Modelling consumers' energy demand

Abstract

The modelling of consumers demand for energy in a general consumer demand system is discussed. Electricity, fuel-oil, the stock of electricity using durables and housing are assumed to be separable from other consumer commodities. This lower level demand system is modelled using a Gorman Polar form. The linear expenditure system is a nested hypothesis of the more general Gorman Polar form and the two systems are estimated and tested against each other. A dynamic version of the linear expenditure system is also estimated. As expected the results indicate that the Engel elasticities for electricity and fuel-oil differ considerably, and that the stock of electricity using durables contributes to explain the use of electricity and fuel-oil over the period.