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Costs and Benefits of Supply-side policies (Benefits (Targets specific…
Costs and Benefits of Supply-side policies
Benefits
Targets specific markets
Supply-side can target certain parts of the economy e.g. where there are skill shortages to improve efficiency.
Combats inflation
They can combat inflation as they cause efficiency and production to grow resulting in a higher aggregate demand.
Increases employment
A rise in aggregate demand and supply means more worker will be employed.
Increases economic growth
they help increase average standard of living and economic welfare.
Improves the balance of payments
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.
Costs
Time lags
Supply-side policies can take a long time to put into effect.
e.g. infrastructure takes a long time to build.
Resistance to policies
Some people will resist these policies e.g. trade unions will go against policies restricting their power.
Equity issues
supply-side policies can have a negative effect on the distribution of income, especially reducing benefits.
Unintended effects
For example, a cut in taxes may mean workers could work less as they can get the same wages for less time.
Cost
some of these policies are very expensive e.g. infrastructure, education, etc.