Appliance Depreciation and the Demand for Energy

Economists have long recognized that the cost of using an appliance or machine should incorporate both the associated energy cost and a user cost for the depreciation of capital that results. One must he careful in measuring the latter. Depending on whether the appliance or machine depreciates with time or usage, quite different measures of user cost can he valid. I attempt here to identify the differences and to suggest some possible tests for determining how consumers might incorporate appliance depreciation in their decision making.