myz-vgb.ru A Business Encyclopedia

Scatter Diagram Method

Definition: The Scatter Diagram Method is the simplest method to study the correlation between two variables wherein the values for each pair of a variable is plotted on a graph in the form of dots thereby obtaining as many points as the number of observations. Then by looking at the scatter of several points, the degree of correlation is ascertained.

The degree to which the variables are related to each other depends on the manner in which the points are scattered over the chart. The more the points plotted are scattered over the chart, the lesser is the degree of correlation between the variables. The more the points plotted are closer to the line, the higher is the degree of correlation. The degree of correlation is denoted by “r”.

The following types of scatter diagrams tell about the degree of correlation between variable X and variable Y.

  1. Perfect Positive Correlation (r=+1): The correlation is said to be perfectly positive when all the points lie on the straight line rising from the lower left-hand corner to the upper right-hand corner.Scatter diagram-1
  2. Perfect Negative Correlation (r=-1): When all the points lie on a straight line falling from the upper left-hand corner to the lower right-hand corner, the variables are said to be negatively correlated.Scatter diagram-2
  3. High Degree of +Ve Correlation (r= + High): The degree of correlation is high when the points plotted fall under the narrow band and is said to be positive when these show the rising tendency from the lower left-hand corner to the upper right-hand corner.Scatter diagram-3
  4. High Degree of –Ve Correlation (r= – High): The degree of negative correlation is high when the point plotted fall in the narrow band and show the declining tendency from the upper left-hand corner to the lower right-hand corner.Scatter diagram-4
  5. Low degree of +Ve Correlation (r= + Low): The correlation between the variables is said to be low but positive when the points are highly scattered over the graph and show a rising tendency from the lower left-hand corner to the upper right-hand corner.Scatter diagram-5
  6. Low Degree of –Ve Correlation (r= + Low): The degree of correlation is low and negative when the points are scattered over the graph and the show the falling tendency from the upper left-hand corner to the lower right-hand corner.Scatter diagram-6
  7. No Correlation (r= 0): The variable is said to be unrelated when the points are haphazardly scattered over the graph and do not show any specific pattern. Here the correlation is absent and hence r = 0.Scatter diagram-7

Thus, the scatter diagram method is the simplest device to study the degree of relationship between the variables by plotting the dots for each pair of variable values given. The chart on which the dots are plotted is also called as a Dotogram.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


bridge loan definitionleveraged leasesdefinition stratifycharacteristics of perfectly competitive market structureisoquant analysistotal assets turnoverinternal rate of return explanationwhat does provident meanequity advantages and disadvantagesporters 5 forces templateproportionality assumptionwhat are decision variables in linear programminghindi meaning of reasonablestatement of strategic intentreport on opening a demat accountojt meaningcompany debenture definitioncash reserve ratio meaninghow to revitalize a brandbases of market segmentationeffective communicator meaningstratified sampling definitionthe different types of marketingneft transactionsclassical and neoclassical theorydefinition cluster samplingmis post office schemefixed income mutual funds definitionmotivation and hygiene theorysamuelson multiplier accelerator modelmicro and macro environmental factors in marketingdefinition of breakevenweber bureacracyhr planning stepsusage segmentation definitionvertical channel conflictthe different types of marketingretained earnings definitionprimal defwhat is crr in bankingattack marketing and promotionsrationing economics definitiondefinition of galloping inflationballoon payment loanwhat are demat accountsaccelerator effect economicswhat are the conditions for an oligopolistic marketporters five forceasset utilization ratios definitionadvantages and disadvantages of loan capitaldefine utility maximizationmm hypothesis capital structure theorylinear programing simplex methodingredient branding definitionwhat is porter five forces modelhow to substitution methodacid test liquidity ratioherzbergs theory of motivationentrepreneurship definition and meaningdistinguish between implicit cost and explicit costpromotion mix strategy definitiontransportation problem linear programming exampleformula for asset turnoveroligopoly market sharemm dividend policydebenture holder definitionguerrilla war meaningwhat is meant by price elasticity of demanddelphi group techniquemultiplier definition economicsdefinition of denotative languagemeaning debenture