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).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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