Page 152 - DECO504_STATISTICAL_METHODS_IN_ECONOMICS_ENGLISH

Statistical Methods in Economics

Notes warrants the adoption of the coefficient of correlation by economists as one of their standard
averages.
9.4 Key-Words

1. Correlation : The correlation coefficient a concept from statistics is a measure of how well trends
in the predicted values follow trends in past actual values. It is a measure of how
well the predicted values from a forecast model "fit" with the real-life data.
2. Galton : An explorer and anthropologist, Francis Galton is known for his pioneering studies
of human intelligence. He devoted the latter part of his life to eugenics, i.e.
improving the physical and mental makeup of the human species by selected
parenthood.
9.5 Review Questions

1. Define correlation. What is its utility ?
2. Explain the meaning of the term ‘correlation’. Does it always signify cause and effect relationship?
3. Discuss the various types of correlation.
4. Describe the application of correlation for economists.
5. Explain, how correlation is a powerful statistical tool. Can it be used to establish cause and effect
relationship ?
Answers: Self-Assessment

1 ( 3 1 − r 2
1. (i) − m ) m (ii) (iii) r 2
12 N
(iv) r + P.E, to r – P.E (v) multiple
9.6 Further Readings

1. Elementary Statistical Methods; SP. Gupta, Sultan Chand & Sons,
New Delhi - 110002.
2. Statistical Methods — An Introductory Text; Jyoti Prasad Medhi, New Age
International Publishers, New Delhi - 110002.
3. Statistics; E. Narayanan Nadar, PHI Learning Private Limied, New Delhi - 110012.
4. Quantitative Methods—Theory and Applications; J.K. Sharma, Macmillan
Publishers India Ltd., New Delhi - 110002.

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