You're completely right. Nobody would make things at a loss unless its the smallest possible loss to skillup on. And after a while, with nobody making them because they were a loss, the supply will shrink and the price will rise again.
Edited, Oct 31st 2010 1:28pm by KujaKoF
If you're talking about some thing like a low level weapon, the opposite could happen. The supply could keep rising, and the demand could eventually fall, and after awhile they won't even be worth selling on a retainer.
After awhile we'll all be dead. The question is, will the price normalize before we're all dead, assuming that making that good at a loss is the shortest path to skilling up?
People pay more and more money every year to attend college, which represents nothing but a cost in time, money, and opportunity. They do it gladly, because they are focused on the long term outlook of making more money later on. The supply of people who are willing to pay money for college may increase or decrease, but it will never go away until there's another alternative.
For the same reason, certain items may literally NEVER be sold except for less than what they cost to make. People are focused on the long term rewards of raising a craft, whatever those rewards might be, and they'll probably accept a certain amount of short term loss to make that happen.