An Analysis of Consumption Pattern in Pakistan

The paper aims at testing the validity of Engel’s law with data on Pakistan. Consumption functions for urban and rural areas have been estimated separately. These functions are shown to be determined by total expenditure and household size. Engel’s law is confirmed for some commodity groups but not for all. Following tests of urban-rural homogeneity and of stability of urban and rural consumption functions, demand growth rates for different food and non-food items have been calculated, assuming different growth rates of total expenditure and household size.