Deregulation fundamentally alters the role of government in the economy by reducing its direct control and intervention. Traditionally, governments often regulate industries to protect consumers, workers, and the environment. Deregulation involves removing or reducing these regulations. This has several key implications:

• Reduced Intervention: Governments relinquish control over pricing, production levels, and other aspects of industry operations.
• Focus on Enforcement: Instead of setting rules, the government's role shifts to enforcing minimum standards and addressing market failures that arise from a lack of regulation. This might involve consumer protection laws, antitrust enforcement, or environmental regulations.
• Promoting Competition: Deregulation aims to create a level playing field for businesses, fostering competition. The government's role is to ensure that competition is fair and that no single firm gains excessive market power.
• Economic Growth: Proponents of deregulation argue that it stimulates economic growth by increasing efficiency and innovation. The government's role is to create a stable and predictable legal and regulatory environment that encourages investment and entrepreneurship.
• Potential for Market Failures: A key challenge is that deregulation can lead to market failures if not carefully managed. The government must be prepared to intervene if necessary to address issues such as monopolies, pollution, or financial instability.

Example: The reduction in regulation of telecommunications in many countries has led to increased competition and lower prices for consumers. However, it also required governments to develop new regulatory frameworks to address issues such as net neutrality and consumer protection.

A higher minimum wage is a supply-side policy aimed at increasing the supply of labour by making work more attractive. It does this by increasing the wage incentive for people to enter or remain in the workforce.

Impact on Supply of Labour:

• Increased Labour Supply: A higher minimum wage encourages more people to enter the labour market, particularly those who were previously discouraged. It also incentivizes those already working to work more hours.
• Reduced Labour Turnover: A higher wage can reduce employee turnover, as people are less likely to leave a job with a higher minimum wage.

Impact on Demand for Labour:

• Increased Labour Costs: Businesses face higher labour costs, which can reduce their profitability.
• Potential Reduction in Demand: Some businesses may respond by reducing their demand for labour, potentially leading to job losses, particularly in sectors with low profit margins.
• Price Increases: Businesses may pass on higher labour costs to consumers through higher prices, which could reduce demand for their products or services.

Effects on Employment Levels:

• Potential Job Losses: If the increase in labour costs leads to a significant reduction in demand for labour, there could be job losses, particularly for low-skilled workers.
• Potential for Increased Employment: If the increased labour supply is not met by a reduction in demand, and if businesses can absorb the higher labour costs through increased productivity or higher prices, employment levels could potentially increase.

The overall effect on employment levels is complex and depends on the relative strength of the supply and demand forces in the labour market. The policy could lead to both increased employment and job losses, depending on the specific economic circumstances.

Governments often use tax incentives to encourage businesses to invest and increase their productive capacity. This is a key element of supply-side policy. Tax incentives work by reducing the cost of doing business, making investment more attractive.

Example: Corporation Tax Reduction. A government might reduce the corporation tax rate (the tax on company profits). This would leave businesses with more profit to reinvest in things like new equipment, technology, or training for their workforce. This increased investment leads to higher productivity and ultimately, greater output. The reduced tax burden encourages businesses to take risks and expand, contributing to economic growth. This is a direct way to stimulate the supply side of the economy.