Although there appears to be a significant relationship between the two variables, we can measure to what degree food expenditure is explained by monthly income by analyzing the value r2. As we have calculated our correlation value to be approximately 0.6, we know that the two variables have a significant linear relationship and therefore regression can be applied. The r2 value was 0.4 in 2007, which indicates that only 40% of food expenditure may have been affected by monthly income. This is similarly the case in 2009, where 35% of food expenditure was dependent on monthly income. The r2 values for both years are not high enough to be considered significant. Therefore, we conclude that there is not a strong relationship between the typical individual’s food expenditure and monthly income. Since our data implies that no significant relationship exists between food expenditure and monthly income, we also similarly conclude that the economic recession does not strongly affect an individual’s monthly expenditure on food. A low r2 value tentatively suggests that further analysis of our data will result in a failure to reject the null hypothesis.
We can determine whether we fail to reject the null hypothesis by analyzing how the p-value compares to the alpha value. The p-value represents the probability of finding relationship between food expenditure and monthly salary if the null hypothesis was true. The p-value as taken from the summary statistics table is 5.6 x 10-7, which is much smaller than the alpha value of 0.05. Therefore, we reject the null hypothesis for the sample. We can extrapolate the results of our sample to the larger population, which indicates that our rho-value is greater than zero. Thus, expenditure on food necessities may possibly be linked by the economic recession.
However, rejecting the null hypothesis does not match our prediction, which is that the economic recession will not significantly change expenditure on food necessities. These results seem opposite to common sense because economics indicates that the food market is relatively inelastic. Our results do make sense, however. The economic recession increases food prices through inflation,which suggests that even though people are still consuming the same amount of food, their expenditure increases. We also collected data on the food expenditure as a percentage of salary. The use of percentages does not indicate whether income remained constant and expenditure increased, as we have assumed. Income may have in fact decreased while food expenditure remained constant, meaning that real money spent on food may not have changed significantly,but the percentage spending which we measured increases.
