ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A per unit tax, or specific tax, is a tax that is defined as a fixed amount for each unit of a good or service sold, such as cents per kilogram. It is thus proportional to the particular quantity of a product sold, regardless of its price. Excise taxes, for instance, fall into this tax category.

Detailed explanation-2: -a tax that is given as a fixed rate for each unit of a good or service, rather than based on its value: They agreed to a new specific tax on petroleum products. Imported breakfast cereals in smaller packages are subject to a specific tax rate of 12.6 cents per kilogram.

Detailed explanation-3: -An ad valorem tax is a tax that is based on the assessed value of a property, product, or service. The most common ad valorem tax examples include property taxes on real estate, sales tax on consumer goods, and VAT on the value added to a final product or service.

Detailed explanation-4: -Indirect taxes can be either specific or ad-valorem. A specific tax on a commodity is a tax per unit of the commodity, whatever its price. Thus the amount of total specific tax will vary in accordance with the changes in total output or sales of the commodity and not with the total value of output or sales.

Detailed explanation-5: -tax incidence, the distribution of a particular tax’s economic burden among the affected parties. It measures the true cost of a tax levied by the government in terms of lost utility or welfare.