his paper presents a study of the consumption behaviors of the rural and urbanrnEthiopian households. It estimates a complete set of consumption equations forrnexpenditures on different group of commodities, applying the Working-Lesser model. Thernestimation of the required parameters is based on data from the rural and urban householdrnsun1eys conducted by the department of Economics.rnThe urban-rural welfare differences are observed across different regions, categories ofrneducatioll levels, categories of age groups and sex groups. Apart from this, significantrnwelfare differences between the rural and urban households have also been observed. Bothrnthe rural and urban household's expenditure elasticities show that clothing, durable goods,rnhousing, education and medical care and drinks and stimulants turn out to be luxwy goodrnwhile the rest are becoming necessity goods. Differences in elasticities between the tworngroups are also obtained. Disaggregated by income groups the estimates of elasticitiesrnshow that the expenditure elasticity is inversely proportional to total expenditure, whilernmarginal budget shares are declining for necessity goods and increasing for luxwy goods.rnThe marginal budget shares for food are quite high ill both sectors. In addition, thernestimates for food conform to the findings of other studies. This attribute makes thernagricultural sector the springboard for development strategies.