3.7 Supply-side Policy Flashcards
Supply side policy
Policy that increases the productive potential, which is the ability of the economy to supply more goods and services
Give 6 Supply side policies
Education and training
Reducing taxes on workers
Reducing benefits
Restricting power of trade unions
Privatisation
Development of infrastructure
How does education and training lead to more supply
More educated workers
More productive workers
More production
How does reducing taxed on workers increase supply
If there is more income availible, people who do not have jobs will be encouraged to get a job
Higher QOL
Higher output
Higher production
How does reducing benefits increase supply
People who were on benefits are now not earning enough to purchase necessities
So they need to find a job
So more people are in employment
So more production
How does restricting power of trade unions increase supply
If people are not in unions
They are not able to strike
EXAMPLE: UK lost £3bn in the coal miners strikes in 84-85
How does privatisation lead to increased supply
Government owned firms have less of an incentive to make profit
Privatisation incentivises to increase efficiency
So more production for less money
So more production in the economy so more supply
What is privatisation
The transfer of publicly owned assets to the private sector
How can development of infrastructure lead to more supply
Healthcare:
Better healthcare
Workers off for less time
More work hours done
More supply
Roads
More goods and services can be transported to different parts of the country
Larger target markets
More incentive to supply as there are more people
More supply
What are 3 negatives of supply side policies
Time lags
Cost- Opportunity cost
Resistance to policies- Trade unions may resist against attempts to limit their power
What are 5 positives of supply side policies
Targets specific markets
Combats inflation
Increased employment
Increased economic growth
Improved balance of payments
