Page 3 - Home assignment-correlation analysis.

When the variables under study moves in the opposite direction

i.e. with the increase in one variable the other variable decreases
and vice versa is called negative correlation.

Example: - = where

; − : − .

With the increase in price the quantity demanded of the product
increases and vice versa.

When the variables under study moves in the same direction i.e.

with the increase in one variable the other variable increases and
vice versa it is called positive correlation.

Example: - = where

; − : − .

With the increase in price the quantity supplied of the product
increases and vice versa.

3. Linear and non-linear correlation: -

When the data related to variables plotted on a graph paper gives
rise to a straight line, we call it linear correlation.

Correlation is said to be linear if the ratio of change is constant.

When the amount of output in a factory is doubled by doubling
the number of workers, this is an example of linear correlation.

Y Y

O X
O X
Linear positive correlation
Linear negative correlation
Correlation is said to be nonlinear if the ratio of change is not

constant.