Suppose that the demand for workers at fast-food restaurants in New Jersey is

L_D=30020W

, where Ldenotes the number of workers and W denotes the wage in dollars per hour. The equilibrium wage is $4 per hour, but the government puts in place a minimum wage of $5 per hour.

• How does the minimum wage affect employment in these fast-food restaurants? Draw a graph to show what has happened and estimate the effect on employment in the fast-food sector.
• Suppose that in the state above, there is another sector uncovered by the minimum wage where L_S =100+80Wand L_D=30020W before the minimum wage is put in place. Suppose that all the workers who lose their jobs in fast-food restaurants due to the introduction of the minimum wage seek work in the uncovered sector. What happens to wages and employment in that sector? Draw a graph to show what happens to wages and employment in the uncovered sector