Q.Distinguish between positive, negative, and zero (no) correlation, giving one real-life example of each.
Positive correlation exists when an increase (or decrease) in one variable is generally accompanied by an increase (or decrease) in the other — both move in the same direction. Example: as a firm's advertisement expenditure rises, its sales also tend to rise.
Negative correlation exists when an increase in one variable is generally accompanied by a decrease in the other, and vice versa — the variables move in opposite directions. Example: as the price of a commodity rises, the quantity demanded of it tends to fall (the ordinary law of demand).
Zero (no) correlation exists when changes in one variable show no consistent tendency to be associated with changes in the other at all — the two variables are, statistically, unrelated in a linear sense. Example: a person's shoe size and the marks they score in a Statistics examination have no meaningful tendency to rise or fall together.
In every case, a scatter diagram of the two variables (see the section above) gives an immediate visual first impression of which of these three patterns, if any, is present, before any numerical coefficient is computed.
Positive correlation — both variables tend to move in the same direction (e.g. advertisement expenditure and sales); Negative correlation — the variables move in opposite directions (e.g. price and quantity demanded); Zero/no correlation — no discernible tendency to move together at all (e.g. a person's shoe size and their examination marks).
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