Energy Demand with the Flexible Double-Logarithmic Functional Form *

Abstract

A flexible double-logarithmic function form is developed to meet assumptions of consumer behavior. Then annual residential and commercial data (1970-87) are applied to this functional form to examine demand for petroleum products, electricity, and natural gas in California. The traditional double log-linear functional form has shortcomings of constant elasticities. The regression equations in this study, with varied estimated elasticities, overcome some of these shortcomings. All short-run own-price elasticities are inelastic and all income elasticities are close to unity in this study. According to the short-run time-trend elasticities, consumers ‘fuelpreference in California is electricity. The long-run income elasticities also indicate that the residential consumers will consume more electricity and natural gas as their energy budgets increase in the long run.