Asymmetric price and income elasticities of residential electricity demand in Taiwan

Chun-Huang Liao, Jiaxuan Chen and Zhihui Liu

Applied Economics, 2025, vol. 57, issue 46, 7438-7451

Abstract: This paper uses per-household and per-capita data from 2000 to 2023 to estimate the impact of changes in electricity prices and income levels on residential electricity demand in Taiwan. The important issues of asymmetric price elasticity and asymmetric income elasticity were studied. The main conclusions are as follows: (1) demand responds much more to increases in prices than to decreases; for price increases, the elasticities range from −0.24 to −0.28, and they range from −0.13 to −0.17 for price decreases; (2) demand responds much more to increases in incomes than to decreases; for income increases, the income elasticities range from 0.57 to 0.67, and they range from 0.19 to 0.34 for income decreases; (3) the speed of demand adjustment is faster to changes in income than to changes in price, i.e. electricity consumption per household/capita will continue to increase as income grows – unless electricity prices increase substantially. Ignoring the asymmetric elasticities will bias the estimated response of electricity consumption to price and income changes, and then incorrect power capacity planning and pricing policy design.

Date: 2025
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DOI: 10.1080/00036846.2024.2392053

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