Will graphics ever become detrimental to the industry?

[radishhead]

Just a short piece, but with a valid point:

With the introduction of a new generation, we're looking forward to a set of consoles that are more powerful and more capable than the last.

Of course, this encourages developers to build games with larger scale than ever before, with super-realistic graphics to make the most of the new hardware. However, doing this increases development costs and could lead to smaller developers to stop making games altogether (unless they instead choose to put them on an online service). They may choose to charge more for their games to cover their costs, but this could lead to fewer people buying their game and so they'd still lose money. Basically:

 - Will there ever be a point where development costs get too high for the industry to keep growing?

 - Is there a point where improving graphics doesn't make a difference to the average consumer? Have we reached this point already?

 - How much of a leap do you expect in terms of graphics from the 7th to the 8th gen?