2.6.3 Supply-side policies Flashcards
Competition policy
Government policy directed at encouraging competition in the private sector
Competitive market
when no single firm has a dominant position and whether the consumer has plenty of choice when buying goods or services
Ease of entry
The ease with which a business can enter a market in search of profit. When barriers to entry are low, a market can grow, increasing competition between firms and creating new jobs.
Geographical immobility
Barriers to people moving from one area to another to find work
Immobility of labour
barriers to the movement of people between areas and between jobs
Incentives
things which motivate people to behave in a certain manner
can be used to make goods and services markets and labour markets work more efficiently and therefore creating greater productive capacity
Infrastructure
The transport links, communications networks, sewage systems, energy plants and other facilities essential for the efficient functioning of a country and its economy. They often involve the production of public goods or the production process
Occupational immobility
workers having the wrong skills for available job vacancies.
This can be overcome by giving labour transferable skills.
Poverty trap
it affects people on lower incomes.
It creates a disincentive to look for work or work longer hours because of the effect of tax and benefits system
Productive potential
Productive capacity of the economy
Productivity
output per worker
or
output per unit of input
Pro-market supply-side policies
these policies focus on reducing the size of the state and extending the role of market forces in allocating scarce resources
Relative poverty
Measures the extent to which a household financial resources for below an average income threshold for the economy
Spare capacity
when a business is not making use of its full capacity – there are spare factors of production including capital enterprise, land and labour.
When an economy has plenty of spare capacity, SRAS is elastic, and the output gap is negative
State-driven supply-side policies
when a government believes that active intervention in markets can help achieve increased productive capacity and competitiveness
