Supply-Side Policy (Edexcel IGCSE Economics)

Privatisation

• The transfer of Government owned assets or firms into the private sector, usually by sale of company shares

• Privatisation encourages new firms to enter the market and compete, thus increasing the total supply and the efficiency in the economy

Deregulation

• This is the process of removing government controls and laws from markets in order to increase competition and encourage new firms to enter the market

• Any regulation increases the cost of production for firms. Deregulation decreases costs, which may result in greater supply

Education and training

• Increasing government spending on education and retraining raises the quality of the workforce

• Productivity increases also increase the supply of output

Regional policies

• Encouraging firms to relocate to high unemployment areas

• Improving transport links to high unemployment regions

• Providing subsidies to firms to hire locally unemployed workers

Lower direct taxes

• Reducing income tax rates incentivises workers to work harder (they keep more money for themselves) and encourages more workers to join the labour force

• Reducing corporation tax allows firms to keep more of their profits, which they can use to invest in new machinery and technology

Infrastructure spending

• Spending on road and rail networks to improve transport links for goods and workers

• Improving broadband coverage to enable workers and firms to relocate to low-cost areas

Improving incentives to work and invest

• Restructuring the unemployment benefits system to incentivise the unemployed to seek work

• Increased government spending on innovation increases the supply of potential jobs in the economy

  • Direct support to firms (subsidies) increases output and promotes international competitiveness