Not cheap but not inflated price
If the price was artificially high on the iPad, they wouldn't be selling millions of them and another manufacturer would be able to put out a competitive product at a better price point without taking a bath. Apple's margins are certainly high and the envy of the industry, but they get that mostly from shrewd supply chain buys which most other manufacturers can't do. They also are sitting on a boatload of cash, which makes buying up components easier.
I bought a 1st gen iPad instead of a laptop for front room surfing and light use on the road or at meetings where I need to take minutes. It has done all of that and more. In its current state, it is what I would give my Father and his wife as an internet device, as they had no experience with computers until very recently and struggle with some of the basic concepts. (Had the 1st gen iPad had a camera and iCloud, I would have never bothered with a computer for them.)