Why does supply equal demand? Problem if large increase of price, decreases demand only by a bit
&quot;Sellers&quot; as a whole indeed do not have a reason to decrease the price under these conditions. But sellers don't decide together collusively, acting like a monopoly seller. Instead, each of the many individual sellers decides on its own. And each does have an incentive to lower its price, because by posting a lower price it can suddenly sell all of its individual supply (as long as this is below total market demand), which always increases profit. In other words, even if the market demand curve is very inelastic, the demand facing a single seller is highly elastic. It is therefore profit maximizing for an individual seller to slightly lower its price. If all others follow suit, the market price has decreased. This continues until equilibrium is reached.