Demand for tradables in an open Economy: The case of Diesel in Uganda

The impact of Diesel availability in small economies can never be under estimated. Energy is an essential factor and a key aspect in every form of development. Specifically energy is required for industrial growth, locomotion, domestic lighting, heating and cooking, and for many other factors. This demand however is not met with supply causing escalating prices and worsening peoples' welfare. This highlights the demand elasticity for diesel in Uganda. Accordingly, the study employees a double logarithm model to investigate this issue together with a list of tools of analysis such as vectors error correction model, which uses the impulse response function and variance decomposition model to show the response of variables to shocks. The study also investigates both short run and long run elasticities for per capital income and price.