8
BASIC ECONOMETRICS
As Figure I.3 shows, the regression line fits the data quite well in that the
data points are very close to the regression line. From this figure we see that
for the period 1982–1996 the slope coefficient (i.e., the
MPC
) was about
0.70, suggesting that for the sample period an increase in real income of
1 dollar led,
on average
, to an increase of about 70 cents in real consumption
expenditure.
12
We say
on average
because the relationship between con-
sumption and income is inexact; as is clear from Figure I.3; not all the data
points lie exactly on the regression line. In simple terms we can say that, ac-
cording to our data, the
average
, or
mean
, consumption expenditure went up
by about 70 cents for a dollar’s increase in real income.