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.