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Supply-Side Policies

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by

Hugo Flower

on 10 February 2014

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Transcript of Supply-Side Policies

Examples of Supply Side Policies
Education and training
AS revisited:
The position of the AS curve depends primarily on the quantity of factor inputs available in the economy, and on the efficiency of those factors.
Definition:
Supply side policies are those that improve the supply side of the economy. In other words, they are government policies that increase the potential capacity output of the economy.
These can be catagorised
Interventionist
http://www.bbc.co.uk/news/business-11619093
a) In what way are these supply side policies?
b) Using an AD/AS diagram, discuss the likely effect of these policies on the UK economy
Evaluation of Supply Side policies
They can be expensive for the Government
By the end of the lesson you will:
1. Be able to analyse different supply-side policies
2. Evaluate the effectiveness of these policies

Supply-Side Policies
The PPF is shifted outwards and AS is shifted right.
SUPPLY SIDE POLICIES therefore focus on affecting these determinants of Aggregate Supply in order to shift the AS curve to the right.
AD
AS1
Price
Level
Real Output
Flexibility of labour markets
Lower unemployment benefits
Promotion of competition
Incentive effects
Deregulation
Privatisation
How many can you think of?
Reduce the power of trade unions
Encourage business start-ups
Grants to encourage R & D
Free Market
Product Market
Labour Market
Supply-side objectives:
They are often very long-term approaches - Time Lag
The effectiveness depends on the state of the economy at the time
Supply-side policies can also affect AD at the same time - conflict with Fiscal Policy
Homework
Find an article relating to real life supply side policies and write a short essay on the effectiveness of such policies
Possible negative effects on income distribution
Key concepts to focus on are incentives, enterprise, technology, mobility, flexibility and efficiency.
•Improve incentives and invest in people’s skills
•Increase labour and capital productivity
•Increase the occupational and geographical mobility of labour
•Increase capital investment and research and development spending by firms
•Promoting more competition and stimulate a faster pace of invention and innovation
•Provide a platform for sustained non-inflationary growth of an economy
•Encourage the start-up and expansion of new businesses / enterprises
Full transcript