Abstract
The purpose of this paper is to analyse the extent to which the observed data support the postulates of neoclassical theory of consumer behaviour. The absolute price version of the Rotterdam model has been estimated for rural and urban areas of India separately. The results indicate a trade off between theoretical consistency and goodness of fit. The symmetry, but not homogeneity, conditions are found to be empirically valid in rural India. All the other hypotheses are rejected both in rural and urban areas of India. Frequent violation of convexity conditions is also observed. The estimated marginal budget shares, income and price elasticities show marked differences in consumption patterns of rural and urban consumers in India. The effect of foodgrains price rise on the demand for various items is also analysed.
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