You left out a part: For commodity goods, lowering the demand will lower the price towards the marginal cost of production. A commodity good is interchangeabl

You left out a part: For commodity goods, lowering the demand will lower the price towards the marginal cost of production. A commodity good is interchangeable: you don't care whether you buy a bushel of winter wheat from Farmer A or Farmer B. A commodity good is produced by many entities and desired by many entities. Some goods are not commodities but are substitutable: when AMD made pin-compatible 386 and 486 processors, you didn't care much about whether a 40MHz 386 came from Intel or AMD, which is why AMD's lower prices let them build their marketshare substantially. If a widget isn't being produced at all, just sitting in a warehouse, the price can easily be governed by: - the person who needs a hundred of them vs the warehouse that would like to no longer pay an inventory tax on the 110 in stock - the broker who knows where the last hundred widgets are stored, and has figured out customers who really need them in ones and tens - the warehouse that thinks it has all the remaining widgets in the world, and advertises them at a high price to see if anybody wants them