Jan 1, 1977
A model of demand for alternative forms of energy is developed which separately identifies short- and long-run adjustments in response to changes in energy prices and other factors related to energy demand. Estimates are presented of the determinants of household demand for electricity based on highly disaggregated data from Los Angeles County from the summer of 1972 to the summer of 1974. The results are highly statistically significant and show that the short-run effect of a change in the marginal price of electricity is to produce an elasticity of about -0.35. The longer run adjustment shows an own-price elasticity in the intensity of utilization of about -0.70. The overall quality of the results supports the value of using highly disaggregated data; a specification that distinguishes between short- and long-run components of demand; and theoretically correct variables, such as the marginal price of energy instead of the average price.