I've been thinking about a mechanism for allowing supply and demand to realistically shape local prices, while allowing plenty of flexibility to balance these features however is desired using just XML. Here are the ideas I've come up with, let me know what you think!


Where iBuyPrice is the current buying price in that city, and the already existing variables below come from CIV4YieldInfos.xml:
iBuyPriceLow : minimum buying price of that yield
iBuyPriceHigh : maximum buying price of that yield
iPriceChangeThreshold : price sensitivity of that yield (how many units you'd need to sell to drive the price down to iBuyPriceLow, or how many units you'd need to buy to drive the price up to iBuyPriceHigh)
iSellPriceDifference : difference between buying and selling prices (may work best to convert this to a percentage rather than a fixed integer?)
Whenever a yield is bought from a city during trade, call the following function, thus raising the local price by a degree proportional to the amount bought, never exceeding iBuyPriceHigh.
iBuyPrice = min(iBuyPriceHigh, (iBuyPrice+(iBuyPriceHigh - iBuyPrice)*(iUnitsBought/iPriceChangeThreshold)))
At the end of the turn, add up the Demand from local units/buildings (based on Androrc's mod), and call the above function using this demand as iUnitsBought; thus generating upward support for prices based on local demand.
Whenever a yield is sold to a city during trade (or sold via its Market/Tradingpost building at the end of the turn), call the following function, thus lowering the local price by a degree proportional to the amount sold, never less than iBuyPriceLow.
iBuyPrice = max(iBuyPriceLow, (iBuyPrice-(iBuyPrice - iBuyPriceLow)*(iUnitsSold/iPriceChangeThreshold)))
iSellPrice can be updated after each transaction as follows:
if using iSellPriceDifference as a percentage margin: iSellPrice = iBuyPrice*(1+iSellPriceDifference)
if using iSellPriceDifference as an absolute margin: iSellPrice = iBuyPrice+iSellPriceDifference
The basic effects should be that local prices drift down slightly if you're earning lots of gold from selling a certain yield to a city via trade or Trading Post/Market; and drift up slightly as the city generates demand for that yield (especially if that demand goes unfulfilled by selling). The price sensitivity and min/max price for each good can be set as desired. Special markets like Spice Route could get their own set of modifiers to adjust min/max price of certain goods for their unique situation, and cities with high Prosperity can get a bonus to the Demand they generate, building higher prices and profits there. Overall it would be a cool way to generate realistic and subtle shifts in local markets in response to supply/demand, so you can benefit by satisfying your citizens' demand through good strategy, without having to micromanage to an artificially precise limit like "demands exactly 3 Cigars per turn".