eco no metrics on income and consumption

8/3/2019 Eco No Metrics on Income and Consumption

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Econometrics on income and

consumption

By Sagar Navlani (0918123)

Moin Bhiriya()


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introduction

Econometrics means economic

measurements

it consists of the application of mathematicalstatistics to economic data to lend empirical

support to the models constructed by

mathematical economics and to obtain

numerical results


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Application

We have taken the data on income and

consumption of United States ofAmerica from

1982-1996 and we have applied

Regression.

correlation.

Time series.


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Regression table


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Regression equation

In our case if we want to calculate the mean consumption expenditure (Y)of future given that we have the X (GDP) which is assumed then we cancalculate the Y by putting the X in the Equation:

Y= 0.668X+44.423

The above equation is derived by the income and consumption of United

States ofAmerica from 1982- 1996.

Similarly if we want to calculate the GDP(X) of future given that we havethe mean consumption expenditure (Y) of future which is assumed thenwe can calculate the (X) by putting it in the equation:

X=1.498Y+2044.4

The above equation is derived by the income and consumption of UnitedStates ofAmerica from 1982- 1996.


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Correlation table


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Correlation Analysis

The above equation shows that income and

consumption are highly correlated with other.


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Time Series Data


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Time Series Graph


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Time Series Analysis

The above graph shows that there is a link between theGDP and PCE of United States ofAmerica, as we cansee that as the GDP is normal from 1982 -1989 the PCEis also normal and as there is a curve in the GDP of

1990 the PCE also curves in the same year and as theGDP increases in 1991 the PCE also increases but. Thistells u that as the income level changes theconsumption level also changes BUT it changes slowlyand gradually, and the GDP in every year is grater than

the PCE of every year which tells us that every thingproduced in a country in a given year is not consumedin the same year by its inhabitants / individuals.


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Conclusion

Keynesian hypothesis is valid which states that as thereis a change in income level the consumption level alsochanges this proves that income and consumption arecorrelated to each other and they have a positiverelationship, and as the independent variable (X) whichis income changes the dependent (Y) variable which isconsumption also changes this means that there isregression between them. The time series shows that

individuals respond to consumption smoothly if theincome is smooth but as there is a change in the levelof income the consumption level changes but slowly.

eco no metrics on income and consumption

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