Question

Suppose that a new labor law increases the minimum required number of paid vacation days for all full-time employees; illustrate the effect of this by shifting the aggregate supply (AS) curve in the appropriate direction.

Answer 1

The AS curve shifts to left.

Step-by-step explanation:

If the minimum number of paid vacation days are increased, then it will increase the benefits of labor. Labor will be interested to join the work and the supply of labor will increase, reducing the cost of production and in turn cost of goods in which the labor was used.

Such a reduction in price, in turn, will reduce the aggregate supply, and so the aggregate curve will shift to left. The diagram illustrating the situation is attached.

The AS curve shifts to left.