Effects of changes in electricity price on electricity demand and resulting effects on manufacturing output

Many countries are interested in reducing electricity consumption in connection with that the electricity demand has been increasing in recent years. Price control is often used as a method of controlling electricity demand in the short-term. However, even if price control causes to decrease in electricity use, the decrease in electricity demand results in a decrease in economic activity as electricity use plays a role in one of input factors. In this respect, this research analyze how changes in electricity price influence electricity demand, and how subsequent changes in electricity demand change production of manufacturing output, focusing particularly on how these relationships change over space. In this paper, we use the simultaneous equation based on Generalized spatial two-stage least squares model (GS2SLS) to examine the interrelationship among electricity demand, economic output, and electricity price. By assessing these relationships in one modeling framework, we evaluate electricity-price scenarios to help policymakers about electricity price decisions.