It can be easy to get confused with regard to the relationship between the Labor Theory of Value and supply and demand.
Three helpful resources for understanding this issue are:
The Law of Value as "Equilibrium Mechanism", being Chapter 5 of The Limits of the Mixed Economy, by Paul Mattick.
Law of Value - 10. Supply and Demand, (this post is just a draft, but a darn good one) over at Kapitalism101
Capital: Volume III, Part Two, Chapter 10, The Equalization of the General Rate of Profit through Competition. Market Prices and Market Values. Surplus Profit.