Costs and Benefits of Supply-side policies

Benefits

Targets specific markets

Combats inflation

Increases employment

Increases economic growth

Costs

Time lags

Resistance to policies

Equity issues

Unintended effects

Improves the balance of payments

Cost

For example, a cut in taxes may mean workers could work less as they can get the same wages for less time.

they help increase average standard of living and economic welfare.

Supply-side policies can take a long time to put into effect.

Supply-side can target certain parts of the economy e.g. where there are skill shortages to improve efficiency.

They can combat inflation as they cause efficiency and production to grow resulting in a higher aggregate demand.

Some people will resist these policies e.g. trade unions will go against policies restricting their power.

some of these policies are very expensive e.g. infrastructure, education, etc.

They lead to a higher quality of resources, leading to more competition in price and quality which helps achieve a balance between imports and exports.

A rise in aggregate demand and supply means more worker will be employed.

supply-side policies can have a negative effect on the distribution of income, especially reducing benefits.

e.g. infrastructure takes a long time to build.