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Correlation — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsCorrelation6 Marks
Question
Define the term correlation. What purpose does it solve?
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Answer

Correlation is a statistical technique that can show whether and how strongly pairs of variables are related. For example, height and weight are related; taller people tend to be heavier than shorter people. The relationship isn't perfect. People of the same height vary in weight, and you can easily think of two people you know where the shorter one is heavier than the taller one. Nonetheless, the average weight of people 5'5" is less than the average weight of people 5'6", and their average weight is less than that of people 5'7", etc. Correlation can tell you just how much of the variation in peoples' weights is related to their heights.
  1. Correlation is very helpful when we want to study relationship between two or more variables.
  2. Correlation also helps in finding if one variable is dependent on other or not.
  3. When two variables are correlated then the value of one variable can be estimated given the value of other variable using regression equations.
  4. It helps in taking important decisions to a business man, government and sociologists.

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