People really do confuse the cost of stuff with value. See, the PS3 cost $800 at launch and it never sold this well because people didn't value it that much. The iPad cost under $300 at launch to produce and it sells due to being of higher value to them. The iPad is a unique item and apple has a monopoly on this class of gadget. This means they can charge closer to what people value the experience at rather than using a cost+ model and pricing it relative to how much they cost to produce.