CHAPTER -1

INTRODUCTION
ECONOMICS: Economics is a Social science It studies the Economic Behaviour of Man It studies
the relationship between ends and scare means, which have alternative uses. Adam Smith is
considered as the father of Economics. Alfred Marshall is considered as the father of Modern
Economics. Now a days Economics deals with Production, Distribution, Exchange and Consumption.

WHAT IS STATISTICS? Statistics is a Science, which deals with Collection, Classification,

Interpretation and Presentation of data systematically. The word Statistics is used both in Singular
and Plural senses.In Singular sense Statistics means the methods used for collection, Classification,
Interpretation and Presentation of numerical data. In Plural sense Statistics mean numerical data
systematically collected.

FUNCTIONS OF STATISTICS
1.It simplifies complexities.
2.It presents the data in a definite form.
3. It presents the data in a precise form.
4.It helps condensation of data.
5.It enables comparison of data.
6.It helps in testing.
7.It helps in prediction.
8.It helps in formulation of policies.
9. It enlarges human experience.

LIMITATION OF STATISTICS
1.Statistics Studies Only Quantitative Data
2.Statistics does not study individual cases.
3.Statistical results are true only on an average
4.Statistics does not revel the entire story of the problem.
5.Statistical methods can be used only by an Expert.

DISTRUST OF STATISTICS
By distrust we mean
1.Lack of confidence in statistical statements and statistical methods.
2.Statistics can prove anything.
3.Whether statistics is good or bad depend on its use.

USES OF STATISTICS IN ECONOMICS:

1. Statistics is an inevitable tool in the hands of Economists.
2. Formulation of Economic policies.
3. Helps for Economic planning.
4. Complex Economic data1 can be reduced.
QUANTITATIVE AND QUALITATIVE DATA: The data which can be Measurable is
called quantitative data. Eg. Price,Height, Weight, Income etc.
The data which cannot be measurable is called Qualitative data.Eg. Honesty, aptitude, beauty etc.

PREVIOUS QUESTIONS
1) Statistics helps the economics in various ways. Cite three instances for it. (MARCH2018)
2) Statistics is used in Singular and Plural sense. Elucidate. (MARCH 2011)

1 PREPARED BY RAJESH. S K.T.C.T.E.M.H.S.S KADUVAYIL, THIRUVANANTHAPURAM

3) Statistics plays a vital role in decision making. Discuss. (MARCH 2012)
4) Tell your friend in Science Stream, Shy you learn Statistics along with Economics. (MARCH 2013)
5) The Government and policy makers use Statistical data to formulate suitable policies of
Economic development. Illustrate with two examples. (MARCH 2014)
6) Complete the following on the basis of hints given.
Statistics in singular sense: Statistical Methods
Statistics in plural sense: .......................... (MARCH 2015)
7) Explain the use of Statistics. (SEPTEMBER 2015)
2
8) Write any two examples each for Quantitative and Qualitative data.(MARCH 2016)
9) Find the odd one and justify your answer.
a) Honesty, Weight, Personality, Income.
b) Aptitude, Intelligence, Honesty, Salary. (SEPTEMBER2016)

2 PREPARED BY RAJESH. S K.T.C.T.E.M.H.S.S KADUVAYIL, THIRUVANANTHAPURAM

 CHAPTER 2
COLLECTION OF DATA
Collection :It is the process of collecting data or information from different sources.A place from data obtained is called
data source.Statistical data can be obtained from two sources .The are primary and secondary sources.
Distinguish between primary and secondary data
PRIMARY DATA SECONDARY DATA

It is first hand in use. It is second hand in use.

It is collected from an enquiry. It is collected from published sources.

It is in the form of raw materials. It is in the form of finished products.

What are the qualities of a good questionnaire?

The main qualities of a good questionnaire are the following.

• Questionnaire should not be too long.

