Specific tax
Definition. A specific tax is an indirect tax levied as a fixed amount of money per unit of a good, regardless of its price, for example a set sum per litre or per stick. It shifts the supply curve vertically upward by the constant amount of the tax at every level of output.
Because the tax per unit is constant, the parallel upward shift contrasts with an ad valorem tax, which is charged as a percentage of price and so widens the gap as price rises.
This term belongs to Indirect Taxes and Subsidies in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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