Suppose that the demand for burger flippers at fast-food restaurants in a small city is L_D = 300 – 20W, where L = the number of burger flippers and W = 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.

a. How does the minimum wage affect employment in these fast-food restaurants?

Draw a graph to show what has happened, and estimate the effects on employment in the fast-food sector.

b. Suppose that in the city above, there is an uncovered sector where L_S = -100 + 80W and L_D = 300 – 20W, before the minimum wage is put in place. Suppose that all the workers who lose their jobs as burger flippers 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, and analyze the effects on both wages and employment in the uncovered sector.