Assess the effectiveness of supply-side policies in reducing unemployment. 12 marks.

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  • Created by: ecobden
  • Created on: 10-05-18 10:08

Assess the effectiveness of supply-side policies in reducing unemployment. 12 marks.

Advantages

  • Supply side policies have been successful in reducing unemployment.
  • When the government introduced policies such as offering businesses subsidies to encourage them to supply more they are increasing their capacity.
  • If a company has increased capacity then they will need to employ more people to be able to fulfil all the orders.
  • Therefore, by businesses needing more people due to being able to supply more at an efficient rate more people are being employed to work in the factories reducing overall unemployment.

Disadvantages

  • However, supply side policies are not effective in reducing unemployment by themselves.
  • Demand side policies also need to be used because even if the government offers firms money to supply more they will not unless their is an increased market for their products, otherwise they would be making a loss.
  • Demand policies such as reducing income tax to give people more disposable income would make people buy more.

Evaluation

overall, supply side policies have been effective in reducing unemployment but it needs to be used along side demand side policies because they are not as effective on their own as businesses will not necessarily increase their supply because it may lead to a loss for them. Demand policies would reduce unemployment because as more people want a product the business would naturally try to supply more therefore employing more people which would be boosted by supply side policies also being used.

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