• A series of questions should move from general to specific.
• The questions should not be ambiguous. They should enable the respondents to answer quickly,correctly
and clearly.
• The questions should not use double negatives.
• The questions should not be a leading question,which gives a clue about how to answer.
• The questions should be precise and clear.
• The questionnaire should include both open ended and closed ended questions.
MODE OR METHODS OF DATA COLLECTION
There are three basic of collecting primary data. The are the following
1) Personal interview:this method is used when the researcher has to access all the members. The main merits
and demerits of the method are the following.
ADVANTAGES DISADVANTAGES
Highest response rate Most expensive
Allows all types of questions More time taking
Better for using open ended questions. Possibility of influencing respondents

Allows clarifications to ambiguous questions

2) Mailing questionnaire: The data in a survey are collected by mail,such method of databases collection is
called mailing questionnaire. It’s advantages and disadvantages are as follows.
ADVANTAGES DISADVANTAGES
Least expensive Cannot be used by illiterates
Only method to reach remote areas Long response time
No influence on respondents Does not allow clarifications to ambiguous questions
Maintains anonymity of respondents Reactions can’t be watched
Best for sensitive questions

3) Telephone interview: In a telephone interview,the investigator asks questions over the telephone. It’s
advantages and disadvantages are as follows.
 ADVANTAGES DISADVANTAGES
Relatively low cost Limited use
Relatively less influence on respondents Reactions can’t be watched
Relatively high response rate Possibility of influencing the respondents

PILOT SURVEY
. When the questionnaire is ready ,it is advisable to conduct a try out with a small group of

Population is known as pilot survey or pre testing of the questionnaire. It’s advantages
Are the following
• It help us to access the suitability of the questionnaire.
• It help us to identify the drawbacks and shortcomings of the questionnaire.
• It help us to calculate survey cost and time
• It help us to pre testing of the questionnaire.
CENSUS OR COMPLETE ENUMERATION: A survey which includes every element of population is called census
of complete enumeration.In India census are conducted by Registrar General Of India(R.G.I.).ln India census ,which
carried out every ten years. Last census of India was held in the year 2011.According to the 2011 census ‘India’s
population is 121crores.The main advantages and disadvantages of census are the following.
ADVANTAGES DISADVANTAGES
Additional information is to be obtained More time taking
More reliable information obtained More expensive
Covers the entire population More enumerators needed
• SAMPLE SURVEY: Data or information is collected from samples only, such
method of data collection is called sample survey.A sample refers to a group or section
of population from which information is to be obtained. A good sample is generally
smaller than population and give reasonably accurate information about the
population. In India sample surveys are conducted by NSSO.Most of the surveys are
sample surveys because of the following reasons.
i. It provides reasonably reliable and accurate
information.
ii. It needed lower cost and shorter time
iii. More detailed information can be collected
iv. Smaller team of enumerators is needed
According to the selection of samples .sample survey divided into two. They are the following.
1) RANDOM SAMPLING: In the random sampling every individual has an equal chance
of being selected as a sample.The individuals who are selected are just like the ones who
are not selected.In random sampling ,samples are selected with the help of random
number tables or Lott’s so this method is also called lottery method.
2) NON RANDOM SAMPLING.:In non random sampling all the unit of the population do
not have an equal chance of being selected as sample.The convenience or judgement of
the investigator plays an important role in the selection of the sample.

SAMPLING ERRORS: The difference between the actual value of parameter of the population and it’s estimate is the
sampling error.lt is possible to reduce the magnitude of sampling error by taking a larger sample.
NON SAMPLING ERRORS:Non sampling errors errors are more serious than sampling errors because sampling error
can be minimised by taking larger sample. It is difficult to minimise non sampling errors, even taking a large sample.some
of the non sampling errors are:
• Errors in data acquisition:This type of error arises from recording of incorrect responses.
• Non response errors: It occurs if an interviewer is unable to contact a person listed in the sample .
• Sampling bias:Sampling bias occurs when the investigator performs biased in the selection of samples.
List out some data collecting agencies in India.
• Central statistical organisation. (CSO)
• National sample survey organisation.(NSSO)
• Registrar general of India(RGI)
• Directorate general of commercial intelligence and statistics(DGCIS)
• Labour bureau.
Previous questions.
1) Most of the surveys in India are sample surveys why? (March 2017)
2) Enumerate the different types of sampling? (September 2016)
3) Prepare a table shows the differences between census survey and sample survey. ( March 2016)
4) ............ are the main sources of data. A) primary B) secondary c) both A and B D) none of these (do)
5) Distinguish between primary and secondary data.
(March 2015) State whether the following statements are true or false.
1) There are many sources of data.
2) Telephone interview is the most suitable method of collecting data ,when the population is literate and spread
over a large area.
3) Data collected by investigator is called the secondary data.
4) Non sampling errors can be minimized by taking large samples.
5) There is certain bias involved in the non random selection of samples.

