Mn Mt Qn Qt CCG IXaXe118

We observe that (11.8) holds both for current values and volumes. Current values and volumes of these variables determine the implicit price index of the items which is denoted by a leading letter P (for price) in the variable name.

The following balance equation for energy states that supply has a domestic gross output Qe component (note that Qe in equation (11.8) above is net output) and import Me component which is matched by demand of consumers Ce, demand by the domestic production sector />' and exports of energy A-6:

The demand components for private non-energy consumption C®, public consumption G, fixed investment and non-energy imports M are determined by the usual specifications at constant prices. Both the specification for fixed investment, labour employed and the price index of net national non-energy income follow from a postulated Cobb-Douglas production function with constant returns to scale.

The energy components are linked with the non-energy components via both flow and price relationships. Following the arguments outlined in Section 11.4 we postulate for both energy demand for private consumption C and energy demand for production De that the corresponding not directly observable services .St and .S'q are determined by energy flows and non-energy capital stock Kc and Kq, respectively:

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