How is correlation different from causation? - Vidyadip

Question

How is correlation different from causation?

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Answer

Difference between correlation and causation is given below:

Definition: "Correlation is a statistical measure (expressed as a number) that describes the size and direction of a relationship between two or more variables. A correlation between variables, however, does not automatically mean that the change in one variable is the cause of the change in the values of the other variable". "Causation indicates that one event is the result of the occurrence of the other event; i.e. there is a causal relationship between the two events. This is also referred to as cause and effect."
Mutual dependence: Theoretically, the difference between the two types of relationships are easy to identify - an action or occurrence can cause another (e.g. smoking causes an increase in the risk of developing lung cancer), or it can correlate with another (e.g. smoking is correlated with alcoholism, but it does not cause alcoholism). In practice, however, it remains difficult to clearly establish cause and effect, compared with establishing correlation.
Pure Chance: The correlation between the two variables may be due to pure chance or co-incidence. But in causation, it is not coincidental but logical.

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Read the following information carefully which records production possibilities for two goods X and Y for a hypothetical economy and answer the questions 1-6 on the basis of the same:

Combination	Good-X (Units)	Good-Y (Units)
A	0	30
B	1	28
C	2	24
D	3	18
E	4	10
F	5	0

1. On the basis of the data given above, the marginal opportunity cost between points B and C will be _________.
(a) 2
(b) 4
(c) 6
(d) 8

2. On the basis of the data given above, calculate the marginal opportunity cost between points E and F.
(a) 2
(b) 2.5
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(d) 10

3. Identify the shape of PPC for the above data.
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(b) Downward sloping convex PPC
(c) Downward sloping straight line PPC
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4. Identify the correct formula to calculate Marginal Opportunity Cost.
(a) $\frac{\Delta Y \text { (gain of output) }}{\Delta X \text { (loss of output) }}$
(b) $\frac{\Delta Y \text { (loss of output) }}{\Delta X \text { (gain of output) }}$
(c) $\frac{\Delta X \text { (gain of output) }}{\Delta Y (\text { loss of output })}$
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Statement 2: Technological advancement shifts the PPC to the right.
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(a) Both the statements are true
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(a) downward sloping concave
(b) downward sloping convex
(c) downward sloping straight line
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