The Law of Supply
The law of supply states that, if all other factors remain equal, the higher the price, the higher the quantity supplied. Producers supply more at a higher price because selling a higher quantity at a higher price increases revenue.
A, B and C are points on the supply curve. Each point on the curve reflects a direct correlation between quantity supplied (Q) and price (P). So, at point A, the quantity supplied will be Q_{1} and the price will be P_{1}, and so on.
The supply relationship curve illustrates the **positive relationship** between price and quantity supplied. The higher the price of a good, the higher the quantity supplied (C) and the lower the price of a good, the lower the quantity supplied (A).
The Law of Demand
The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded.
A, B and C are points on the demand curve. Each point on the curve reflects a direct correlation between quantity demanded (Q) and price (P). So, at point B, the quantity demanded will be Q_{2} and the price will be P_{2}, and so on.
The demand relationship curve illustrates the **negative relationship** between price and quantity demanded. The higher the price of a good the lower the quantity demanded (A) and the lower the price, the more the good will be in demand (C).
Correlation

**Introduction: **Correlation means the relationship between two variables where with the changes in the values of one variable, the values of other variable also changes. For example, selling price of a commodity and profit earned are correlated to each other because change in a selling price of a commodity will cause a change in profit earned.

**Definition:** According to Ya-lun Chou, "correlation analysis attempts to determine the degree of relation between the variables" and according to Simpson and Kafka, "Correlation analysis deals with the association between two or more variables". Thus, correlation is a statistical device, which helps us in the analysis of co-variation of two (or) more variables.

**Types of correlation: **Classification of correlation can be done in following three ways: On the basis of direction of change of variables, On the basis of number of variables, On the basis of change in proportion.

**On the basis of direction of change of variables: ** Depending upon the direction of change of variables, correlation is divided into two types called positive correlation and negative correlation.

**Positive correlation:** When the values of two variables move in the same direction, that is, if an increase in the value of one variable is associated with an increase in the value of other variable (or) decrease in the value of one variable is associated with decrease in the value of other variable then the correlation is called as positive correlation. **Eg: **Relationship between price and supply.
**Negative correlation:** When the values of two variables move in different directions, that is, if an increase in the value of one variable is associated with a decrease in the value of other variable and decrease in the value of one variable is associated with the increase in the value of other variable then the correlation is called as negative correlation. **Eg: **Relationship between price and demand.

**On the basis of number of variables: ** Depending upon the total number of variables, correlation is divided into three types called simple correlation, partial correlation and multiple correlation.

**Simple Correlation: ** A correlation, in which only two variables are studied is known as simple correlation. **Eg:** Relationship between height and weight.
**Partial Correlation: **In this correlation, we recognize more than two variables but consider only two variables to be influencing each other, the effect of other influencing variables being kept constant. **Eg: **Relationship between price and demand by keeping supply as constant.
**Multiple Correlation: ** A correlation, in which three or more variables are studied simultaneously is known as multiple correlation. **Eg: ** Relationship between price, demand and supply.

**On the basis of change in proportion: **Depending upon the change in proportion, correlation is divided into two types called linear correlation and nonlinear correlation.

**Linear Correlation: **If the amount of change in one variable tends to bear constant ratio to the amount of change in other variable then the relation is called linear correlation.
**Curvilinear (or) Nonlinear correlation: **If the amount of change in one variable does not bear a
constant ratio of the amount of change in the other then the relation is called curvilinear (or) nonlinear correlation.