THE DEMAND FOR RESIDENTIAL ELECTRICITY - NEW EVIDENCE ON TIME-VARYING ELASTICITIES

This study employs a generalized functional form to examine demand for residential electricity. The appropriateness of the conventional double-log and linear forms are tested. Time-varying elasticities are estimated. Major findings are summarized as follows: (1) the double-log and linear forms can be rejected at the 0.05 and 0.01 levels, respectively; (2) long-run own-price elasticities declined in absolute value consistently from 2.13 to 1.19 during the period 1950-87; (3) long-run income elasticities also decreased from 1.29 to 0.97 during the same period; and (4) long-run cross-price elasticities with respect to the price of natural gas dropped from 0.40 to 0.29. These results may be helpful to decision makers in determining the change in total revenues owing to the change in prices, pricing strategies, the effectiveness of energy conservation programmes, the effect of rising real income on the demand for residential electricity and future demand. © 1991, Taylor & Francis Group, LLC. All rights reserved.