There is a difference between the price that balances supply and demand, and the price that is 'fair' to ask. Specifically, when demand is very inelastic because things are plain necessary the balance point is no longer fair.

Normally, the balance point is the fair point. By making it cheaper, you get people who don't need it still buying it, leaving no supply for others that do need it. At the same time, making it more expensive leaves people who need it not being able to get it.

This reasoning is why we say the market price and fair price coincide. This breaks down when demand is inelastic. (It also breaks down when income inequality gets to be huge). Specifically, when there are no people that want something but don't need it, the argument breaks down. In this situation, the market price is called price gouging.

There are some cases where responding to the market makes sense. I.e. when there is a flood incoming, make flashlights and batteries a bit more expensive to discourage hoarding and encourage more supply. Don't charge the market price mark-up of 10x though.