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Price and Output

This document analyzes the relationship between industrial output and manufacturing prices in India from 1994 to 2011. It provides data on annual general industrial output and manufacturing product inflation rates. A trend chart shows a direct, linear relationship between output and prices, with output increasing as prices rise. The document concludes there is a strong, positive correlation between output and prices based on a linear regression equation.

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rsagrawal1986
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6 views

Price and Output

This document analyzes the relationship between industrial output and manufacturing prices in India from 1994 to 2011. It provides data on annual general industrial output and manufacturing product inflation rates. A trend chart shows a direct, linear relationship between output and prices, with output increasing as prices rise. The document concludes there is a strong, positive correlation between output and prices based on a linear regression equation.

Uploaded by

rsagrawal1986
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Here we will try to find relationship between output and price.

We have focused on industrial output and manufacturing price and we taken the annual data from financial year 1994 to year 2011.

General industrial output and price from 1994-2011


General Industrial output( million tons) Year 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 229.25 2006-07 258.8 2007-08 299.12 2008-09 306.51 2009-10 322.77 2010-11 349.37 216.35 9.56 204.71 3.81 200.22 8.06 188.58 4.67 179.93 6.60 170.29 4.50
109.1

Manufacturing Product inflation WPI rate 112.3 12.60 7.99 4.61 4.40 5.95 3.27 7.16 3.60 3.41 5.46 0.30 (Base : 1993-94 = 100)

123.3

121.9
130.8

124.4
139.5

128
145.2

133.6
154.9

137.2
162.5

141.7
167

144.3
176.6

148.1
189

156.5
211.1

166.3

Source : Central Statistics Office (CSO), Government of India. (Through RBI website)

Trend Chart between price and industrial output for above data.
250 200 150 Series1 100 Linear (Series1) y = 0.4111x + 73.285 R = 0.9872

WPI

50 0 0 50 100 150 200 250 300

output

350

400

We can see that there is direct relationship between output and price. When we plot a trend chart we see a upward sloping curve that indicates output is directly proportional to price. Over the years when price of output rises the output also rises. Here we consider that output is a dependent variable and price is independent and we a linear relationship between them. O = 2.401P - 173.3 R = 0.987 (from the above trend line we have switched the X and Y axis)

Where O = output, P= price and R= Correlation coefficient We see that the value of R = .99 which indicates a strong linearity. This relationship we also find in aggregate supply and price in short run macro. When the price raises industries tend to increase the aggregate supply and hence output.

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