Production and price per unit correlation:

In economics, the relationship between production and price per unit is a topic of great significance. The correlation between these two variables can provide valuable insights into the behavior of markets and the potential impact on producers and consumers. The correct answer to the given question is option 'B' - negative correlation. Let's explore this further.

Understanding correlation:
Correlation is a statistical measure that quantifies the relationship between two variables. It indicates the direction and strength of the relationship. Correlation can be positive, negative, or zero.

Positive correlation:
Positive correlation occurs when two variables move in the same direction. In the context of production and price per unit, a positive correlation would mean that as production increases, the price per unit also increases. This could happen due to factors such as scarcity of resources, increased demand, or limited supply.

Zero correlation:
Zero correlation means that there is no relationship between the two variables. In the case of production and price per unit, zero correlation would imply that changes in production have no impact on the price per unit. This could occur when the market is perfectly competitive and efficient, with no market power or external factors affecting the price.

Negative correlation:
Negative correlation, as mentioned in the correct answer, occurs when two variables move in opposite directions. In the context of production and price per unit, a negative correlation would mean that as production increases, the price per unit decreases. This can be attributed to various factors such as economies of scale, technological advancements, increased competition, or excess supply.

Explanation of the answer:
The correct answer to the given question is option 'B' - negative correlation. This implies that as production increases, the price per unit decreases. This negative correlation can be observed in industries where economies of scale play a significant role. As production increases, the average cost per unit decreases, allowing producers to lower the price per unit and gain a competitive advantage.

It is important to note that the correlation between production and price per unit can vary across industries and markets. Factors such as market structure, demand elasticity, input costs, and government policies can influence this correlation. Therefore, it is crucial to analyze the specific context and dynamics of a particular industry or market to determine the exact correlation between production and price per unit.