Supply Side Policies – AS/A LEVELS/IB/IAL

Supply Side Policies – AS/A LEVELS/IB/IAL

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Supply Side Policies

Supply side polices aim to shift the aggregate supply (AS) curve to the right. They are controlled by the government and aim to increase the productive potential of a country.

There are a variety of supply side policies that are used within an economy. They can be split into short run (SRAS) and long run (LRAS) supply side policies.

Short run supply side polices

There is a shift in the short run aggregate supply curve if there is a change in the cost of production.

Causes of SRAS Shifts

  • A decrease in corporation Tax
  • A decrease in the price of oil or other commodities
  • A decrease in the national minimum wage (NMW)
  • Government providing subsidies
  • A reduction in tariffs and quotas

There is a shift in the long run aggregate supply curve if there is a change in the quality, quantity or efficiency of a factor of production (Land, Labour, Capital and Enterprise).

Causes of LRAS Shifts

  • Increase in education and training
  • Labour market changes e.g. migration
  • Improved infrastructure
  • Increase in healthcare services
  • Introduction of new technology or capital
  • Increased innovation or spending on R&D

 

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