The country pays for them out of its cash reserve. If its a product the population uses, then yes the population will buy them from the govt. The country would order them off the world market or common market (if you use one) anyway.
Your corps should be making quite a high quality though where as your population doesnt need so high so they will be overpaying but the corp is selling, its all swings and roundabouts there, depends on how you want to be. For stuff that the population doesnt use the only good time to contract to your country is when there is no demand for the product so the corp cant sell and the price is very low. Then you have a stock of high quality your country bought for cheap to sell at a later date when the price goes right up. And additionally you are keeping a cash flow in your corp, quite important for its survival.
PS. Please understand that what small ideas I manage to give you apply to you now as a relatively new player (I presume). Later on when you have a good grip things change a bit. You can contract certain high quality products or sell them manually to your corps to mess with the supplies average so paying less for supplies to produce the same quality product. Like FMU, you dont want to spend money on high quality of those for your corps so dont contract them.