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).

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 1E: The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales...

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The Potomac Range Corporation manufactures a line of microwave ovens costing $500 each. Its sales have averaged about 6,000 units per month during the past year. In August, Potomacs closest competitor, Spring City Stove Works, cut its price for a closely competitive model from $600 to $450. Potomac noticed that its sales volume declined to 4,500 units per month after Spring City announced its price cut. What is the arc cross elasticity of demand between Potomacs oven and the competitive Spring City model? Would you say that these two firms are very dose competitors? What other factors could have influenced the observed relationship? If Potomac knows that the arc price elasticity of demand for its ovens is 3.0, what price would Potomac have to charge to sell the same number of units it did before the Spring City price cut?