PREPARED BY
RAJESH.S
K.T.C.T.E.M.H.S.S KADUVAYIL
THIRUVANANTHAPURAM
 CHAPTER. -3
ORGANISATION OF DATA
Organisation: It is a process of arranging or organising things into groups or classes based on
some criteria.organisation help us
• To condense data for easy understanding.
• To help comparison.
• To eliminate unnecessary details.
• To make decision making possible.
Types of organisation.
• Chronological organisation: The organisation based on time is called chronological
organisation.The chronologically organised data is called time series.
• Spatial organisation: The data are classified with reference to geographical locations
such as countries, States,cities, districts ,etc.
• Quantitative organisation: The data organised with reference to quantities are called
quantitative organisation.
• Qualitative organisation:The data organised with reference to qualities are called
qualitative organisation.
VARIABLES: variables are anything their values are changing. They are broadly classified
into two types.
• Discrete variables: The variables which receive whole numbers as their values only
,such variables are called discrete variables. Eg. Cricket score, family size.
• Continuous variables:A continuous variable can take any numerical value. It may
take integral values, fractional values, irrational values
FREQUENCY ARRAY:The arranged form of discrete variables is called frequency array.
FREQUENCY DISTRIBUTION: It is a comprehensive way to classify raw data of a
quantitative variable.while preparing a frequency distribution ,the following four questions need
to be addressed
• How many classes should we have?
• What should be the size of each class?
• How should we determine the class limits?
• How should we get the frequency for each class?
RANGE:It is the difference between the largest and the smallest values of variable.
Range=largest value – smallest value
UPPER CLASS LIMIT:The highest value of a class is called upper class limit.
LOWER CLASS LIMIT:The lowest value of a class is called lower class limit.
CLASS INTERVAL:The difference between upper class limit and lower class limit is called
class interval.
CLASS MARK OR CLASS MID POINT:The average of upper class limit and lower class
limit is called class mark or class mid point.
INCLUSIVE AND EXCLUSIVE CLASS:Under inclusive method upper class limit of a class
included in the class interval .
Under exclusive method upper class limit of a class is excluded from the class interval.
Loss of information:Statistical calculations are based only on the vaues of class mark and not
on the values of the observations in that class.so other values of the class are not considered .It
is called loss of information.
UNIVARIATE AND BIVARIATE FREQUENCY DISTRIBUTION: The frequency
distribution of a single variable is called univariate frequency distribution.
A Bivariate frequency distribution is the frequency distribution of two variables.
STEPS REQUIRED FOR THE CONVERSION OF INCLUSIVE INTO EXCLUSIVE:
1. Find the difference between the lower limit of the second class and the upper limit of the
first class.
2. Divide the difference obtained in by two.
3. Substract the values obtained in from lower limits of all classes.
4. Add the value obtained in to upper limits of all classes.
Previous questions.
1. While preparing a frequency distribution from the raw data ,Name the questions we have
to addressed?
2. Vipin ,a student of class X1 Classify the students of his class as follows
Height 110-120 120-130 130-140 140-150 150-160 160-170
No.of
5 6 7 10 13 4
students

• Name the classification Vipin did.

