Effect of government regulation and interference on demand and supply:
Price ceiling is the maximum price at which a good can be sold. If this ceiling is above the equilibrium price it will have no effect on the equilibrium. However if the price ceiling is below the equilibrium price, it will lead to shortage of the good as demand will exceed supply and thus lead to dead weight loss due to inefficient quantity produced and supplied.
Price floor is the minimum price that a buyer has to offer for a good. If this price floor is below the equilibrium price it will have no effect on the equilibrium. However if the price floor is above the equilibrium price it will lead to excess supply at the floor price thus causing dead weight loss due to inefficient quantity produced and consumed. Sellers will not be able to sell all that they produce.
Tax on a good will increase its equilibrium price and quantity.
Diagram depicting the effect of taxes on equilibrium
Actual and statutory incidence of tax:
In diagram (b), the statutory incidence is on the buyers. The result is a downward revision in the prices at which goods are demanded at every price point on the demand curve which leads to the downward shift in the demand curve. The buyers ultimately pay price Ptax (which is inclusive of taxes) but the seller receives only PS. Since for the buyers the original price was PE, their actual tax incidence is only from PE to Ptax. From the point of view of the suppliers, they would have originally supplied QE at PE. However now they have to supply only Qtax and receive PS. So because of the reduced production the actual incidence of tax on suppliers is between PE and PS.