4. In an empirical study to investigate the effect of income (x, measured in $) on food expenditure
(y, measured in $1,000) based on a sample of 40 households, the following regression results
are obtained:
$\hat{y}$ = 83.4 + 10.2$x$
(se) (43.4) (2.1), $R^2$ = 0.39
(a) What is the literal meaning of the intercept parameter estimate? What is the problem with this
estimate in practice? (3%, 3%)
(b) Interpret the slope parameter estimate. (3%)
(c) Interpret the value of $R^2$ obtained, and draw a Venn diagram for illustration. Explain whether
you expect to a low or a high $R^2$ for this empirical study. (3%, 3%, 3%)
