In the linear consumption function ˆcons=ˆβ0+ˆβ1inc, The estimated marginal propensity to consume (MPC) out of income is simply the slope,ˆβ1,while the average propensity to consume (APC) isˆcons/inc=ˆβ0/inc+ˆβ1
In the linear consumption function ˆcons=ˆβ0+ˆβ1inc, The estimated marginal propensity to consume (MPC) out of income is simply the slope,ˆβ1,while the average propensity to consume (APC) isˆcons/inc=ˆβ0/inc+ˆβ1
In the linear consumption function ˆcons=ˆβ0+ˆβ1inc, The estimated marginal propensity to consume (MPC) out of income is simply the slope,ˆβ1,while the average propensity to consume (APC) isˆcons/inc=ˆβ0/inc+ˆβ1
The estimated marginal propensity to consume (MPC) out of income is simply the slope,ˆβ1,while the average propensity to consume (APC) isˆcons/inc=ˆβ0/inc+ˆβ1.
Using observationsfor 100 families on annual income and consumption (both measured in dollars), the followingequation is obtained:
ˆcons=-124.84 + 0.853inc
n= 100, R2= 0.692.
(a) Interpret the intercept in this equation, and comment on its sign and magnitude. Does it make logical sense ?
b. What is the predicted consumption when family income is $30,000? c. With inc on the x-axis, draw a graph of the estimated MPC.
Expression, rule, or law that gives the relationship between an independent variable and dependent variable. Some important types of functions are injective function, surjective function, polynomial function, and inverse function.
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