In the free market nowadays, allocating the scarce of resource and allow the market to forces supply and demand to set prices is the very view of the government. Therefore, protect property right, maintain the value of the currency had become the role of the government. Improvements in allocative, dynamic efficiency and productive are often deliver by the competitive markets. The erosions for policy intervention are mainly to correct for market failure, attain a more equitable distribution of income and wealth to enhance the achievement of the economy. There are many methods the intervention can take place. For example are the laws on minimum age for buying cigarettes and alcohol. The government appointed utility regulators who may levied taxation on certain goods.

Per-unit tax can be defined as a fixed amount for each unit of good and service sold. Per-unit taxes are often imposed on specific goods, services or markets such as non-alcoholic beverages, gasoline, alcohol and cigarettes for particular reasons. An ordinary reason is to advocate the allocation effect. This means that the government discourage the production, consumption or exchange of the specific merchandise.

Non-alcoholic beverages, gasoline, alcohol and cigarettes are also known as excise tax. Excise tax can be deliberate as an indirect form of taxation. This is because the government indirectly apply the tax to the consumer. This tax is normally passed on the consumer as the normal cost of doing business. For example, if a bottle of wine costs $10. It may have a specific excise tax imposed onto it which is $2. This additional cost of the wine would be levied onto the consumer, making the market price to be at $12 for per bottle of wine. Government imposed a tax onto it is because alcohol is bad for our health. Therefore, a tax levied onto it may reduce the consumption of some consumer.

Taxes are kind of a significant sources of revenue for government. On the other hand, taxes would decrease the supply curve and demand curve in the market because sellers obtain less revenue for their product and buyers would need to pay a higher price for the goods they want. Occasionally, government will try to reduce the burden of the tax for sellers and buyers due to a high exes for sellers or buyers if the government set the tax for only one of them. For example, the federal government does with the payroll tax. The government require both of the labors and firms to pay half of the taxes.

The rationale behind why governments would want to impose a per-unit tax on buyer or seller of certain goods. Firstly, let’s say about excise taxation. Excise is a taxation which is enforced to a narrow base of goods and services which are seen to have harm associated with their expenditure, such as tobacco, alcohol, fuel, motor vehicles, and in some other countries to wider the range of products. For example soft drinks, coffee and tea.