• Tell vipin about other types of classification
• What is class interval of first class? Define it?
• What do you mean by class mark? Find the class mark of first and last class.
PREPARED BY
RAJESH.S
K.T.C.T.E.M.H.S.S KADUVAYIL
THIRUVANANTHAPURAM
 CHAPTER 4
PRESENTATION OF DATA
PRESENTATION: It is the process of presenting voluminous data collected through different Statistical tools.
There are generally three forms of presentation of data. They are
1. Textual presentation
2. Tabular presentation
3. Diagrammatic or Graphical presentation.
TEXTUAL PRESENTATION OF DATA: In textual presentation,data are described within the text.When the
quantity of data is not too large this form of presentation is most suitable.
TABULAR PRESENTATION: In tabular presentation , data are presented in rows and columns. The most
important advantage of tabular presentation is that is used for further Statistical calculations and decision
making.
PARTS OF A TABLE: There are eight functional parts of a Statistical table. They are the following.
1. Table Number: It is assigned on the top of a table. It assigned for easy identification.
2. Title: It narrates about the content of the table.
3. Captions OR Column headings: At the top of each column in a table a designation is given.it is caption.
4. Stubs OR Row headings: The designation of a row is called stubs.
5. Body of the table: It is the main part of a table. It contains the actual data.
6. Unit of measurement:It shows the unit which is used to measure the figures in the table.
7. Source: It contains the source of the data presented in the table.
8. Note: It gives additional information about the table.
DIAGRAMMATIC PRESENTATION OF DATA. This is the third way of presentation. It provides the
quickest understanding of actual situation. Diagrams maybe less accurate but are much more effective than
tables in presenting the data. There are various kinds of diagrams.Amongst them the important ones are the
following .
1. Geometric diagrams
2. Frequency diagrams 3. Arithmetic line graph.
GEOMETRIC DIAGRAMS: Simple bar diagrams ,Multiple bar diagrams,Component bar diagrams,
percentage bar diagrams,pie diagrams are come under this category.
1. SIMPLE BAR DIAGRAM: It comprises a group of equispaced and equiwidth rectangular bars for
each class of data. Height of the bar reads the magnitude of data.
2. MULTIPLE BAR DIAGRAM: Multiple bar diagrams are used for comparing two or more sets of
variable.
3. COMPONENT BAT DIAGRAM: It is also called sub- divided bar diagram.It is very useful in
comparing the sizes of different parts of data.
4. PIE DIAGRAM: It is a circle whose area is proportionally divided among the components it
represents.It is also called pie chart.
FREQUENCY DIAGRAMS: Data in the form of grouped frequency distributions are generally represented by
frequency diagrams. The following are the most commonly used frequency diagrams.
• HISTOGRAM: If is a two dimensional diagram. It represents a continuous frequency distribution. It
can helpful in locating mode
• OGIVES OR CUMULATIVE FREQUENCY CURVE: Ass there are two types of cumulative
frequencies .They are less than and more than cumulative frequencies. An interesting feature of the two
ogives together is that their intersection point gives the median.
• FREQUENCY POLYGON: It is a plane bounded straight lines ,usually four or more lines.lt can be
construct with or without constructing of a histogram.
• FREQUENCY CURVE The frequency curve is obtained by drawing a smooth free hand curve passing
through the points of the frequency polygon as close as possible.
ARITHMETIC LINE GRAPH OR TIME SERIES GRAPH: It helps in understanding the
trend,periodicity, etc. in a long time series data.
PREVIOUS QUESTIONS:
1. Data represented through a histogram can help in finding graphically the ................
Mode
2. Ogives can be helpful in locating graphically the…………..
Median
3. What kind of diagrams are more effective in representing the following?
• Monthly rainfall in a year. --------- simple bar diagram.
• Composition of population of Delhi by religion--------Component bar diagram
• Components of cost in a factory --------------- Pie diagram.
4. Distinguish between bar diagram and histogram

BAR DIAGRAMS HISTOGRAM

Width are same Width may be differ
Space is left between adjacent bars No space is left
Drawn for discrete and continuous variables Drawn for continuous variables only
Not help to determine any average Help to determine mode
5. Write another name for component bar diagram ---Sub divided bar diagram.
6. While explaining the parts of a table, your teacher says ,” It narrates the content of the table.It has to
be very clear and brief.” Identify the part of table mentioned here.---------Body of the tab

PREPARED BY
RAJESH.S
K.T.C.T.E.M.H.S.S KADUVAYIL
THIRUVANANTHAPURAM
7. Some particulars from a class time table are given below.By using them, fill the columns in the table
correctly.
CLASS TIME TABLE
Days PERIODS

