Estimating the Demand Function for an Economic Resource:Electricity

In an effort to estimate the demand function for electricity, as an economic resource, Kuwait was selected as a case study because of the availability of detailed data for a long period. In estimating the residential demand for electricity in Kuwait, the "price-exponential" model was used for the first time in electricity demand estimation, although it was developed to estimate demand for water in the United States of America. The most widely used models, the linear and logarithmic, were also estimated for comparison. Five explanatory variables were used: real price of residential electricity, real per capita income, per capita residential electricity consumption in the previous period, average temperature, and average relative humidity. When the three models were estimated using montWy time-series data (1977-1981), the ordinary least squares regression results indicated that the price-exponential model was statistically superior to the linear and logarithmic models. The estimated price and income elasticity of demand using the price-exponential model were-0.656 and 0.239 in the short run and-0.994 and 0.362 in the long run, respectivel