LILONGWE UNIVERSITY OF AGRICULTURE AND NATURAL RESOURCES

FACULTY OF DEVELOPMENT STUDIES

DEPARTMENT OF AGRICULTURALND APPLIED ECONOMICS
To: MAPEMBA, PhD
FROM: CHIFUNDO MULIWA…………………...150100732……. ….EDM
ALINAFE PHIRI…………………………160100831……. …..AAE
TAWONGA MALUWA…………………160100539…………AAE
PETER MGUNGWE ……………………...160100613……. …ABM

COURSE NAME: ECONOMETRICS II

COURSE CODE: AAE 322
QUESTION 2
a) regression function

average weekly household food expenditure = independent variable

average weekly household income = dependent variable

𝑌(𝑤𝑒𝑒𝑘𝑙𝑦 ℎ𝑜𝑢𝑠𝑒ℎ𝑜𝑙𝑑 𝑓𝑜𝑜𝑑 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒)

= 𝛽0 + 𝛽1 𝑋(𝑤𝑒𝑒𝑘𝑙𝑦 ℎ𝑜𝑢𝑠𝑒ℎ𝑜𝑙𝑑 𝑖𝑛𝑐𝑜𝑚𝑒) + е
b) the least squares estimate of the parameters and their standard errors

𝛽1 = 0.2322533, Se(𝛽1 )= 0.0552934

𝛽0 = 7.383218 , Se(𝛽0 ) = 4.008356

c) estimated of the variance of the stochastic disturbance term

Var(e) = 46.8529624

d) 𝑌(𝑤𝑒𝑒𝑘𝑙𝑦 ℎ𝑜𝑢𝑠𝑒ℎ𝑜𝑙𝑑 𝑓𝑜𝑜𝑑 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒) = 7.383218 +

0.2322533𝑋 (𝑤𝑒𝑒𝑘𝑙𝑦 ℎ𝑜𝑢𝑠𝑒ℎ𝑜𝑙𝑑 𝑖𝑛𝑐𝑜𝑚𝑒)
When weekly household income is MK 100
𝑌(𝑤𝑒𝑒𝑘𝑙𝑦 ℎ𝑜𝑢𝑠𝑒ℎ𝑜𝑙𝑑 𝑓𝑜𝑜𝑑 𝑒𝑥𝑝𝑒𝑛𝑑𝑖𝑡𝑢𝑟𝑒) = 7.383218 + 0.2322533(100)
= MK 23.23

NOTE: HHE: average weekly household food expenditure

HHI: average weekly household income
e) HISTOGRRAM FOR THE OBSERVATIONS

.02

.015

Density
.01

.005

0
20 40 60 80 100 120
HHI

f) SCATTER PLOT
 50

40

HHE
30

20

10
20 40 60 80 100 120
HHI