> No... less demand leads to less supply at a lower optimum price.

Not always.

If I make fancy handkerchiefs, and I can sell 2 per month, I will make 2 by hand and charge a high price.

If there is demand for 100,000/per month, I'll develop a way to mass produce them and charge a lower price per handkerchief (which may further increase demand.)

But if demand fades, I won't be able to sustain the equipment/workers that produced the 100,000/ month, and if I continue to produce any, it will probably drop back to a higher price, even at a lower demand.

This can occur because of consumer surplus and differing marginal demand. At the mass-producing volume, people who are willing to pay 100x for the product get what they need for a price of 1x. The marginal consumer gets it for exactly the price he is willing to pay.

All those less motivated customers drop out at the higher price which is necessary to support a limited production, leaving the 100x customers paying at their maximum price, because no supplier can profitably produce that small an amount for a lower price.

For example, obsolete technologies may increase in price as demand goes down.