mrshearingeconomics
  • Home
  • AS level 2015
    • Induction day
    • Year 11 Induction
    • Theme 1 >
      • 1.1 Nature of economics >
        • 1.1.1 Economics as a social science
        • 1.1.2 Positive and normative economic statements
        • 1.1.3 The economic problem
        • 1.1.4 Production possibility frontiers
        • 1.1.5 Specialisation and the division of labour
        • 1.1.6 Free market economies, mixed economy and command economy
      • 1.2 How markets work >
        • 1.2.1 Rational decision making
        • 1.2.2 Demand
        • 1.2.3 Price, income and cross elasticities of demand
        • 1.2.4 Supply
        • 1.2.5 Elasticity of supply
        • 1.2.6 Price determination
        • 1.2.7 Price mechanism
        • 1.2.8 Consumer and producer surplus
        • 1.2.9 Indirect taxes and subsidies
        • 1.2.10 Alternative views of consumer behaviour
      • 1.3 Market failure >
        • 1.3.1 Types of market failure
        • 1.3.2 Externalities
        • 1.3.3 Public goods
        • 1.3.4 Information gaps
      • 1.4 Government intervention >
        • 1.4.1 Government intervention in markets
        • 1.4.2 Government failure
    • Theme 2 >
      • 2.1 Measures of economic performance >
        • 2.1.1 Economic growth
        • 2.1.2 Inflation
        • 2.1.3 Employment and unemployment
        • 2.1.4 Balance of payments
      • 2.2 Aggregate demand (AD) >
        • 2.2.1 The characteristics of AD
        • 2.2.2 Consumption (C)
        • 2.2.3 Investment (I)
        • 2.2.4 Government expenditure (G)
        • 2.2.5 Net trade (X-M)
      • 2.3 Aggregate supply (AS) >
        • 2.3.1 The characteristics of AS
      • 2.4 National income >
        • 2.4.1 National income
        • 2.4.3 Equilibrium levels of real national output
        • 2.4.4 The multiplier
      • 2.5 Economic growth >
        • 2.5.1 Causes of growth
        • 2.5.2 Output gaps
        • 2.5.3 Trade (business) cycle
      • 2.6 Macroeconomic objectives and policies >
        • 2.6.1 Possible macroeconomic objectives
        • 2.6.2 Demand-side policies
        • 2.6.3. Supply-side policies
        • 2.6.4 Conflicts and tradeoffs between objectives and policies
        • Financial Crisis v Great depression
      • Class 2016
  • A level 2016
    • Theme 3 >
      • 3.1. Business Growth >
        • 3.1.1 Sizes and types of firms
        • 3.1.2 Business growth
        • 3.1.3 Demergers
      • 3.2 Business Objectives >
        • 3.2.1 Business objectives
      • 3.3 Revenue, Costs & Profits >
        • 3.3.1 Revenue
        • 3.3.2 Costs
        • 3.3.3 Economies and diseconomies of scale
        • 3.3.4 Normal profits, supernormal profits & losses
      • 3.4 Market Structures >
        • 3.4.1 Efficiency
        • 3.4.2 Perfect competition
        • 3.4.3 Monopolistic competition
        • 3.4.4 Oligopoly
        • 3.4.5 Monopoly
        • 3.4.6 Monopsony
        • 3.4.7 Contestability
      • 3.5 Labour market >
        • 3.5.1 Demand for labour
        • 3.5.2 Supply of labour
        • 3.5.3 Wage determination in competitive and non-competitive markets
      • 3.6 Government intervention >
        • 3.6.1 Government intervention
        • 3.6.2 The impact of government intervention
    • Theme 4 >
      • 4.1 International economics >
        • 4.1.1 Globalisation
        • 4.1.2 Specialisation & Trade
        • 4.1.3 Pattern of trade
        • 4.1.4 Terms of trade
        • 4.1.5 Trading blocs & WTO
        • 4.1.6 Restrictions on free trade
        • 4.1.7 Balance of Payments
        • 4.1.8 Exchange Rates
        • 4.1.9 International Competiveness
      • 4.2 Poverty and inequality >
        • 4.2.1 Absolute & Relative Poverty
        • 4.2.2 Inequality
      • 4.3 Emerging and developing economies >
        • 4.3.1 Measures of development
        • 4.3.2 Factors influence growth & dev
        • 4.3.3 Stratergies for growth & dev
      • 4.4 The financial sector >
        • 4.4.1 Role financial markets
        • 4.4.2 MF in Financial markets
        • 4.4.3 Role of Central Banks
      • 4.5 Role of the state in the macroeconomy >
        • 4.5.1 Public expendicture
        • 4.5.2 Taxation
        • 4.5.3 Public sector finances
        • 4.5.4 Macro policies
  • Class List
    • Year 12
    • Year 13
ILO:

