Supply side policies

Supply side policy is a long term strategy used to increase the potential productive capacity by increasing the quality or quantity of factors of production. Contribute to increase the countries real national output.

Goals of supply side policy:

• long term growth by increasing productive capacity - Increasing the stock of labour and increasing the number of machines will increase productive capacity, and hence it will increase output.
• improving competition and efficiency - competition force each firm to improve their products and could influence the lower or more affordable price for the same product.
• reducing labour costs and unemployment - raise the minimum wage above the equilibrium
• reduce inflation
• increasing firms incentives to invest by reducing costs e.g lower business taxes, reduce corporation tax and other tax incentives