ABSTRACT
This chapter outlines the formulation of a dynamic model for personal consumption expenditures based upon utility theory. Special attention will be directed toward the determinants of household energy consumption, in particular electricity demand. A prerequisite for the development of an effective energy policy is knowledge of the relative importance of the factors affecting the demand for electricity. It is convenient in demand analysis to divide the economy into separate sectors, agricultural, commercial, residential, industrial, and government. The chapter explains discussion of the data required for estimation. Results of a preliminary single equation model estimated from available data are discussed so as to illustrate the potential for an expanded model. The chapter suggests that alternative modelling strategies that might be effectively developed to address other electricity policy issues. The demand for electricity is a derived demand which reflects the uses to which electricity is put rather than the direct satisfaction provided to consumers from the use of the commodity itself.
