New Zealand household consumption patterns 1983–1992: An application of the almost‐ideal‐demand‐system

Econometric analysis of household expenditure is a most important area of economic inquiry because the estimated demand parameters are particularly useful in many of the behavioural aspects of forecasting consumer demand as well as in welfare issues. This paper analyses expenditure patterns in New Zealand by estimating, on a time series of budget consumption data, a demand system based on a demographically extended version of the Almost Ideal Demand System. From the estimated system we have computed the price, total expenditure and household size elasticities which are within expectations and offer some insights of consumer behaviour.