Supply Side Policy And Productivity

• What are supply-side policies?

  Government policies improving the economy's supply side
• What do supply-side policies aim to increase?

  The productive capacity of the economy
• What does productivity measure in a business?

  Efficiency in producing goods and services
• How is productivity commonly confused?

  With production, which counts total output
• How is productivity measured?

  Output produced per worker
• What happens to LRAS when productivity increases?

  It increases due to improved labor quality
• What is a supply-side policy aimed at productivity?

  Any policy that seeks to increase productivity
• How does high productivity affect profits?

  It may lead to increased profits for investment
• What is the relationship between productivity and employment?

  Higher productivity can reduce the need for workers
• What is the formula for productivity?

  Productivity = Output / number of workers
• If a firm has an output of 5,000 units and 10 workers, what is the productivity?

  500 units per worker
• How can supply-side policies be illustrated diagrammatically?

  By an outward shift of the LRAS or SRAS curve
• What are the total labor costs for 10 workers earning £30,000 each?

  £300,000
• How does increasing productivity through training affect employment?

  It reduces the number of employees needed
• If productivity increases to 1,000 units per worker, how many workers are needed for 5,000 units?

  5 workers
• What are the labor costs for 5 workers earning £30,000 each?

  £150,000
• How does a productive workforce affect consumer surplus?

  It can increase consumer surplus by lowering prices
• What is the impact of productivity on international competitiveness?

  It can enhance competitiveness through lower prices
• What are supply-side policies to increase productivity?

  • Improved education and training
  • Enhanced healthcare to reduce absenteeism
  • Adjusting benefits and income tax to incentivize work
  • Reducing bureaucracy and regulation
  • Privatization for competition and efficiency
  • Lowering corporation tax to attract investment
  • Increasing labor market flexibility and mobility
  • Infrastructure investment for better access
  • Improved childcare provision for working parents
• How does improved education and training affect productivity?

  It increases the productivity of the workforce
• How does improved healthcare contribute to productivity?

  It reduces absenteeism, increasing productivity
• How can changing benefits and income tax affect productivity?

  It incentivizes employment, increasing output
• What is the effect of reducing bureaucracy on productivity?

  It allows higher output by saving time
• How does privatization influence productivity?

  It can lead to increased competition and efficiency
• What are the advantages of cutting marginal rates of direct taxation?

  • Incentivizes people to work
  • Reduces unemployment
  • Increases real GDP and economic growth
• What is the impact of reducing corporation tax on productivity?

  It attracts investment, improving productivity
• How does labor market flexibility affect productivity?

  It increases productivity by enhancing labor supply
• What role does infrastructure investment play in productivity?

  It reduces costs and improves access to markets
• How does improved childcare provision affect productivity?

  It allows parents to work more often
• What are the disadvantages of cutting corporation tax?

  • May lead to increased imports
  • Could cause demand-pull inflation
  • Results in falling tax revenue for the government
• How does cutting income tax affect disposable income?

  It increases disposable income for individuals
• What is a potential conflict arising from increased consumption due to tax cuts?

  It may cause demand-pull inflation
• What is a consequence of not increasing unemployment benefits in line with inflation?

  It incentivizes the unemployed to seek work
• What is a disadvantage of cutting Job Seekers Allowance (JSA)?

  It could lead to increased poverty levels
• How does increasing expenditure on training and education affect productivity?

  It leads to a more skilled workforce and higher productivity
• What is a disadvantage of investing in education and training?

  It can be expensive and time-consuming
• What is the effect of reducing trade union power on production costs?

  It is likely to lower production costs
• What is a potential negative outcome of reducing trade union power?

  It may lead to worker exploitation by management
• Why might productivity fall if trade union power is reduced?

  Worse working conditions may lower morale
• What are the advantages of privatization and deregulation?

  • Encourages competition
  • Increases efficiency
  • Lowers unit costs for firms