Compare the trend in crude oil price from April 2014 to June 2014 with the trend from June 2014 to September 2014.
Use a demand and supply diagram to show the change in the average price of one unit of solar power mentioned in the article.
- What formula would you use to measure the link between the change in the price of solar power and the change in the demand for oil? [1]
- What would you expect this measure to show in this situation? Explain your answer. [3]
In Venezuela the state-owned industry sells gasoline (petrol) at a price below the market price. Explain the likely economic effects if the price mechanism were allowed to operate freely without government interference in Venezuela.
Venezuela was experiencing a recession, high inflation and the government had difficulties balancing its budget. Controls on foreign exchange and imports have been used to keep the exchange rate of Venezuela’s currency, the bolivar, stable. Discuss whether a devaluation of the bolivar might be seen as a ‘dangerous step’ or as the solution to Venezuela’s economic problems.