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.

Keywords

Flexible functional form Energy demand oil electricity natural gas California

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