No abstract

-This paper attempts to estimate the kerosene demand function in Korea over the period 1981-2012. As the kerosene demand function provides us information on the pattern of consumer's kerosene consumption, it can be usefully utilized in predicting the impact of policy variables such as kerosene price and forecasting the demand for kerosene. We apply least absolute deviations and least median squares estimation methods as a robust approach to estimating the parameters of the kerosene demand function. The results show that short-run price and income elasticities of the kerosene demand are estimated to be -0.468 and 0.409, respectively. They are statisitically significant at the 1% level. The short-run price and income elasticities portray that demand for kerosene is price-and income-inelastic. This implies that the kerosene is indispensable goods to human-being's life, thus the kerosene demand would not be promptly adjusted to responding to price and/or income change. However, long-run price and income elasticities reveal that the demand for kerosene is price-and income-elastic in the long-run.

The main cooking and heating fuel in the urban area of South Korea is city gas (CG), whose main ingredient is natural gas. A total of 34 operators in the country supply residential CG (RCG) in the form of a regional monopoly. Both the government and the operators need information on the demand function for RCG to establish policies and business plans. In response to this need, this article empirically estimates the demand function for RCG. There are two difficulties in securing data necessary for this estimation. First, since all RCG operators are private and most past performance data are trade secrets, the data required for the estimation are not usually available. Second, the prices of RCG are strongly controlled by local governments and price management authorities rather than determined in the marketplace. To overcome these two difficulties, this study applied the price sensitivity measurement experiment and a survey on RCG demand was conducted with 886 households nationwide. More specifically, each household was asked about current RCG usage and rates and then how they would adjust demand for the four alternative rising RCG prices. Therefore, a total of five observations were obtained for each household. The total number of observations used in this study was 4430. The estimated demand function for RCG held statistical significance. In addition, the price and income elasticities of demand were obtained as −0.570 and 0.038, respectively, securing statistical significance. The demand for RCG was inelastic to both price change and income change. This information can be useful in various fields of policymaking related to RCG.