Aggregate Supply

Mind Map by , created over 5 years ago

ib economics (Microeconomics ) Mind Map on Aggregate Supply, created by bella.calonje on 03/31/2014.

Created by bella.calonje over 5 years ago
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Aggregate Supply
1 SRAS: the period of time when the prices of the FOPs do not change, labour price is fixed
1.1 a change in any of the factors other then price level will result in a shift of the SRAS
1.1.1 A change in wage rates: government raises min wage or trade unions A change in the cost of raw materials: for example oil A change in the prices of imports: rise in import prices will raise costs of production Change in indirect taxes or subsidies
2 Supply Side Policies
2.1 Interventionist
2.1.1 Investment in Human capital Research and development: tax incentives to increase R & D, tax credits, intellectual property rights, finance R & D development centres Provision and maintenance of infrastructure Direct Support for businesses/ industrial policies: improving the competitive nature of industries through maintenance of anti-monopoly laws, helping enterprises grow,
2.2 Market Based
2.2.1 reduction in household income taxes so there is more incentive to work harder reduction in corporate taxes: if businesses are able to keep more profit there will be greater investment and investment in R & D- more incentive to be efficient Deregulation- if governments have placed many regulations on businesses that increase costs of production this reduces potential output- environmental laws or working laws Privatisation- privately owned, profit maximising firms will be more efficient than nationalised firms will be more efficient then nationalised firms Policies to increase competition which encourages greater efficiency
2.2.2 Labour market reforms reduction in trade union power Reduction/ elimination of minimum wages Reduction in unemployment benefits

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