What is perfect correlation? Give two examples.

Perfect correlation is that where changes in two related variables are exactly proportional. It is of two types:

(i) Positive perfect correlation and (ii) Negative perfect correlation.

There is perfect positive correlation between the two variables of equal proportional changes are in the same direction. It is expressed as +1. If equal proportional changes are in the reverse direction. Then there is negative perfect correlation and it is described as –1.

(a) Example of positive perfect correlation

Price (Rs): 1 2 3 4 5

Supply (units) : 10 20 30 40 50

(b) Example of perfect negative correlaion

Price (Rs): 1 2 3 4 5

Demand (units) : 50 40 30 20 10 Q. 5. Define simple, and partly correlation.

Ans. Simple Correlation : When the relationship between two variables is studied and of these two variables one is independent and the other is dependent, then such correlation is called simple correlation. For example, relationship between income and expenditure.

Partial Correlation : When more than two variables are involved and out of these the relationship between two variables is studied only treating other variables as constant, then such correlation is partial.