Given price elasticity, then if demand goes down, the price of a good goes down, because of competition between vendors. This is good for two reasons: one, it rewards the most efficient and lowest-cost way of making that product, and two, it performs the all-valuable allocative function: producers know that they should stop producing x and start producing y instead.
So says, as far as I understand it, the economic theory.
However, if price does not fluctuate, then what? If demand goes down, customers buy less of the product, and there is competition between producers. Competition generates not shoddy workmanship at low prices but higher at the same price, and producers still know that less of that product is required (the ‘signal’ being they are selling less) and the same allocative function is fulfilled… ?