• examples of positive correlation.

Positive Correlations in Microeconomics

Microeconomics, which analyzes individual consumers and firms, features many

instances of positive correlation between variables, one of the most common being
the relationship between demand and price. When students study microeconomics
and statistics, one of the first concepts they learn about is the law of supply and
demand and the influence it has on price. The supply and demand curve shows that
when demand increases without a concomitant increase in supply, a corresponding
increase in price occurs. Similarly, when a demand for a good or service decreases,
its price also drops.

The relationship between demand and price is an example of causation as well as

positive correlation. An increase in demand causes the corresponding increase in
price; the price of a good or service increases precisely because more consumers
want it and therefore are willing to pay more for it. When demand decreases, that
means fewer people want a product and sellers must lower its price to entice people
to buy it.

In contrast, supply is negatively correlated with price. When supply decreases

without a corresponding demand decrease, prices increase. The same number of
consumers now compete for a reduced number of goods, which makes each good
more valuable in the eye of the consumer.

Positive Correlations in Macroeconomics

Positive correlation also abounds in macroeconomics, the study of economies as a

whole. Consumer spending and GDP are two metrics that maintain a positive
relationship with one another. When spending increases, GDP also rises as firms
produce more goods and services to meet consumer demand. Conversely, firms slow
production amid a slowdown in consumer spending to bring production costs in line
with revenues and limit excess supply.

Like demand and price, consumer spending and GDP are examples of positively
correlated variables where movement by one variable causes movement by the
other. In this case, consumer spending is the variable that affects a change in GDP.
Firms set production levels based on demand, and demand is measured by consumer
spending. As the level of consumer spending moves up and down, production levels
strive to match the change in demand, resulting in a positive relationship between
the two variables.
It has been empirically found that when the GDP of a country increases, then the
demand for luxury goods also increases. So both the demand for Luxury goods and
GDP has a positive Correlation.

The price of the Bond is positively Correlated to the Coupon Rate. If the Coupon
Rate of a Bond is high, then its price will also be high as the bond is giving higher
coupons, so the bond will be more attractive in the market, and its price will also
start to rise to ignore the risk of the bond.

As the Export of a particular country increases, so the demand for the home
currency in the international currency market increases because people will need
your home currency to make payments for the goods purchased from your country.
So the Home currency starts appreciating

• FIVE EXAMPLES OF “NEGATIVE CO-RELATIONS”

student who has many absences has a decrease in grades.

The more one works, the less free time one has.

As one increases in age, often one's agility decreases.

If a car decreases speed, travel time to a destination increases.

The more time you study or prepare for a test, the fewer mistakes you'll make.

When you spend more time brushing your teeth, you'll have fewer cavities.

If a car tire has more air, the car may use less gas per mile.

If a train increases speed, the length of time to get to the final point decreases.

The more you pay off a loan, the less debt you'll be in.

• FIVE EXAMPLES OF ZER0 “CO-RELATION”

1. The nicer you treat your employees, the higher their pay will be.

2. The smarter you are, the later you'll arrive at work.

3. The wealthier you are, the happier you'll be.

4. The earlier you arrive at work, your need for more supplies increases.

5. The more funds you invest in your business, the more employees will leave work
early