Assume that the demand for short-order cooks at diners in a small town is ED=400 – 16 w , where E is the number of short- order cooks and w is the hourly wage rate. The market clearing wage is $8, but the town's City Council imposes a "living wage" of $10.
a) Does the living wage ordinance affect employment in diners? Draw a graph depicting what has transpired in the "diner sector."
b) The small town in question has an uncovered sector (not subject to the living wage) in which ES=–208+60w and ED=400–16w, before the living wage ordinance goes into effect.Assume that the short-order cooks who lose their jobs due to the living wage ordinance seek employment in the uncovered sector. What happens to employment and wages in that sector? Draw a graph depicting events in the uncovered sector.