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Demand for Energy and the Revenue Impact of Changes in Energy Prices


    (Pakistan Institute of Development Economics, Islamabad.)

Energy sector is considered an important source of revenue generation for the government. However, given the price elastic energy demand structure, the revenue generating potential of this sector may be limited. This study examines this issue by analyzing the demand for different sources of energy for domestic, commercial, industrial and other users. The results show that energy demand is, in general, price elastic. Similarly, the changes in income also affect energy demand significantly. This responsiveness of the energy demand to changes in prices (own and others) and to economic conditions in the country can affect the revenue generation from this sector. In Pakistan, given the existing economic conditions and the energy price structure, the actual revenue generation may be significantly lower then expected revenue. Furthermore, the rise in energy price may not be desirable due to its impact on inflation, income distribution, economic competitiveness, environment, and on other social conditions unless it leads to energy conservation in the country.

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Paper provided by Pakistan Institute of Development Economics in its series PIDE-Working Papers with number 1999:174.

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Length: 34 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:pid:wpaper:1999:174
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  1. Helliwell, John F. & Cox, Alan J., 1979. "Electricity pricing and electricity supply : The influence of utility pricing on electricity production by pulp and paper mills," Resources and Energy, Elsevier, vol. 2(1), pages 51-74, September.
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