Fuel Demand Elasticities in Pakistan: An Analysis of Households' Expenditure on Fuels using Micro Data

Abstract

This study aims to examine the pattern of households' expenditure on fuel consumption in Pakistan using the data of Household Income and Expenditure Survey (1984-85). Price and income elasticities have been estimated by applying the Extended linear Expenditure System. It is found that the expenditure pattern of the rural households is different from the urban households, with the rural households spending proportionately more on fuels. The estimates of the income elasticities imply that all fuels are a necessity for both urban and rural households. The price elasticities of different fuels are found to be extremely low, implying that the Consumption of fuels in Pakistan is highly price inelastic.