Question

1- Given the data of palm oil production (Y), number of labour (X) and total capital (X:) in Table 7 as follows: Table 8: Palm oil production (metric tonne), number of labour (people) and total capital (RM). III Palm oil production Number of lahour Total capital 50 30 100 50 250 180 40 20 60 30 220 170 90 160 200 a) Run the linear and non-linear multiple correlation estimation of the above data in Table 8 with any computer software and report your findings. b) Give the interpretation of the estimated correlation coefficient for both findings.

Answer 1

SOLUTION:

From the given data,

a.

Palm Oil Production (Tonne Metric)	Number Of labor (People)
50	100
30	50
40	60
20	30
90	160
Correlation coefficient	0.9886

Formulas used in excel calculation:

A Number of labor (People) 100 50 1 Palm Oil Production (Tonne Metric) 2 50 3 30 4 40 5 20 6 90 7 Correlation coefficient 60 =CORREL(A2:A6,B2:B6)

b. A Correlation coefficient r = 0.9886 means there is a strong positive linear relationship between Palm Oil Production and Number Of labor.

Correlation coefficient measures the degree of association between two variables. It is measured on a scale of + 1 to - 1. Where r = + 1 means a complete positive correlation between two variables (if one will increase then other will also increase in same proportion) and r = - 1 means complete negative correlation between two variables (if one will increase then other will decrease in same proportion). If the value of r = 0, it means that there is no linear relationship between two variables. The other values of r between 0 to +1 shows positive linear relationship between variables but not complete and Correlation coefficient = 0.9886 (which is very close to 1) shows a very strong positive linear relationship between Palm Oil Production and Number of labor.