Table 2.8 gives data on expenditure on food and total expenditure, measured in rupees, for a sample

Question:

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

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 scatter points.

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.

TABLE 2.8 Food and Total Expenditure (Rupees) Food Expenditure Total Expenditure Food Total Observation Observation Expe