1 2 3 4 5 6
Wednesday ECONOMICS MALAYALAM HISTORY ENGLISH MATH HISTORY

1 Title Class time table

2 Caption Periods
3 Stub Days
4 Body Subjects
5 Note Nil

PREPARED BY
RAJESH.S
K.T.C.T.E.M.H.S.S KADUVAYIL
THIRUVANANTHAPURAM
 CHAPTER-5
MEASURES OF CENTRAL TENDENCY
Points to Remember :-
A central tendency is a single figure that represents the whole mass of data.
Arithmetic mean or mean is the number which is obtained by adding the values of all the items of a series and dividing
the total by the number of items.
When all items of a series are given equal importance than it is called simple arithmetical mean and when different
items of a series are given different weights according with their relative importance is known weighted arithmetic
mean.
Median is the middle value of the series when arranged in ascending order.
When a series is divided into more than two parts, the dividing values are called partition values.
If a statistical series is divided into four equal parts, the end value of each part is called a quartile and denoted by ‘Q’.
The first quantile or lower quartile (Q1) is that value which divides the first half of an orderly arranged series into two
equal parts.
Third quartile or upper quartile (Q3) is that value which divides the latter half of an ascending orderly arranged series
into two equal parts.
Mode is the value which occurs most frequently in the series, that is modal value has the highest frequency in the
series.
Main purposes and functions of averages.
1)To represent a brief picture of data. 2)Comparison 3)Formulation of policies.
4)Basis of statistical analysis. 5) One value for all the group or series.
Essentials of a good average.
Easy to understand. 2) Easy to compute 3) Rigidly defined.
4) Based on all the items of series. 5) Capable of algebraic treatment.
Merits of Arithmetic mean
Simplicity 2) Certainty 3)Based on all values. 4) Algebraic treatment possible.
5) Basis of comparison. 6) Accuracy test possible.
Demerits of Arithmetic1 mean.
Effect of extreme values. 2) Mean value may not figure in the series
3)Misleading conclusions. 4) not be used in case of qualitative phenomenon.
Merits of Median
1) Simple measure of central tendency. 2) It is not affected by extreme observations. 3)Possible
even when data is incomplete.4) Median can be determined by graphic presentation of data.
5) It has a definite value.
Demerits of median.
1) Not based on all the items in the series. 2) Not suitable for algebraic treatment.
3)Arranging the data in ascending order takes much time. 4)Affected by fluctuations of items.
Merits of mode
Simple and popular measure of central tendency.
2) It can be located graphically with the help of histogram.3) Less effect of marginal values.
4) No need of knowing all the items of series. 5) It is the most representative value in the given series.
Demerits of mode
It is an uncertain 3) It is not capable of algebraic treatment.
Procedure of grouping is complex. 4) It is not based on all observations.
Relation among mean, median and mode
Mode = 3 median - 2 mean
Location of median by graph -
By ‘Less than’ or ‘More than’ ogives method a frequency distribution series is first converted into a less than or more
than cumulative series as in the case of ogives, data are presented graphically to make a ‘less than’ or ‘more than’
ogive N/2 item of the series is determined and from this print (on the y-axis of the graph) a perpendicular is drawn to
the right to cut the cumulative frequency curve. The median value is the one where cummulative frequency curve cuts
corresponding to x-axis.Less than and more than ogive curve method present the data graphically in the form of ‘less
than’ and ‘more than’ ogives simultaneously. The two ogives are superimposed upon each other to determine the

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S, KADUVAYIL, THIRUVANANTHAPURAM
median value. Mark the point where the ogive curve cut each other, draw a perpendicular from that point on xaxis, the
corresponding value on the x-axis would be the median value.
Graphic representation of mode -
Prepare a histogram from the given data find out the rectangle whose height is the highest. This will be the modal
class. Draw two lines - one joining the top right point of the rectangle preceding the modal class with top right point
of the modal class. The other joining the top left point of the modal class with the top left point of the post modal
class. From the point of intersection of these two diagonal lines, draw a perpendicular on horizontal axis i.e. x-axis
the point2 where this perpendicular line meets x-axis, gives us the value of mode. Formulae of calculating arithmatic
mean -

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S, KADUVAYIL, THIRUVANANTHAPURAM
 class
f1 = Frequency of the modal class.
f2 = Frequency of the group succeeding the modal
class
C = Class interval of moda 3l class

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S, KADUVAYIL, THIRUVANANTHAPURAM
 CHAPTER –6
MEASURES OF DISPERSION
Dispersion: The word Dispersion means deviation or difference. In statistics,dispersion refers to deviation of
various items of the series from its Central value. It is also called averages of second order. Dispersion is
two types. They are the following.
1. Absolute Measures of Dispersion: It is expressed in the same statistical unit in which the original
data are given.
2. Relative Measures of Dispersion: It is the ratio of absolute dispersion to an appropriate average. It is
independent of the unit .
Measures of Dispersion: The following are the important measures of Dispersion.

