Abstract

This paper investigates and estimates the price and income elasticity of electricity consumption and then compares the level of sensitivity of demand for electricity in the rural and urban areas in Malaysia. The non linear model was employed to estimate the elasticity of electricity consumption. The electricity demand has been estimated as a function of tariff, real GDP, gas price and population in the rural and urban population. The gas price has been used as a proxy to measure the level of sensitivity goods by using the annual data covering the 1980-2009 period. The results showed that the income elasticity ( was less than unity which indicated electricity as a necessity good to the people in Malaysia. The reaction of electricity consumption was found to be greater in the urban area compared to the rural area. The higher sensitivity of electricity consumption in the urban population was due to higher exposure to electricity appliances and facilities. 

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