You believe everyone will keep producing 24/7 trying to increase their share of a market where the demand is shrinking. You have absolutely no concept whatsoever about manufacturing, sales and profit.
Let me dumb it down for you, Think of car sales in a certain segment are slowing at a fast rate. GM, Ford, Chrysler, Toyota, Nissan, VW, Honda and all the others keep their production ramped-up in that segment because they have the infrastructure to build more? You actually believe production will always outpace demand?
China has the capability of producing billions of widgets, demand is for millions however according to you they should continue to produce billions as the have the infastructure to do it.
There is a fine line in balancing supply with demand, it is in everything in the world and that is how to maintain profitibility. I am not implying anything, you just don't get it.
While I appreciate your attempt to dumb something down which must come naturally for you as it is your normal language, you are the one who "just don't get it". Sad, because it is a really simple concept and taught in 100 level econ classes at most public institutions.
What you fail to grasp is that without a single source producer, or a cartel of producers acting in unison, there is no way to keep manufacturers from all idling production to keep prices high. So while it may work for a planned economy like China if they are the sole producer, in the real world with competition from others, places like China flood the market in a price war, and their capacity to produce more than the other guys enable them to win by selling in quantity with low margins. It is how they have cornered the market on most mass produced items.
But back away from "widgets", and on to the US ammunition market.
If the price is $25 a brick of .22, and demand is for 1 million units, who is going to dictate how much each manufacturer produces?
No one that is who.
If a manufacturer has the capacity (newly built with millions of invested capital) they will do their best to meet the whole million themselves (or as much as possible), and do so by offering a discount (like $24.99) and creative marketing (like bulk packs with free ammo cans, novelty ammo like "Zombie Max", or celebrity endorsements like the "Swamp People" ammo). They will do this as long as they are running a profit.
Your own example of the car industry is perfect, as when demand slumps and they have excess capacity they offer huge discounts, incentives, and novelty packages to regain or maintain market share. They don't just idle their production lines as long as people are still buying and they turn a profit (or sometimes they will even run at a short term loss as long as they are gaining or maintaining market share and brand loyalty).
I have yet to see a time when the auto industry maintained their prices when demand dropped by simply cutting their supply. I do however remember awesome incentives from cash back, zero down and zero interest financing, to free accessories. Are you really implying I am imagining this, and they simply agreed to all cut their production and the price stayed the same as at the peak when the economy was booming and demand was through the roof?
No one is saying they will be running 24/7 paying OT like they are to meet demand, or investing in new capacity like they are now, but they will be using as much as their normal capacity (recently greatly increased) to keep as much market share as possible.
So just like the auto industry, this will include deals for the consumer in the ammunition market when they compete for the decreasing demand.
That is unless they all collude to agree to keep prices high, and collude to set hard production targets for each to meet with an agreed on market share, just like the OPEC cartel. It is the only way to influence the price. However, as soon as someone does not go with the cartel, or there are sizeable producers outside of it, they loose their ability to influence price, and will increase production to regain market share.
Since there is no ammunition cartel I know of, and many producers, it will be simply increased competition and a fight for market share: lower prices, more choices.
So yes there is a fine line between meeting supply and demand, but it an open competition market with many producers with excess capacity, that means lower prices.
Seriously, it is not rocket science, it is basic economics, and even your own example of the auto industry proves my point, and shoots holes right through yours.
