“Demand sets the price of items. The higher the demand the more costly an item becomes.”
True, but only if prices are free and allowed to rise and fall with demand. If demand for “X” increases and the government has imposed a price control on it, the increased demand will cause a shortage of “X”. If “X” is deemed a “necessity” by some “X Czar” in the government’s administration, government will then impose rationing on “X.”
Then you have an undermarket which sets the actual value for the item. Generally it is inflated but that’s life.