The residential demand for electricity: a variant parameters approach

Residential demand for electricity is specified in this paper as a function of three separate ''marginal'' prices in addition to income, the price of substitutes, and a proxy (lagged consumption) for the stock of electrical appliances. The analysis shows that not only is the demand for electricity price inelastic, it is more inelastic for the lower levels of consumption. The resulting estimates also indicate a smaller discrepancy between the short and long-run price elasticity of electricity than that obtained from other demand studies. The estimated price and income elasticities are robust, consistent, and capable of providing a reliable basis for policy formulation. 27 references.