Demand for gasoline in Japan

To explore the relationship between the price of gasoline, price of substitute goods, and per capita income in Japan, this study suggests and estimates a partial adjustment model. Applying the ordinary squares method to the time-series data for the years 1957-99, the suggested model is estimated. The statistical analysis of our study suggests that previous consumption behavior, price of gasoline, price of substitute goods, and income are significant variables that determine gasoline consumption in Japan. In the short-run, elasticity of gasoline demand, with respect to price and income, are inelastic, -0.115 and 0.296 respectively. However, for the demand for gasoline in the long-run, income tends to be slightly elastic, 1.056, while price elasticity remains inelastic, -0.411.