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Some energy Policy analyses focus on the effects of large price changes in international markets. Multi-sector econometric models (Broadman and Hogan) or Computable General Equilibrium models ( Uri; Kemfert and Welsch; Breuss and Steininger ) help to evaluate the overall consequences for a country’s energy sector and macro economy. Mathematical programming models also remain useful, especially when environmental or performance constraints limit production choices in the energy sector. But sector models are typically extensions of firm problems, in that the objective function concerns processor profits or costs, input prices are given, and product demands are taken as inelastic ( Vlachou, Basso, and Andrikopoulos; Manne). Under these assumptions, consumer price adjustments are synomous with firm cost adjustments. For better understanding of markets and price relationships in the presence of environmental regulation, inelastic facor supplies and price responsive demands should be taken into account.

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Economics Commons