<P> 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 . By contrast, an ad valorem tax is a charge based on a fixed percentage of the product value . Per unit taxes have administrative advantages when it is easy to measure quantities of the product or service being sold . </P> <P> 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 . </P> <P> The term specific tax is mostly connected to tobacco taxation . In this case we can claim that 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 pre cent of product value may lead to substitution to cheaper brands . </P>

The amount of the tax per unit is