Household expenditure on consumption of goods and services increases over time and imposes high financial burden on household which causes dramatical decline in their welfare indices. This study aims at analysing the poverty and social welfare over the past two decades, during the period1991 to 2012, using expenditure and income statistics of urban and rural households. This study uses Engel’s law on consumer behaviour in order to analyse expenditure and income statistics of households over the last two decades. The Engel’s law states that an increase in household income, which leads to an improvement in the economic situation of households, the proportion of foods decreases in household expenditures. Clearly, if the share of income devoted to food (and other necessities) falls as income increases, then the available share for other goods and services that are non-essential increases. The results of the current study show that, during the study period, although the average real household expenditure on foods decreases, a sharp increase in real expenditure of nonfoods imposes a financial stress on household to provide these goods. These findings confirmed the results of other studies arguing that not only poverty has not alleviated in Iran, but also the consumption structure of the Iranian household has changed from necessity goods to unnecessity or luxury goods during these decades. This happened due to high decreases in the quantity of necessity goods consumption.
