How does the economy work?

I'm confused at how the economy works. Merchants sell goods (crafting materials, dyes) at varying prices based on supply and demand. That means when people buy, prices go up, and when they sell, prices go down, right?

In Ascalon at the moment the price of a Fur Square from the Rare Materials Merchant is about 1700 gp. I went out and got me a Fur Square and when I checked for a price to sell to this Rare Materials Merchant, expecting something like half or even quarter price, I actually was only offered 50gp! It seems totally random the prices asked versus the prices offered. Why do some things cost so much to buy, but are worth so little to sell?

I think it has to do with whats in stock, so the rare materials merchant might have lots of fur in stock, but lots of people might be buying fur, so he can sell the fur at a high price but doesnt need to buy it at a high price coz he already has alot of it

i'm sure i'll be corrected if i'm wrong but thats my understanding of it, and on a side note, its always a joy when u get a black dye, go to the trader who is selling them for 10k and they offer you 1g for urs :P:P

C
Xxx

I wanted to sell a black dye and the Dye Marchand offered me 1 gp for it !
Now I know why there 's no more black dye to buy.

Traders' prices are bugged (or simply crappy).