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a) An Econometric modeler from EES 400 class of Machakos University sought to investigate the effect of disposable income on consumption. The specified model was:

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a) An Econometric modeler from EES 400 class of Machakos University sought to investigate the effect of disposable income on consumption. The specified model was: Yi = Bo + BIXi + Hi Where Y is household consumption and X is household income. The following data was obtained. Household A B C D E Income (in Kishs. '000s) 2 5 8 10 15 Consumption (in Kishs.'000s) 2 3 4 S Using the above data Fit the sample consumption function for the 5 households and interpret your results. From the marginal propensity to consume, what can you say about the nature of households in the sample? (S marks) i1. Compute the ESS and RSS for this data (4 marks) iii. Compute the coefficient of determination for this data and interpret your results

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