Supply-and-demand is the driving force in real-world markets and this also holds true for World of Warcraft. With the in-game Auction House, market prices react instantly to supply-and-demand changes and become an ideal simulation of these principles.
In World of Warcraft, when a player posts an item on the Auction House, they generally undercut the currently lowest price bid so players will buy their slightly cheaper product over their competitors. If these items aren't bought out, the next competitor will undercut them, further bringing down the sale price. This continues until either the items become unprofitable for the suppliers to sell or until the demand meets the supply and the price levels out.
Because of this interaction, changes to supply and/or demand can have an immediate effect on the market, with changes happening much quicker than is possible in the real world.