2. Analytic Approaches For The Analysis Of The Energy Demand Flashcards
Year on year growth rate
a = (E_t+1 - E_t) / E_t
E_t - energy demand in the years t & t+1
Annual growth rate over a period
a_g = (E_T1 / E_T0)^(1/T1-T0) - 1
Is it always assumed a constant growth pace inside the period T0 - T1
Yes.
The effect of extreme values inside the period is reduced
Energy demand elasticity
e_t = (delta E_t / E_t) / (delta X_t / X_t)
Delta E_t & x_t: variations of the energy demand E_t of the dependent variable X_t in period t
What does e_t > 1 imply?
Energy demand elastic
What does e_t < 1 imply?
Energy demand inelastic or rigid (not very much impact)
What does positive GDP(deltaGDP_t > 0) variations do to the variations in the energy demand(deltaE_t > 0)?
It generates positive variations of the energy demand.
Depending on the value of deltaE_t on the degree of development of the economy
What does positive variations on energy price P(deltaP> 0) do to the energy demand?
It generates negative variations in the energy demand (delta E_t<0)
(The elasticity demand of electricity is rigid/inelastic though)
How does developed vs developing countries have for elasticity in terms of income?
Developed countries usually have inelastic demand with respect to income
Developing countries usually have an elastic energy demand with respect to income
The demand of energy: E_t
E_t = Q_tEI_t = Q_t * sum(EI_t,iS_t,i)
Q - economic activity indicators
EI - energy intensity
S - structure of the sector
Energy intensity
Ratio of the total primary energy supply to a measure of economic activity, as GDP or added value
Primary energy supply / GDP
Multiple linear regression model:
What is the typical single equation for estimating energy demand?
log(E_t) = a + b * log(Q_t) + c* log(P_Et) + e_t
E_t: per capita energy consumption in year t
Q_t: per capita real income/output in year t
P_Et: unit price of energy in year t
e_t: disturbance term in year
What is the equation for
Variation including a lagged variable?
log(E_t) = a + b * log(Q_t) + c * log(P_Et) + d * log(E_t-1) + e_t
b: short run income/output elasticity
b/(1-d) : long run income/output elasticity
c: short run price elasticity
c/(1-d): long run price elasticity
What does the utility function do?
It measures the utility or satisfaction that the consumer obtains when she consumes certain basket of goods
What is the budget constraint?
The basket of goods that the consumer can obtain depend on their prices & on her available income
What is the indifference curves?
Locus of the points corresponding to a basket of goods that result in the same value for the utility function
What is utility maximization?
The consumer will select the basket of goods that will result in the maximum utility, I.e. the greatest possible satisfaction, subject to the budget constraint.
This corresponds to the point where the budget constraint line is tangent to an indifference curve.
What is the individual demand curve of a good?
It relates to the consumed quantity of a good to its price. It has a negative slope, since the greater the price, the smaller the demand, and vice versa
What is the demand curve of the market?
It is obtained by summing the individual demand curve of a good
[minimization of the producer cost]
What is the production function?
It stablished the quantity of a good that can be produced with different quantities of productive factors
Ex. Capital, labour, raw materials, etc
[minimization of the producer cost]
What is isoquant curves?
Sum for all the productive factors of the quantitative of a product factor by its unit price
[minimization of the producer cost]
What is the total production cost?
Sum for all the productive factors of the quantity of a given set of their prices, Results in a same same total production cost
[minimization of the producer cost]
What is the isocost line?
Locus of all the combinations of productive factors that, for a given set of their prices, result in a same total production cost
[minimization of the producer cost]
What is the production cost minimization?
Optimal combination of productive factors that allow for the desired production at the lowest cost.
This corresponds to the point where the isoquant curve I tangent to a line of total production cost.
(Isoquant curve = sum for all the productive factors of the quantity of a productive factor by its unit price)
