The point is, 500 dollars is ridiculous, it may not seem that way to someone like you, but the average person who makes up the majority of sales for the gaming industry is going to be reluctant about spending that type of money on a gaming system.
And you made a good point before MM, people are spending 500 dollars a week on gas, so where are they going to get another 500 for a video game system? Necessities such as gas and food come before games.