Empirical regularities in South African consumption patterns

Abstract

This article investigates a number of empirical regularities in the South African consumption patterns. The data support the following empirical regularities: (1) variability in consumption systematically exceeds the variability in prices; (2) law of demand; (3) income flexibility is about -0.5; (4) Engel's law; and (5) the demand hypotheses, demand homogeneity and Slutsky symmetry are acceptable. In contrast to the findings for a number of other countries, another important empirical regularity that consumer's utility function is additive is rejected for the South African consumers. Based on the implied demand elasticity estimates from the preferred model, it is found that food, housing and medical care are necessities, and clothing, furniture, transport and recreation are luxuries and demand for all the commodities are price inelastic.