ITPEC IP April 2023 Question 66

Topic: Corporate ActivitiesAlso asked in Spring 2020

Which of the following has a negative correlation between temperature and total sales?

Explanation

Scatter plot (b) — its points fall from upper left to lower right, so sales go down as temperature goes up: a negative correlation.

A scatter diagram plots each pair of values as a point to show whether two variables are related. The direction of the cloud of points gives the sign of the correlation:

  • •Rising from lower left to upper right: positive correlation (one increases, the other increases)
  • •Falling from upper left to lower right: negative correlation (one increases, the other decreases)
  • •No slope, or no pattern at all: no correlation

Answer (b)

Why not others:

  • •(a) — points rise to the upper right, so sales increase with temperature: positive correlation
  • •(c) — points lie in a flat band, so sales stay the same whatever the temperature: no correlation
  • •(d) — points are scattered over the whole plot with no trend: no correlation

Key rule: The slope of the point cloud gives the sign of the correlation and its tightness gives the strength; a correlation alone does not prove that one variable causes the other.

Corporate Activities · AI-written, may contain errors

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