Question

If employees were given more employment benefits such as sick leave and annual leave, assuming this...

If employees were given more employment benefits such as sick leave and annual leave, assuming this would significantly increase costs for the employer:

1. What would be the effect on supply and demand?

2. Graph the effects this would have

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Answer #1

Initially wages and quantity of labor is determined when demand and supply of labor is equal to each other. But if  employees were given more employment benefits such as sick leave and annual leave then supply of labor will increase and curve will shift rightwards . But at the same time ,this would significantly increase costs for the employer: and demand for labor will decrease and demand curve will shift downwards. Due to that changes , wages will decline and quantity of labor will remain the same.

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