Effect of Grouping of Observations on Co-Efficient of Determination in Engel Curve Analysis

In Engel curve analysis, it is not uncommon to obtain regression of mean consumption on mean income (usually total expenditure) instead of corresponding variables or their appropriate transformations for individual households. This approach is followed because micro-level individual households data are either not available or even when available cost involved in processing these is too high to warrant their use in Engel curve analysis.