a) Distinction between market-based and interventionist methods

b) Market-based and interventionist policies:
o to increase incentives
o to promote competition
o to reform the labour market
o to improve skills and quality of the labour force
o to improve infrastructure

c) Use of AD/AS diagrams to illustrate supply-side policies

d) Strengths and weaknesses of supply-side policies

Supply Side Policy:

A supply-side policy is a government scheme to promote market forces, cut costs and to raise the full employment level of output.
Market-based policies focus on the power of the free market, or allowing the forces of supply and demand to eliminate equilibria imbalances. 

The role of the government in market-based policies is limited since it tends to interfere with the market mechanism. Conversely, interventionist policies focus on the need for the government to intervene in
markets to achieve a goal.
Market-based supply-side policies include:

• reducing income and/or corporation tax rates
• deregulating and/or privatising the public sector
• reducing or abolishing the national minimum wage and trade union power
• reforming the benefits system to encourage workers to take available jobs
• encouraging free trade.
Corporation tax explained - BBC News
​

Task:
Research and assess recent Government policy aimed at increasing the LRAS of the UK economy.  
Supply-side Policies: Specific Examples for 2019 Exams
​
Interventionist supply-side policies include:

• increased government spending on education and training
• increased government spending on healthcare
• increased government spending on infrastructure
• stricter government competition policy
• policies to reduce the geographical immobility of labour, such as improving information on job vacancies and subsidising worker relocation.
Not working: why some apprenticeships are falling short
​
3rd party Finland as one of the best education systems in the world
​

Supply Side Policy - Old v New

Now that many UK firms have been privatised, the standard argument that a government can sell off state-owned businesses is losing its potency.

It is stronger to argue that competition between firms can be improved, with descriptions and examples of how this might be achieved.

​Similarly, in relation to reducing trade union power in the UK, students should focus on additional measures that might be undertaken, rather than what has already been done.

Related article:
Privatisation versus Nationalisation
Why did we sell off the railways?
​

Examples of Policy & Intended Outcome

AS Macro Revision: Supply-Side Policies from tutor2u
Why is the efficiency below important for an economy?
​
​How could the USA Govt. of helped BMW achieve it?
How BMWs Are Made
​

AD/AS diagrams to illustrate supply-side policies

Picture

Strengths and weaknesses of supply-side policies

Exam note - you must relate the analysis to the achievement of the stated aim of the policy.

Unemployment - In contrast to fiscal and monetary policy supply side policy can be targeted directly in the labour market through education and training changes. This means that it becomes the only policy that can effectively deal with structural unemployment, by providing labour with appropriate skills to re-enter another labour market.

However if the economy currently has a negative output gap then supply side policy is not going to be as effective as monetary policy for example in shifting AD and reducing cyclical unemployment. Supply side policy will involve an element of Government spending and/or encourage grater levels of Investment which will shift AD. However a growing negative output gap could be associated to low levels of confidence and a recession, therefore unemployment is likely to increase as economic agents do not respond to the Govt. policy and a negative multiplier continues until demand side management policies are put into place.  

Task:
Based upon the above analysis. Explain the strengths and weaknesses of supply side policy in tackling key macro economic objectives:

  • Sustainable economic growth
  • Inflation
  • Current account of the BOP
  • Inequality 

    
Powered by Create your own unique website with customizable templates.