The variation in expenditure and spending among households will eventually affect differences in lifestyle. Economic impact of this different lifestyle will exacerbate and widen the income disparity between rich and poor households. Household expenditure and income disparity can lead to significant differences in either rural or urban location in terms of their expenses on basic needs. The urban household tends to increase their consumption based on the level and increment of their income in order to improve their lifestyle. While, Micheal Beine et. al, disclosed their findings whereby the household in United States prefer to spend their money at shopping centre rather than choose their leisure time for other activities.
According to the above problem statement, the East Coast of Peninsular Malaysia, which is represented by Pahang, Terengganu and Kelantan will be selected as research area for the current study. A random sample of household of each state will be selected for the analysis. The study is intended to investigate changes in household’s consumption and their spending priorities interchangeably with income during the economic crisis.
Simple random sampling was used as the basis in the selection of the respondents. Three states in the East Coast of Peninsular Malaysia were selected namely Pahang, Kelantan and Terengganu. The selection of districts and mukims was purposively based on the suggestion from District Officers due to their knowledge and wide experience about the survey areas. In Pahang, two selected districts were Kuantan (urban) and Pekan (rural), while for Kelantan, the selected districts were Kota Bharu (urban) and Kuala Krai (rural). Lastly for Terengganu, Kuala Terengganu and Setiu were chosen to represent the urban and rural area respectively. Based on mukims selected in each state, respondents were drawn by simple random sampling technique.
The information provided in Figure 1 below shows the ditribution of sampled respondents (households) by state. All togather a total of 645 respondents were interviewed with breakdown shows that 218 households were interviewed in Pahang, 213 households in Kelantan and 214 households in Terengganu. As noted the samples from each state was divided into rural and urban areas for which about the same number of samples were drawn from the rural area (314 households) and urban area (311 households). The number of samples by rural and urban was stipulated to represent a sufficient number of representation from each stratum for the analysis. The system of structural equations for simultaneous solutions of the reduced forms are shown below for identification of order condition (we have not shown here the rank condition for limitation of space). Most of the strtructural equations used in this study are over-identified meaning that they have several solutions rather than a single solution as non of the equations is exactly identified. The only problem arising from identification of the simultaneous equation technique is the possiblity of no solution which occurs when the equation is found to be under-identified. This study uses the two stage least square (2SLS) statistical estimation procedure using SHAZAM software. Specifically other software the Satistical Package for Social Scireces (SPSS) was used to verify the results and they were found to yield identical results for all states.

Figure-1

Figure 1.