And to put it another way, inflation-adjusted household incomes for the typical middle-class American has remained relatively stagnant, being about the same in 2017 (the most recent year data is available) as they were in 2000, with a modest dip during the late 00s recession (a time when console sales were growing). This means that the PS4's launch price as a percentage of the total income of a middle-class household is about the same as the PS2's was 14 years prior. That also means that $450 ought to be roughly the same size expenditure in 2020, and $500 only $50/11.1% more than that.
Even if you go by other metrics, like what portion of household income is consumed by a large purchase like a game console, or how many hours the average American might have to work to buy a console, a $500 PS5 or XBO in 2020 is not outrageous by any stretch, and wouldn't be considerably more than what they spent on the PS4 if they bought one at launch.
Your post is perfect. I would just disagree on one point, people don't really understand inflation. But they certainly have the feeling of "stuff is getting more expensive", this is a complain almost everyone have.
So the guy that earned his wage on 1980 compared price of other stuff to decide if 100 USD for NES was good, will today compare PS5 at 500 to other stuff to see if it is good. It is exactly because gaming doesn't exist in a vacuum and people compare stuff that inflation is a thing that affects all (but differently, each person experience it different based on what they consume).
I got my first job in 1998. I have spent enough time "adulting" to notice the changing numbers on the price tags and on my paychecks. In adjusted terms, I'm not making considerably more now than I was 21 years ago. And I can say with confidence that gaming isn't any more expensive for me now than it was back then in terms of how much of my income percentage-wise goes to a console or a new game. Putting food on my table isn't more expensive. Keeping the lights on isn't more expensive. My housing costs are actually higher now that I own my own home instead of renting a room from a friend (though that's offset a good bit by having a roommate who pays me rent). I live a life of modest means, and I'm good with money, so even with my less-than-impressive income (~$21,800 last year) I'm not struggling. I don't find $500 unreasonable for a new console at launch one bit. I would have found it unreasonable 20 years ago.