3.4.2: Shift in the AS Curve/ Supply Side Policies

Short Run AS Shift Causes (Cost of Factors) –Price of Labor –Price of Inputs –Taxation and Legislation Increase costs

Long Run AS Shift Influenced by changes in –Quality and Quantity of FOP NOT influenced by factor prices –(reason for vertical LRAS)

Supply-Side Policy Market Oriented Aims to reduce barriers to “clearing” like: –Govt. intervention –Labor legislation

Supply-Side Focus Labor –Strives to create increased labor mobility Incentives for firms to hire and labor to accept jobs Increased quality of labor Regulation/Union free labor market Incentives to work through –Lower income tax rates

Capital –Increase quantity and quality of capital Tax breaks on –Investment –Dividends –Profit

Competition –Privatization –Deregulation –Encourage business start-up –Reduce barriers to trade (tariffs/regulation)