1. Calculate the price elasticity of the demand for oil based on the illustration in appendix 1. Briefly explain possible reasons for the calculated price elasticity.
2. Based on appendix 2, explain how the development of oil production affects the price formation in the oil market. Illustrate this in a supply/demand chart.
3. In appendix 3, it is mentioned that Europe is nearing deflation. Explain why this may become a socio-economic problem.
a. Explain how it is possible that Russia's economic growth in 2015 is minus 3.7 percent, according to appendix 4, but in the same year, Russia's GDP
increases from RUB 71,406 to RUB 73,010 billion.
b. Based on appendix 4, analyze the reasons for the economic growth in Russia in 2015.
Exports are taking their biggest dive so far in the illuminated period, and it is the crisis in the oil sector in particular that can take the "credit" for it.
Real growth in the period started to be positive in 2013, at 4.6%, ending in 2015 with a decrease of -25% - one of Russia's most crucial items for the country's production and growth.
At the same time, imports have fallen, also significantly, and went from a negative real-world growth of -7.9% in 2014 to -35% in 2015, the largest deviation so far in the illuminated period. As mentioned earlier, the purchasing power of the community has decreased. Therefore, private consumption falls naturally, both domestically and abroad.
Companies also do not import raw materials for production to the same extent anymore, since goods are not in demand as much as before. In addition, the weak ruble also makes it much more expensive to buy foreign goods.
Russia is also experiencing stagnant public consumption during the illuminated period. In 2015, real growth was 0, which, apart from 2013, has been roughly the result for all years. Thus, the state is unlikely to have favorable opportunities to make the public investment at this time, as other things weigh higher, such as the oil sector and inflation in society.
In addition, we see a negative development in public finances in% of GDP, which is declining in the illuminated period. In the bright period, the item has fallen from -0.8% of GDP to -4% of GDP, much more than before.
The country's economy is far from healthy, and it does not look good on the basis of Appendix 4 - the macroeconomic indicators.
Also, crucial for economic development is the fixed investments that have fallen during the illuminated period. In 2013, real growth was still positive but negative in 2014.
The negative growth continues, ending with negative growth in% of -6%. Much of the world has begun to turn Russia back, with sanctions and lower investment in the country. In the next assignment, the significance of foreign investment will be explained in more detail.