its analysis. However, one should not depend entirely on statistical results.
These results must invariably be supplemented by the results of alternative methods of analysing the
problem. It should be kept in mind that statistics is only a means and not an end. According to D. Gregory and
H. Ward, “Statistics cannot run a business or a government. Nor can the study of statistics do more than
provide a few suggestions or offer a few pointers as to firm’s or government’s future behaviour.”

6. Liable to be misused
Statistical data are likely to be misused to draw any type of conclusion. If the attitude of the investigator is
biased towards a particular aspect of the problem, he is likely to collect only such data which give more
importance to that aspect. The conclusions drawn on the basis of such information are bound to be
misleading. Suppose, for example, the attitude of the Government is biased, and it wants to compute a price
index which should show a smaller rise of prices than the actual one. In such a situation, the Government
might use only those price quotations that are obtained from markets having lower prices.

7. Must be used only by experts

Statistics, being a technical subject, is very difficult for a common man to understand. Only the experts of
statistics can use it correctly and derive right conclusions from the analysis. In the words of Yule and Kendall,
“Statistical methods are the most dangerous tools in the hands of inexperts.” Hence, this is the most
important limitation of statistics.