Engel's law states that as income rises, the proportion of income spent on food falls, even if absolute expenditure on food rises. Formulate appropriatenull and alternative hypotheses to test Engel's law, and give the test decision atthe 5% signicance level (assuming normally distributed errors and 2 > 0).

Model In(FOOD;) = B1 + B2 In(INCOME;) +Ei, i= 1,...,40 Then, with xi2 = In(FOOD;), x2 = In(FOOD) and x = = (1, x2)': (x2-x2) v(x) = x'(X'X)-2x = 211(xi2 7.2)2 1 n +