Does the living wage ordinance affect employment in diners

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Reference no: EM131076669

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.

Reference no: EM131076669

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