Consider a simple model of the labour market, characterised by a downward-sloping labour demand curve and an upward sloping wage-setting curve in the N − W/P - plane, where N is the number of employed workers and W/P the real wage. Labour demand is a linear function of N and given by W P = 140 − 0.5N. Wage setting is given by W P = 44 + 0.5N. a. Suppose that the labour force, L, comprises 100 workers. Illustrate the equilibrium in a diagram and compute employment, unemployment and the market-clearing real wage. b. Starting from the equilibrium in a, suppose that the government introduces a minimum wage corresponding to a real wage of 95. Illustrate the effects of the reform in a diagram. 

How high is the unemployment rate under the minimum wage?