2. Analytic Approaches For The Analysis Of The Energy Demand

Question 1

Year on year growth rate

Answer 1

a = (E_t+1 - E_t) / E_t

E_t - energy demand in the years t & t+1

Question 2

Annual growth rate over a period

Answer 2

a_g = (E_T1 / E_T0)^(1/T1-T0) - 1

Question 3

Is it always assumed a constant growth pace inside the period T0 - T1

Answer 3

Yes.
The effect of extreme values inside the period is reduced

Question 4

Energy demand elasticity

Answer 4

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

Question 5

What does e_t > 1 imply?

Answer 5

Energy demand elastic

Question 6

What does e_t < 1 imply?

Answer 6

Energy demand inelastic or rigid (not very much impact)

Question 7

What does positive GDP(deltaGDP_t > 0) variations do to the variations in the energy demand(deltaE_t > 0)?

Answer 7

It generates positive variations of the energy demand.
Depending on the value of deltaE_t on the degree of development of the economy

Question 8

What does positive variations on energy price P(deltaP> 0) do to the energy demand?

Answer 8

It generates negative variations in the energy demand (delta E_t<0)

(The elasticity demand of electricity is rigid/inelastic though)

Question 9

How does developed vs developing countries have for elasticity in terms of income?

Answer 9

Developed countries usually have inelastic demand with respect to income
Developing countries usually have an elastic energy demand with respect to income

Question 10

The demand of energy: E_t

Answer 10

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

Question 11

Energy intensity

Answer 11

Ratio of the total primary energy supply to a measure of economic activity, as GDP or added value

Primary energy supply / GDP

Question 12

Multiple linear regression model:

What is the typical single equation for estimating energy demand?

Answer 12

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

Question 13

What is the equation for
Variation including a lagged variable?

Answer 13

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

Question 14

What does the utility function do?

Answer 14

It measures the utility or satisfaction that the consumer obtains when she consumes certain basket of goods

Question 15

What is the budget constraint?

Answer 15

The basket of goods that the consumer can obtain depend on their prices & on her available income

Question 16

What is the indifference curves?

Answer 16

Locus of the points corresponding to a basket of goods that result in the same value for the utility function

Question 17

What is utility maximization?

Answer 17

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.

Question 18

What is the individual demand curve of a good?

Answer 18

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

Question 19

What is the demand curve of the market?

Answer 19

It is obtained by summing the individual demand curve of a good

Question 20

[minimization of the producer cost]

What is the production function?

Answer 20

It stablished the quantity of a good that can be produced with different quantities of productive factors

Ex. Capital, labour, raw materials, etc

Question 21

[minimization of the producer cost]

What is isoquant curves?

Answer 21

Sum for all the productive factors of the quantitative of a product factor by its unit price

Question 22

[minimization of the producer cost]

What is the total production cost?

Answer 22

Sum for all the productive factors of the quantity of a given set of their prices, Results in a same same total production cost

Question 23

[minimization of the producer cost]

What is the isocost line?

Answer 23

Locus of all the combinations of productive factors that, for a given set of their prices, result in a same total production cost

Question 24

[minimization of the producer cost]

What is the production cost minimization?

Answer 24

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)

Question 25

What is the equation if the total production cost?

Answer 25

c = C(K,E) = p_k + p_E * E