For the following data on a company's monthly advertising expenditure (, ₹'000) and units sold (), state — from the shape a scatter diagram of this data would show — whether the correlation between and appears to be positive, negative, or approximately zero, and verify your visual judgement by computing Karl Pearson's coefficient of correlation.
| Month | 1 | 2 | 3 | 4 | 5 |
|---|---|---|---|---|---|
| Advertising () | 2 | 4 | 6 | 8 | 10 |
| Units sold () | 50 | 55 | 65 | 70 | 85 |
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Start your 14-day free trial to unlock the full solution →Step 1 — Visual judgement (scatter diagram reasoning). Reading down both rows together: every time increases from one month to the next, also increases (2→50, 4→55, 6→65, 8→70, 10→85 — no reversal anywhere). A scatter diagram of these five points would therefore show a cloud of points running consistently from lower-left to upper-right — the classic picture of a strong positive linear relationship, with the points expected to lie fairly close to a single upward-sloping line (since the increases are fairly steady, not erratic).
Step 2 — Verify numerically. Find the means. . .
Step 3 — Tabulate deviations, products and squares.
| 2 | 50 | −4 | −15 | 60 | 16 | 225 |
| 4 | 55 | −2 | −10 | 20 | 4 | 100 |
| 6 | 65 | 0 | 0 | 0 | 0 | 0 |
| 8 | 70 | 2 | 5 | 10 | 4 | 25 |
| 10 | 85 | 4 | 20 | 80 | 16 | 280 |
| Total | 170 | 40 | 630 |
Step 4 — Apply Pearson's formula.
Since a valid correlation coefficient can never exceed in magnitude, this signals an arithmetic slip — re-checking the cross-product column: , , , , ; total , which is correct as tabulated, so the error must be in a squared term. Re-checking : , not as first written (the last term, , not ) — correcting this: .
Step 5 — Recompute with the corrected sum.
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