Two-stage budgeting postulates that the consumer's utility maximization dec
ision can be decomposed into two steps. In the first stage, total expenditu
re is allocated over broad groups of goods. In the second stage, group expe
nditures are allocated over elementary commodities. In this article, we ass
ume that the current weighted true cost-of-living price indices defined for
each broad group of elementary commodities vary only very slightly with su
b-utility levels. Hence, it is possible to approximate the first stage of a
two-stage budgeting structure by a maximization problem involving a single
price index and a single quantity index for each of the broad groups. Rela
tionships between conditional and unconditional expenditure and price elast
icities are derived within this context.