• Range 1
• Quartile deviation
• Mean deviation
• Standard deviation
• Lorenz curve
Range:It is defined as the difference between the largest and the smallest value of the series.

Range=L-S

Here L= largest value, S=smallest value

𝐿−𝑆
coefficient of Range =.
𝐿+𝑆

Merits and Demerits of Range Merits:

1.Easy to calculate
2.Easy to understand Demerits:
1. It is affected by extreme values
2. It is not based on all observations
3. It cannot be used in case of open-end distribution.
Quartile Deviation: It is the average of the difference between the upper quartile (Q3) and the lower quartile (Q1).

𝑄3−𝑄1
QUARTILE DEVIATION =
2

𝑄3−𝑄1
COEFFICIENT OF QUARTILE DEVIATION =
𝑄3+𝑄1

Merits of quartile deviation

1. Easy to calculate
2. Easy to understand
3. Not affected by extreme values
4. More reliable than range

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S, KADUVAYIL, THIRUVANANTHAPURAM
 Demerits of quartile deviation
1. It is not based on all observations
2. It ignores the first 25% observations as well as the last 25%
3. Not capable of further algebraic treatment
4. It doesn’t measure variation of items 2 from the average.
MEAN DEVIATION: Mean deviation of a series is the arithmetic average of the deviations of various items from a
measure of Central tendency.

In individual series Σ|D|

Mean deviation = N

In continuous and discrete series Σf|D|

Mean deviation = N
Coefficient of MD = Mean Deviation
Average
MERITS OF MEAN DEVIATION:
1. Easy to calculate
2. Easy to understand
3. Rigidly defined
4. Based on all items
5. Not very much affected by extreme values
DEMERITS OF MEAN DEVIATION:
1. Very much affected by sampling fluctuations
2. Not capable of further algebraic treatment
3. Ignoring signs reduces its application in scientific problems.
STANDARD DEVIATION: It is defined as the square root of the arithmetic average of the squares of deviations
taken from the arithmetic average of a series.

SD in individual series =

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S, KADUVAYIL, THIRUVANANTHAPURAM
 SD in discrete and continuous series =

CO efficient of variation=
MERITS AND LIMITATIONS OF STANDARD DEVIATION
• It is the best measure of Dispersion
• It is capable of further algebraic treatment
• It is less affected by sampling fluctuations
• It is based on every item of the distribution
• The value is always definite
LIMITATIONS
• It is difficult to compute
• It gives more importance to extreme items
• It can not be used for purposes of comparison
INTERPRETATIONS
• If the value of Coefficient of Variation is less, it means it is more consistent.
• A series with more Coefficient of Variation is regarded as less consistent or less stable than a series
with less coefficient of variation.

LORENZ CURVE
It is the graphical representation of Dispersion Developed by Dr. Max O. Lorenz
LORENZ CURVE STEPS
1) Find Class Mid Point
2) Cumulate the Class Mid Points
3) Cumulate the frequencies 3
4) Take the grand total of class mid points and grand total of frequencies as 100
5) Then convert all the other cumulative class mid points and cumulative frequencies into their respective percentages
6) Mark cumulative percentages of frequencies on the x axis and cumulative class mid points on the y axis 7)
Each axis should have values from 0 – 100.
8) Draw a line from the origin to the point whose cordinate is 100, 100.
9) This Line is called the LINE OF EQUAL DISTRIBUTION
10) Then plot the cumulative values and cumulative frequencies.

MERITS AND LIMITATIONS MERITS

1) It is most commonly used to show the various kinds of inequality.
2) The curve uses the information expressed in a cumulative manner to indicate the degree of variability.
3) It is especially useful in comparing the variability of two or more distributions.
4) Since it gives a picture, it is easy to understand.
LIMITATIONS
1. It does not give any numerical value of the measure of dispersion
2. It merely gives a picture of the extent 4 to which a series is pulled away from an equal distribution

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 Join those points to get a curve which is called LORENZ CURVE

C.

