(a) Calculate the Karl Pearson's coefficient of correlation for the following data and explain.
| Price x | 10 | 12 | 14 | 15 | 19 |
|---|---|---|---|---|---|
| Supply y | 40 | 41 | 48 | 60 | 50 |
OR
(b) Explain the importance of National Income.
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Start your 14-day free trial to unlock the full solution →(a) Using deviations from the means, r = 68 / sqrt(46 × 260.8) ≈ +0.62 — a fairly high positive correlation between price and supply. (b) National income is important because it measures economic performance, allows time and cross-country comparison, guides planning and policy, and indicates living standards.
(a) Karl Pearson's coefficient of correlation
Given data: x (Price) = 10, 12, 14, 15, 19 ; y (Supply) = 40, 41, 48, 60, 50 ; n = 5.
Step 1 — Means:
Mean of x = (10 + 12 + 14 + 15 + 19) / 5 = 70 / 5 = 14.
Mean of y = (40 + 41 + 48 + 60 + 50) / 5 = 239 / 5 = 47.8.
Step 2 — Deviations from the means (dx = x − 14, dy = y − 47.8) and their products:
| x | y | dx | dy | dx·dy | dx² | dy² |
|---|---|---|---|---|---|---|
| 10 | 40 | −4 | −7.8 | 31.2 | 16 | 60.84 |
| 12 | 41 | −2 | −6.8 | 13.6 | 4 | 46.24 |
| 14 | 48 | 0 | 0.2 | 0.0 | 0 | 0.04 |
| 15 | 60 | 1 | 12.2 | 12.2 | 1 | 148.84 |
| 19 | 50 | 5 | 2.2 | 11.0 | 25 | 4.84 |
| Total | 68.0 | 46 | 260.8 |
Step 3 — Apply the formula:
r = Σ(dx·dy) / sqrt( Σdx² × Σdy² )
r = 68 / sqrt( 46 × 260.8 )
r = 68 / sqrt( 11996.8 )
r = 68 / 109.53
r ≈ +0.62.
Interpretation: r ≈ +0.62 is a fairly high positive correlation. As price (x) increases, supply (y) also tends to increase — which agrees with the law of supply.
(b) Importance of National Income
In the Tamil Nadu HSC Economics syllabus, national income estimates are important because:
- Measure of economic performance: National income shows the total output and the overall performance and growth of the economy over a period.
- Basis for comparison: It allows comparison of economic progress over different years and between different countries. …
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