Problem two: E-levy and elasticity of demand for electronic transaction services Consider the following facts about mobile money transactions. Currently, MTN and Airtel Tigo charge 1% on mobile money transactions up to a total charge of GHS 10 per transaction while Vodafone charges 0%. The government introduced E-levy which took effect 1st May, 2022 imposed an additional 1.5% charge on most electronic transactions. a) In ordinary language, explain what it means to say the demand for mobile money transactions is price elastic. 2 b) A deputy minister of finance has suggested that the introduction of the E-levy will reduce mobile money transactions by 24%.¹ Based on this and information in the preamble to this question, is the demand for mobile price elastic or price inelastic? Does your answer depend on which mobile network one is using? c) What does your answer in part (b) imply about the likely amount the government can realize about the E-levy? (Hint: calculations are not needed here. Just explain whether the government will raise a lot of revenue or not much revenue).
Problem two: E-levy and elasticity of demand for electronic transaction services Consider the following facts about mobile money transactions. Currently, MTN and Airtel Tigo charge 1% on mobile money transactions up to a total charge of GHS 10 per transaction while Vodafone charges 0%. The government introduced E-levy which took effect 1st May, 2022 imposed an additional 1.5% charge on most electronic transactions. a) In ordinary language, explain what it means to say the demand for mobile money transactions is price elastic. 2 b) A deputy minister of finance has suggested that the introduction of the E-levy will reduce mobile money transactions by 24%.¹ Based on this and information in the preamble to this question, is the demand for mobile price elastic or price inelastic? Does your answer depend on which mobile network one is using? c) What does your answer in part (b) imply about the likely amount the government can realize about the E-levy? (Hint: calculations are not needed here. Just explain whether the government will raise a lot of revenue or not much revenue).
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter11: Public Goods And Common Resources
Section: Chapter Questions
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![Problem two: E-levy and elasticity of demand for electronic transaction services
Consider the following facts about mobile money transactions. Currently, MTN and
AirtelTigo charge 1% on mobile money transactions up to a total charge of GHS 10
per transaction while Vodafone charges 0%. The government introduced E-levy which
took effect 1st May, 2022 imposed an additional 1.5% charge on most electronic
transactions.
a) In ordinary language, explain what it means to say the demand for mobile money
transactions is price elastic.
2
b) A deputy minister of finance has suggested that the introduction of the E-levy will
reduce mobile money transactions by 24%.¹ Based on this and information in the
preamble to this question, is the demand for mobile price elastic or price inelastic? Does
your answer depend on which mobile network one is using?
c) What does your answer in part (b) imply about the likely amount the government can
realize about the E-levy? (Hint: calculations are not needed here. Just explain whether
the government will raise a lot of revenue or not much revenue).](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F626a464d-c752-480a-8d85-f6950a86c0e3%2Fba4a0688-8c8a-4573-bad6-ea99afa20452%2Fh61ca4_processed.png&w=3840&q=75)
Transcribed Image Text:Problem two: E-levy and elasticity of demand for electronic transaction services
Consider the following facts about mobile money transactions. Currently, MTN and
AirtelTigo charge 1% on mobile money transactions up to a total charge of GHS 10
per transaction while Vodafone charges 0%. The government introduced E-levy which
took effect 1st May, 2022 imposed an additional 1.5% charge on most electronic
transactions.
a) In ordinary language, explain what it means to say the demand for mobile money
transactions is price elastic.
2
b) A deputy minister of finance has suggested that the introduction of the E-levy will
reduce mobile money transactions by 24%.¹ Based on this and information in the
preamble to this question, is the demand for mobile price elastic or price inelastic? Does
your answer depend on which mobile network one is using?
c) What does your answer in part (b) imply about the likely amount the government can
realize about the E-levy? (Hint: calculations are not needed here. Just explain whether
the government will raise a lot of revenue or not much revenue).
![](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F626a464d-c752-480a-8d85-f6950a86c0e3%2Fba4a0688-8c8a-4573-bad6-ea99afa20452%2Fn3pxskt_processed.png&w=3840&q=75)
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