Question

What are the key limitations on supply sides policy?

Economics

Answer 1

Supply side policy stresses on increasing supply through various incentives and interventions. Following limitation of supply side policies:

• Supply side economics does not address the problem of recession. Fall in demand must be addressed when recession hit economy.
• Supply side lag effect is relatively larger, hence it takes time to affect economic variables.
• Ultimately, supply and growth depends on innovation and research, supply side not necessarily leads to research and innovation.