Do higher electricity prices cause people to use less?

Question

Demand for gas is elastic...

I've read that cars in Europe are, on average, more efficient than cars in the US due to significantly higher taxes on gasoline.

...but not for electricity?

In the context of electricity, however, I have heard that demand is inelastic - people tend to use about the same amount regardless of the cost.

Is this true?

Here's a comparison of per capita electric usage for the USA and a few other high income nations around the world:

When comparing the US to other high income nations, is the discrepancy in usage due to higher prices, or some other factor(s)?

Answer 1

In some locations, the overall cost of domestic electricity & gas (not gasoline) is not solely dependent on usage.

This can arise in locations where electricity and gas bills have two charges, the first being a service or utility charge that is charged to every household irrespective of usage, because it's a fixed cost. The other cost is for usage of electricity or gas; this is the variable cost.

The service or utility charge is a cost for distributing electricity or gas. In the case of electricity, this pays for items such as: poles, pylons, wires, transformers and sub-stations. Sometimes these costs can be very high compared to the variable cost of usage.

The other thing to consider is what is electricity being used for, predominantly: lighting, cooking, heating and cooling. Who wants to be in a dark house at night? Who want's to eat raw food and who want's to be cold in winter? Who want's wear dirty, smelly clothes just to save money on electricity for the washing machine?

Humans are creatures of habit, if we are to use less electricity in the home, we need to have energy efficient appliances & insulated homes.

Answer 2

Part of the issue may be people don't realise how much electricity they are using.

When you switch on an appliance in your home, you can't tell how much electricity that is using, or what that will cost you. You don't know whether it is wasting much electricity by leaving it on all day. It may be several months later before you receive a bill, so you can't match increased costs with your usage.

An answer to this could be smart meters. These let you see usage in real time, so you can see how specific appliances affect consumption. If you can watch your bill increasing, you may be more inclined to switch things off when not needed. Or you can see if its worth replacing inefficient devices.

Answer 3

Much of it is government & customs. Here were 50% of the population has electric. It is like this. People who can afford on lowest rate least use have a lightbulb & fan in there home. They use care not to use to much to avoid going into the next rate higher. As they improve there life. They buy a motorcycle & big screen T.V. Middle class. The rate goes up but it is status to have a T.V. Next comes a refrigerator & or window fan. But most buy a small one.So use less than Americans were every thing is supper sized. Custom. Women will not give up walking to the market every day to shop with there friends so need a small fridge. From there you move up to the upper class. You put in A.C. in the home. Your rate goes up. so few have at that rate. So they buy less things for electric. Then you move to the rich. Washmachine T.V.fridge apartment size, 2 A.C. units, freezer small. you pay for electric then because you can afford it.So high rate keep many from buying. So they use less. All is smaller than in America except the T.V. So they use less. So Government rates encourage some at the bottom to have. But discourage some better of not to have. Also here power poles often end at the city limits. So some well of farms may not have. Grandmother is like that. Nice plantation. But 20 years from electric here. So Americans like all supper sized use more. Larger fridge, larger freezer, more A.C.we keep houses warmer than them. Custom of not buying all bigger is better. Washers are smaller also. Spin dryers & hang on line in most of the world. They use less. Less food also goes to waste so no need have a big box as less to go in it in left overs. Custom there.