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What broad conclusions can you draw from this example

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Reference no: EM13882214

Table 2.8 gives data on expenditure on food and total expenditure, mea- sured in rupees, for a sample of 55 rural households from India. (In early 2000, a U.S. dollar was about 40 Indian rupees.)

TABLE 2.8    FOOD AND TOTAL EXPENDITURE (RUPEES)

 

Observation

Food expenditure

Total expenditure

 

Observation

Food expenditure

Total expenditure

1

217.0000

382.0000

29

390.0000

655.0000

2

196.0000

388.0000

30

385.0000

662.0000

3

303.0000

391.0000

31

470.0000

663.0000

4

270.0000

415.0000

32

322.0000

677.0000

5

325.0000

456.0000

33

540.0000

680.0000

6

260.0000

460.0000

34

433.0000

690.0000

7

300.0000

472.0000

35

295.0000

695.0000

8

325.0000

478.0000

36

340.0000

695.0000

9

336.0000

494.0000

37

500.0000

695.0000

10

345.0000

516.0000

38

450.0000

720.0000

11

325.0000

525.0000

39

415.0000

721.0000

12

362.0000

554.0000

40

540.0000

730.0000

13

315.0000

575.0000

41

360.0000

731.0000

14

355.0000

579.0000

42

450.0000

733.0000

15

325.0000

585.0000

43

395.0000

745.0000

16

370.0000

586.0000

44

430.0000

751.0000

17

390.0000

590.0000

45

332.0000

752.0000

18

420.0000

608.0000

46

397.0000

752.0000

19

410.0000

610.0000

47

446.0000

769.0000

20

383.0000

616.0000

48

480.0000

773.0000

21

315.0000

618.0000

49

352.0000

773.0000

22

267.0000

623.0000

50

410.0000

775.0000

23

420.0000

627.0000

51

380.0000

785.0000

24

300.0000

630.0000

52

610.0000

788.0000

25

410.0000

635.0000

53

530.0000

790.0000

26

220.0000

640.0000

54

360.0000

795.0000

27

403.0000

648.0000

55

305.0000

801.0000

28

350.0000

650.0000

 

 

 

 

Source: Chandan Mukherjee, Howard White, and Marc Wuyts, Econometrics and Data Analysis for Developing Countries, Routledge, New York, 1998, p. 457.

a. Plot the data, using the vertical axis for expenditure on food and the horizontal axis for total expenditure, and sketch a regression line through the scatterpoints.

b. What broad conclusions can you draw from this example?

c. A priori, would you expect expenditure on food to increase linearly as total expenditure increases regardless of the level of total expenditure? Why or why not? You can use total expenditure as a proxy for total income.

Reference no: EM13882214

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