Consider the following data on income and savings in your answers to the questions below: Income...

Consider the following data on income and savings in your answers to the questions below:

Income ($ thousands)	Savings ($ thousands)
50	10
51	11
52	13
55	14
56	15
58	15
60	16
62	16
64	17
67	17

Using excel, calculate the correlation coefficient for the same. Interpret this correlation coefficient and describe the relationship between income and savings.
Show a scatter diagram of the relationship between income and savings.

Expert Solution

Here, we have to obtain the Correlation Coefficient for the given data on Income and Savings.

The detailed procedure to answer the given question is as given in the images below:-

Hence, the Correlation Coefficient, r = 0.9306

Description:- Here, the Correlation Coefficient between Income and Savings is r= 0.9306 , which implies a very strong positive correlation between the two variables.

It means that , both the variables move in the same direction. i.e. either both increase or decrease together.

b.

The Scatterplot for Income and Savings is as follows:-

The Scatterplot shows an increasing nature i.e. if Income increases, the savings also increase.

Hence, the Scatterplot gives us an idea that the correlation between the two variables should be Positive.

This answers your question.

If you have understood the answer please rate Positively.

orchestra answered 1 year ago

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