Per Unit Tax

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A per unit tax is a fixed tax on a product, independent of the product's price. It can be represented as a wedge between the supply and demand curves. indicates the price buyers pay and indicates the price sellers receive net of the tax. The orange rectangle represents the tax revenue (the per unit tax times the quantity sold). The consumer surplus is shaded in blue, the producer surplus in pink, and the deadweight loss in purple.

Contributed by: Fiona Maclachlan (March 2011)
Open content licensed under CC BY-NC-SA


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