Water consumption, to a certain extent, could characterize the level of economic development of a city. The overall demand for water in Macau has maintained sustained growth for many years due to the rapid development of the economy and continuous increase in population. It is imperative that we act now to conserve water and develop the effective water pricing strategy. However, pricing strategy must be established on the basis of empirical analysis of water demand function and price elasticity of demand. This thesis attempts to figure out the relationship between residential water consumption and possible influencing factors by using economic and statistical theories and tools. Different determinants such as water price, income, population, meteorological situations would be analyzed to explain the changes on residential water consumption. By means of some tests, a water demand function would be ultimately constructed. And the price elasticity of demand would be also derived. The model and the price elasticity derived could provide a reference for related research and decision-making.