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The demand for energy is a derived demand in nature. Hence, it is vital when modelling energy demand that the impact of technical progress is appropriately captured. However, the energy economics literature does not give a clear guide on how this can be achieved. One strand suggests that technical progress is ‘endogenous’ via asymmetric price responses, whereas another strand suggests that it is ‘exogenous’. With references to appropriate academic literature, write an essay to critically evaluate the role of technical progress and asymmetric price responses in energy demand modelling. In your essay, you may want to consider, but not limit yourself to, • the use of graphical and mathematical techniques to explain and illustrate economic concepts • the application of relevant economic methodological analysis to real world issues. Adeyemi, O. I & L. C., Hunt (2014). Accounting for asymmetric price responses and underlying energy demand trends in OECD industrial energy demand. Energy Economics. 45, 435–444.
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