Another way to think of this intuitively is simple economies of scale. Or volume discounts if you work in sales.

When you buy 10,000 handbags you pay the wholesale price whereas buying a single handbag can be quite expensive.

If there is way lower hose demand (volume of sales), the horse producers will have to charge a higher price per horse.

Thus, society in aggregate spends way less on horses while the price of a horse goes up.