2.4.3 Supply-side policies

Supply-side policies

Policies aimed at improving the long-run productive potential of the economy.

Production possibility frontier (PPF)

A curve showing the maximum feasible amount of two goods that can be produced in an economy.

Human capital

The skills, knowledge, and experience possessed by an individual, particularly regarding their value in the economy.

Deregulation

The process of removing government controls from an industry to encourage competition and efficiency.

Privatisation

The transfer of ownership of a business, enterprise, or public service from the government to private individuals or organizations.

Cutting income tax

Reducing the amount of income tax imposed, aimed at increasing incentives to work and invest.

Training and education

Programs designed to improve the skills and qualifications of the workforce, enhancing productivity.

Welfare reform

Changes to the welfare system aimed at improving work incentives and reducing dependence on benefits.

Expansionary supply-side policy

Policies intended to increase the productive capacity of the economy, often involving government spending.

Balance of payments

A record of all monetary transactions between a country and the rest of the world.

Equity in supply-side policy

The consideration of fairness in the distribution of income and wealth as a consequence of supply-side policies.

Opportunity cost

The loss of potential gain from other alternatives when one alternative is chosen.

Market failure

A situation in which the allocation of goods and services is not efficient, often warranting intervention.

Aggregate demand

The total demand for goods and services within a particular market.

Inflation

The rate at which the general level of prices for goods and services is rising.

Monetary policy

The process by which the monetary authority of a country controls the supply of money.

Fiscal policy

Government spending and tax policies used to influence economic conditions.

Natural monopoly

A market structure where a single firm can produce at a lower cost than multiple firms.

Externalities

Costs or benefits of economic activities that affect third parties not involved in the transaction.

Consumer surplus

The difference between what consumers are willing to pay for a good and what they actually pay.

Producer surplus

The difference between what producers are willing to accept for a good and the price they actually receive.