Unit 3.7 · Supply-side Policies
Market-based Policies
AO2AO4Diagram required
Syllabus Requirement
Encourage competition through deregulation, privatization, trade liberalization, anti-monopoly laws. Examples are labour reforms which involves reducing union power, benefits, and minimum wage. Incentives include personal and business tax cuts.
Assessment Objectives
AO2Application and Analysis
AO4Use of Appropriate Skills
Summary
Market-based supply-side policies aim to enhance an economy's productive capacity by improving market efficiency and encouraging private sector involvement. These policies focus on shifting the long-run aggregate supply (LRAS) to the right, which can lead to increased output and lower inflation over time, contrasting with demand-side policies that primarily affect aggregate demand in the short term.