INTERPRETATION (with reference to the given diagram)

Any curve similar to 'OAC' closer to the line of Equality 'OC' indicates high degree of
equality or limited degree of inequality. The farther the curve OC, the greater is the
variability present 5in the distribution. The farthest curve from the line 'OC' has the highest
Dispersion

5 PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S, KADUVAYIL, THIRUVANANTHAPURAM

 CHAPTER-7 CORRELATION
CORRELATION:
Correlation is defined as a Statistical tool used to establish the relationship between two or more variables It is
commonly classified into : Positive and Negative
Positive Correlation
The correlation is said to be Positive when the variables move together in the same direction
EXAMPLES
When income rises, consumption also rises. when income falls, consumption also falls when
summer heat rises, hill stations are crowded with visitors
NEGATIVE CORRELATION
The correlation is said to be negative when the variables move in the opposite direction
EXAMPLES
When the price of apples fall demand increases
When the price of apples rise demand decreases
When you spend more time in studying, you get more a+
TECHNIQUE FOR MEASURING CORRELATION
There are three important tools to measure Correlation.
1.Scatter Diagram
2.Karl Pearson’s Coefficient of Correlation
3.spearman’s Rank Correlation
I - SCATTER DIAGRAM
A scatter diagram is an useful technique for visually examining the form of relationship, with out calculating. IN this
technique the values of the two variables are plotted as points on a graph paper.
SCATTER DIAGRAM
If all the points lie on a line, the correlation is perfect and is said to be unity
If the scatter points are widely dispersed around the line, the correlation is low
The correlation is said to be linear if the scatter points lie on a line or near a line
POSITIVE CORRELATION
Scatter around an upward rising1 line indicating the movement of the variables in the same direction. when 'x' axis
rises, 'y' will also rise and vice versa.
NEGATIVE CORRELATION
The points are found to be scattered around a downward sloping line. this time the variables move in opposite
direction. when 'x' rises, 'y' falls and vice versa.
NO CORRELATION
There is no upward rising or downward sloping. points are scattered

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S,KADUVAYIL,THIRUVANANTHAPURAM
PERFECT POSITIVE AND PERFECT NEGATIVE CORRELATION: The points are no longer scattered around an
upward rising or downward falling line. The points themselves are on the lines.
MERITS OF SCATTER DIAGRAM
1. It is a simple and non mathematical method
2. It is not influenced by the size of extreme items
3. Can form relationship between variables at a glance
4. Usually2 it is the first step in finding the relationship
LIMITATIONS OF SCATTER DIAGRAM
1. It does not give a numerical measurement
2. It gives only an approximate idea only

II – KARL PEARSON’S COEFFICIENT OF CORRELATION

● It is only one among the many methods of measuring Correlation
● It is also known as Pearsonian Coefficient of Correlation ● It is denoted by
the symbol

NOTE.
+1 Perfect Positive

Greater than 0 but less than 1 Positive

0 No Correlation

Less than 0 but greater than -1 Negative

-1 Perfect Negative

SPEARMAN’S RANK CORRELATION

IT was developed by the British Psychologist Charles Edward Spearman in 1904.
This method is used when the variables are not capable of quantitative measurement
(Eg. beauty, intelligence, honesty, colour etc.)
PROPERTIES OF CORRELATION COEFFICIENT
The Correlation Coefficient 'r' has no unit. It is a pure number
The range of simple correlation coefficient is -1 to +1
If 'r' = 0, then the variables have no correlation
If 'r' is positive, then there is positive correlation between the variables
If 'r' is negative, then there is negative correlation between the variables
If 'r' = +1, then the variables have perfect positive correlation
If 'r' = -1, then the variables have perfect negative correlation
A high positive value of 'r' indicates strong positive correlation
A negative value near to -1 indicates strong negative correlation
A value near to 0 indicates weak linear correlation

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PREPARED BY RAJESH.S K.T.C.T.E.M.H.S.S,KADUVAYIL,THIRUVANANTHAPURAM