Targeting the Price of Energy Carriers and Consumption Behavior of Urban Households in Iran

The main purpose of this paper is to investigate the composition of consuming expenditures of urban households in Iran under various scenarios of the price of energy carriers. For this purpose، initially، goods and services consumed by urban households are divided into 7 groups and the share of total household expenditures is estimated by applying an almost ideal demand system (AIDS) and the data of the years 2001-2010 for 10 cost deciles. Then، the average of the share of each of these groups is simulated for the years 2011 -2013 under two scenarios of 20 and 85 percentage of the price. The results indicate that using either of these two scenarios does not change the consumption composition of urban households and consumers preferences before relating the price to the needs and priorities. So، if the government plans to impose steep price scenarios، it should follow supporting supplements policies to compensate the decline of consumer welfare.