Problem two: E-levy and elasticity of demand for electronic transaction servicesConsider the following facts about mobile money transactions. Currently, MTN andAirtel Tigo charge 1% on mobile money transactions up to a total charge of GHS 10per transaction while Vodafone charges 0%. The government introduced E-levy whichtook effect 1st May, 2022 imposed an additional 1.5% charge on most electronictransactions.a) In ordinary language, explain what it means to say the demand for mobile moneytransactions is price elastic.2b) A deputy minister of finance has suggested that the introduction of the E-levy willreduce mobile money transactions by 24%.¹ Based on this and information in thepreamble to this question, is the demand for mobile price elastic or price inelastic? Doesyour answer depend on which mobile network one is using?c) What does your answer in part (b) imply about the likely amount the government canrealize about the E-levy? (Hint: calculations are not needed here. Just explain whetherthe government will raise a lot of revenue or not much revenue).d) The same deputy minister of finance indicated that based on their research, after awhile mobile money customers will return to their respective service:"The research we did also told us that there will be about 24 per cent attrition rate in the three monthsto six months that we will introduce it. The same research told us what should be done to bring backthese people after a while, and we have all these things in place"Suppose that the 3-6 months constitute short-run and any period after that constituteslong-run. Based on the minister's statement, is the demand for mobile money servicesmore or less elastic in the short-run compared to the long-run? Is this consistent withwhat we learned about elasticity in this class? Explain.

Attrition rate refers to the percentage of mobile money users who are expected to discontinue or…

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.

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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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