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CORRELATION ANALYSIS:

The Correlation is a statistical device which helps us in


analyzing the co variation of two or more variables.

SIGNIFICANCE:
The study of correlation is of immense use in practical life
because of the following reasons:

 Most of the variables show some kind of relationship. For example


there is relationship between price and supply, income and
expenditure, etc. With the help of correlation analysis we can
measure in one figure the degree of relationship existing between
the variables.
 Once we know that two variables are closely related. We can
estimate the value of one variable given the value of another.
 Correlation analysis contributes to the understanding of economic
behavior, aids in locating the critically important variables on
which others depend, may reveal to the economist the connection
by which disturbances spread and suggest to him the paths through
which stabilizing forces may become effective.

YEAR 2006 2007 2008 2009 2010


X 227.63 273.46 386.61 409.42 437.97
(SALES)
Y 30.77 34.50 48.01 65.59 87.20
(NET
PROFIT)

YEAR X (X- X2 Y (Y-53) Y2 XY


347) X Y
2006 227.63 -119.3 14232.4 30.77 -22.23 494.17 2652.03
2007 273.46 -73.5 5402.2 34.50 -18.5 342.25 1359.75
2008 386.61 39.61 1568.9 48.01 -4.99 24.9 197.65
2009 409.42 62.42 3896.2 65.59 12.29 151.04 791.72
2010 437.97 90.97 8275.5 87.20 34.2 1169.64 3111.17
TOTAL 1735.09 0.2 33375.2 266.07 0.77 2182 8112.32

r = xy
x2 x y2
= 0.98

REGRESSION:

Regression analysis is a branch of statistical theory


that is widely used in almost all the scientific disciplines. In
economist it is the basic technique for measuring or estimating
the relationship among economic variables that constitute the
essence of economic theory and economic life. For example if
we know that two variables, price (x) and demand (y), are
closely related we can find out the most probable value of x for
a given value of y or the most probable value of y for a given
value of x.
YEAR X(SALES) Y(WORKING DX=X- DY=Y- DX2 DY2 DXDY
CAPITAL) 350 100
2006 227.63 71.88 - - 14974.4 790.73 3441.0
122.37 28.12
2007 273.46 87.12 -76.54 - 5858.3 165.8 985.8
12.88
2008 386.61 111.88 36.61 11.88 1340.2 141.1 434.9
2009 409.42 118.00 55.42 18 3071.37 324.00 997.56
2010 437.97 132.93 87.97 32.93 7738.72 1084.3 32896.8
TOTAL 1735.09 521.81 78.91 - 32982.9 2505.33 8756.06
21.73

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