Trends in Consumption and Production - Household Energy Consumption by Dzioubinski & Chipman – Article Example
The paper “Trends in Consumption and Production - Household Energy Consumption by Dzioubinski & Chipman" is a cognitive example of an article on family & consumer science. Household energy is a service which is a necessity for people around the world. The article provides valuable information related to the consumption patters for household energy. The information within this article can be utilized to perform an economic analysis in which concepts such as elasticity, demand & supply, price elasticity, and utility can be applied to evaluate the results. The purpose of this paper is to evaluate the article mentioned above utilizing an economic framework to reach conclusions about the literature.
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 mean 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 cause the consumer to shift consumption to the substitute good” (Colander, 2004, p.140). Elasticity means how sensible a product is to changes in 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 installed 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 have greater levels of disposable income and in their households, the overall consumption of energy will be higher. The list below illustrates the key determinants of energy demand in the household sector:
- Prices of fuel and appliances,
- Disposable income of households,
- Availability of fuel and appliances,
- Regulation related to appliances or energy consumption,
- Cultural preferences (Dzioubinski, et. al. 1999).
Technology is a factor that affects consumption and purchasing behavior in a lot of industries. The household energy segment is no exception. The users of energy were positively affected by technological advances. New advances inefficient technologies for the appliances people utilized for cooking, heating, lighting, electrical appliances and building insulation brought energy savings as high as 75% (Dzioubinski, et. al. 1999). The technological advances that affected the energy consumption of household affected the supply and demand curve of the service. The demand of energy went down, but the consumers, in reality, were utilizing energy at the same rate of theoretical consumption. The lower usage was caused by having appliances which were more efficient, thus less energy was purchased from the energy providers. During this shift towards more efficient devices, the consumption would have gone down irrelevant to the price levels for household energy.
Marginal utility is defined as the satisfaction obtained from purchasing one additional unit of a product (Colander, 2004, p.193). In the consumption of household energy, the marginal utility concept applies to the consumption behavior of people. People realize that the electrical devices and appliances in their homes utilize energy which they have to pay at the end of every month. People are willing to spend more to watch a little extra television at night due to the satisfaction that comes from those couple of extra hours. When the extra usage is occurring the consumer usage is based on the satisfaction he seeks and monetary considerations are not considered into the equation.
The consumption pattern of people is an interesting field of study in which economic concepts are very useful to determine the purchasing patterns of the consumers. Price elasticity is a very important concept because it is able to forecast how changes in prices affect overall levels of consumption of a particular good or service. Companies can utilize the elasticity concept to optimize their levels of production based on a particular price which will provide the maximum total of profits for a company.