Trends in Consumption and Production: Household Energy Consumption by Dzioubinski and Chipman - Essay Example

The household sector accounts for nearly 15 to 25 percent of the usage of energy in OECD countries of which the developed countries are utilizing a higher proportion of this overall usage of energy (Dzioubinski, et. al. 1999). The energy in developed countries is derived from fuels such as crude oil, but in many developing countries the people are using substitute products such as fuelwood and biomass as a means to meet their household energy needs.

Substitute products greatly impact the elasticity of any good. “If a good has substituted a rise in the price of that goodwill causes the consumer to shift consumption to the substitute good” (Colander, 2004, p.140). Elasticity means how sensible a product is to changes in the prices of the good. A very elastic good has the characteristic that changes in the price of the goodwill impact the overall demand for a particular good. If the price goes up consumption goes down, on the other hand, if the price goes down consumption goes up.

The service understudy is household energy consumption. This service is a basic need for all citizens. The acquisition of the service, especially in developed countries has the characteristic of being inelastic. Irrelevant of fluctuation in prices the consumer will purchase the service from its local energy provider. The service is inelastic as far as the decision to acquire it or not due to the fact that energy is a basic necessity of all households. The overall levels of consumption within the households could be categorized as been influenced by the rules of elasticity.

If the prices go down people will install luxury items such as air conditioners and will turn them on for longer periods of time since it is cheap to maintain the device on and their overall quality of life rises when the device is on. When prices go up the energy consumption on luxury items such as air conditioners goes down since people are not willing to excessively waste money on that type of energy consumption. A household with greater per capita income has greater levels of disposable income and in their households, the overall consumption of energy will be higher.