One of the dilemmas about inequality in Egypt is that perception of inequality has always exceeded actual measures of inequality. Egyptians have long called for more equal income distribution while Gini coefficient according to income figures has maintained its same magnitude ranging from 37.8 percent to 36.6 percent in the last decade (World Bank, 2012). One claim to explain this puzzle is that inequality directly impacts on welfare; people feeling worse off compared to the rest of the economy. When it comes to welfare, consumption captures people utility better than income does. Using consumption expenditure data from different waves of Household Income and Consumption survey 1999-2013, this thesis investigates consumption inequality among different income groups in Egypt and found an improvement in consumption inequality overtime. In addition, we examine to what extent does inflation affect different income groups in Egypt. We find that differences in baskets of goods consumed, perceptions of necessities and luxuries and the fact that people do not pay the same prices for the same goods weaken CPI power in estimating the average consumer\u27s cost of living. More accurate weighting for different consumption baskets based on income groups used throughout the thesis show statistically significant different inflation rates. One policy recommendation is to improve indexation policies because the lower income groups burden a proportional share of inflation
