"Discuss the Effectiveness of Supply Side Policies in Improving UK Economic Performance"

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Kanak Shah

Economics AS/b

David Conquest

“Discuss the Effectiveness of Supply Side Policies in Improving UK Economic Performance”

Supply side policies are those designed to increase an economy’s long-term growth and so increase aggregate supple or production. In terms of a graphical analysis, if supply side policies work, the long run AS (aggregate supply) curve would shift to the right. A number of various policies have been implemented to increase aggregate demand (AD).

The first is deregulation. This involves removing laws and regulations which restrict competition. With deregulation, more firms will compete in the industry and the total supply of the good or the service will increase.  A good example to look at is airline deregulation. All Europe flight routes were regulated by governments. There was not very much competition. With the introduction of deregulation, any airline company can fly on any routes that they bid for e.g. EasyJet and Buzz (all low cost airlines). This increases passenger numbers and there is more aggregate supply in the industry.

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There are a couple of advantages of deregulation. Less regulation means that fewer regulators need to be employed by the government or local councils. Also less regulation should encourage more competition.

However, many rules affecting business were to stop exploitation: is this acceptable nowadays? Another disadvantage is that competition does not necessarily provide what society wants; it may only provide what is profitable.

Privatisation is another supply side policy. This involves selling off state-run organisations and transferring them to the private sector. The idea is that privately run companies are more efficient and competitive and as ...

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**** A succinct explanation of supply side policies. All of them could be discussed further and some are not particularly well explained but a reasonable introduction to the topic.