Lecture 1:

Scope of Statistical
Methods for Economic
Analysis
ECN 2331
Statistics: Theory and Techniques for Economics
Grayson Koyi
Economics Department, University of Zambia
grayson.koyi@unza.zm

Structure
Nature

of Statistics

Statistics
Types
Data

and Economic Analysis

of Data

Sources

(sigma) operation home work

Nature of Statistics

Statistics refers to the collection, presentation, analysis,

and utilization of numerical data to make inferences and
reach decisions in the face of uncertainty in economics,
business and other social and physical sciences.

Statistics is subdivided into descriptive and inferential.

Descriptive statistics is concerned with summarizing and

describing a body of data.

Inferential statistics is the process of reaching generalizations

about the whole (called the population) by examining a portion
(called the sample).

In order for this to be valid, the sample must be representative of

the population and the probability of error also must be specified.
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Nature of Statistics

Descriptive statistics is discussed in detail in Lecture 2.

This is followed by (the more crucial) statistical inference

starting in lecture 3.

Lecture 3 deals with probability and probability distribution

Lecture 4 deals with estimation methods, and lecture 5 with

hypothesis testing

The course wraps up with an introduction to simple linear

regression in lecture 6

Thus, this course deals with the statistics required for

economic/econometric analysis

The aim is to enable students understand and appreciate the relevance

and importance of basic statistical techniques for economic analysis
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Nature of Statistics

EXAMPLE 1

Suppose that we have data on the incomes of 1000 Zambian families. This
body of data can be summarized by finding the average family income and
the spread of these family incomes above and below the average.

The data can also be described by constructing a table, chart, or graph of

the number or proportion of families in each in each income class.

This is descriptive statistics.

If these 1000 families are representative of all Zambian families, we can

estimate and test hypotheses about the average family income in Zambia
as a whole.

Since these conclusions are subject to error, we would also have to

indicate the probability of error.

This is statistical inference.

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Statistics and Economic Analysis

Apart

from methods comprising the scope of descriptive and

inference branches of statistics, statistics also consists of
methods dealing with other issues of specific nature

In

economic analysis, statistics is often used in

Regression

and correlation analysis

To determine

how data sets are related

For instance, we may want to examine the nature of the relationship between
sales of a product and the expenditure incurred on its advertisement for a
specified period.

This requires use of appropriate statistical methods in order to quantify the

degree of relationship.
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Statistics and economic analysis

Construction

of index numbers

Situations

occur quite often when we require

averaging (totaling) of data on prices and/or
quantities expressed in different units of
measurements.
For

instance, price of cloth may be quoted per meter

of length and that of maize grain per kilogram of
weight.
Since

ordinary methods may not apply to such

price/quantity data, special techniques are
needed for the purpose of developing index
number.

Statistics and Economic Analysis

Performance
Statistical

evaluation

methods used to evaluate performance

Many

a time, it becomes necessary to examine the past performance of an

economic activity with a view to determine its future behavior.

For example, economic performance, programme performance, firm

performance etc.

These requires compilation and analysis of data overtime made possible

through statistics

Forecasting
Statistical

methods used to obtain the most likely future estimate on any

aspect relating to a business or economic activity

This

serve the necessary basis of production scheduling, and planning

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Types of Data: Qualitative and Quantitative

Statistical

data are the basic raw materials of statistics.

Statistical

data, therefore, refer to those aspects of a problem

situation that can be measured, quantified, counted or classified

In

other words, Data are the facts and figures that are collected,
summarized, analyzed, and interpreted.
The

data collected in a particular study are referred to as the data set.

Any

object, subject, phenomenon, or activity that generates

data through this process is termed a variable
In

other words, a variable is one which shows the degree of variability

when successive measurements are recorded

A variable is a characteristic of interest.

Types of Data: Qualitative and Quantitative

In statistics, data are classified into two broad categories:

qualitative or quantitative.

Quantitative data are those that can be quantified in definite units of

measurements

Qualitative data refer to refer to qualitative characteristics of a subject

or an object

The statistical analysis that is appropriate depends on whether

the data for the variable are qualitative or quantitative.

In general, there are more alternatives for statistical analysis

when the data are quantitative.

Qualitative Data

Qualitative data are labels or names used to identify an

attribute of each element.

Qualitative data use either the nominal or ordinal scale of

measurement.

Qualitative data can be either numeric or nonnumeric.

The statistical analysis for qualitative data are rather

limited.

Quantitative Data

Quantitative data indicate either how many or how much.

Quantitative data that measure how many are discrete.

Quantitative data that measure how much are continuous because

there is no separation between the possible values for the data..

Quantitative data are always numeric.

Ordinary arithmetic operations are meaningful only with

quantitative data.

Data Types: Cross-Sectional and Time Series Data

Cross-sectional data are collected at the same or approximately

the same point in time.

Example: data detailing the number of voters cards issued in January 2011
in each of the constituencies in Zambia

Time series data are collected over several time periods.

Example: data detailing the number of voters cards issued in Zambia, in

each of the constituencies, over the last 36 months

Data Sources: Secondary and primary

Data sources could be seen as of two types: secondary and primary

Secondary data are secondary in the sense that they already exist in some form published
or unpublished in an identifiable secondary source

Primary data, on the other hand are those that do not already exist in any form and thus
have to be collected for the first time from primary sources

By their very nature, these data require fresh and first-time collection covering the whole or a
sample drawn from it.

Class Preparation for next class

The basic statistical methods developed in this course will be

based on summation, denoted by the capital Greek letter ,
called sigma.

represents a statistical process involving summation of a set of

numerical values

Now sigma follows a number of rules:

As preparation for the next class, I want you to revise the rules of
operation as covered in your first year elementary algebra course;

Refer to any standard statistics or algebra text book for which you might have
access to.

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