Per unit tax
This article relies largely or entirely on a single source. (July 2023) |
A per unit tax, or specific tax, is a
Effect on supply curve
Any tax will raise cost of production hence shift the supply curve to the left. In the case of specific tax, the shift will be purely parallel because the amount of tax is the same at all prices. That amount is illustrated in the distance between the supply curve with taxation and the one without taxation. Specific tax are indirect tax. This will raise the supply curve vertically by the amount of the tax, and new curve will be parallel to the original curve.
Tobacco taxation
The term specific tax is mostly connected to tobacco taxation. Using specific taxes has proved to be one of the most effective ways to reduce consumption, whereas ad valorem tax which is based on a per cent of product value may lead to substitution to cheaper brands. [1]
References
- PMID 26391905.
External links
- Per unit tax — Definition at EconGuru.com's Economic Glossary
- Specific tax — Definition at BusinessDictionary.com gando