The Price Elasticity of Residential Energy Use

by Kent P. Anderson

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The long-run elasticity of household energy consumption with respect to price can be expressed as the sum of a usage-level and a fuel-choice elasticity. Using 50-state data for 1960 and 1970, this study describes procedures for estimating mean values for both total elasticity and its two components. The procedures involve the estimation of equations for predicting stocks of energy-using equipment by energy type as well as equations for predicting energy consumption. For "own-prices," the resulting estimates suggest a mean usage-level elasticity of about one-third for electricity and (less certainly) utility gas and a mean fuel-choice elasticity of about 0.8 for electricity and 1.7 for gas. Mean cross-price elasticities vary depending on the energy type and price considered.

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