The Demand for Electricity and Natural Gas in the Northeastern United States

An estimation was done of the demand for electricity and natural gas in residential, industrial, and commercial sectors of the northeastern part of the US, in the period from 1967-1977. Using apparently unrelated regressions in combination with the error components model, the estimation was made. Natural gas and electricity were both shown to be price elastic in the long run and inelastic in the short run, in both the residential and industrial sectors, in accordance with the estimated demand models. Natural gas had long-run income elasticity only in the industrial sector. Electricity showed a significant income effect only in the industrial sector. Fuel oil had a generally negative effect. Natural gas demonstrated a faster adjustment to change than electricity due to higher elasticities of adjustment.