How does " the invisible hand" of competition set a market price in market economies?

the way that " the invisible hand" of competition set a market price in market economies is: Shortages always raise prices and surpluses always reduce prices until competition produces a price where there are no more surpluses or shortages. When a commidity is rare, the value of that commodity will be increased, raising its prices in the process. Competitors that compete in the market will always modify their profit margin in order to maintain the best business flow for them