The consumption function captures one of the key relationships in economics. It expresses consumption as a function of disposal income, where disposal income is income after taxes. The attached file “Regression Dataset” shows data of average US annual consumption (in $) and disposable income (in $) for the years 2000 to 2016.
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Business Analytics – The consumption function captures
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1. Find the sample linear regression equation for the model
2. In this model, the slope coefficient is called the marginal propensity to consume. Interpret its meaning
3. What is the predicted consumption if disposal income is $33,000?