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HomeHomework HelpeconomicsLump Sum vs Per Unit Tax

Lump Sum vs Per Unit Tax

Lump sum tax is a fixed amount paid regardless of income or usage, while per unit tax is charged based on the quantity of goods or services consumed.

intermediate
2 hours
Economics
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Overview

Lump sum tax and per unit tax are two distinct forms of taxation that have different implications for individuals and businesses. A lump sum tax is a fixed amount that everyone pays, regardless of their income or consumption levels. This type of tax is straightforward but can be seen as regressive, ...

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Key Terms

Tax
A mandatory financial charge imposed by a government.

Example: Income tax is a common type of tax.

Lump Sum Tax
A fixed amount of tax that does not vary with income or consumption.

Example: A flat fee of $100 for all residents.

Per Unit Tax
A tax applied to each unit of a good or service sold.

Example: A tax of $2 on every liter of gasoline.

Equity
The fairness of a tax system in distributing the tax burden.

Example: Progressive taxes are considered more equitable.

Efficiency
The effectiveness of a tax system in achieving economic goals.

Example: A tax that does not distort market behavior is efficient.

Government Revenue
The income generated from taxes and other sources.

Example: Taxes on income and sales contribute to government revenue.

Related Topics

Progressive Taxation
A tax system where the tax rate increases as income increases.
intermediate
Regressive Taxation
A tax system where the tax rate decreases as income increases.
intermediate
Tax Policy
The principles and practices that govern taxation in a country.
advanced
Economic Impact of Taxes
How taxes affect economic behavior and growth.
intermediate

Key Concepts

Tax TypesEconomic ImpactEquityEfficiency