You get what you pay for
With the exception of the ipod which is relatively cheap by Apple's standards, and the iPhone which is heavily subsidised by lengthy contracts from network operators, their other products are aiming at the wealthier sector. (And students who don't yet know that that 500 ipad on credit will eventually cost them 2 grand).
If you're after something that is cheap and does most of the things you need it to then a kindle is going to appeal to many people. Notice I said you're after and not you need... I am still waiting for a good argument as to why anyone actually NEEDS a tablet PC.
Which raises another issue, if you have a product that only appeals to people who want, rather thanm need it, you will always be targetting a high value customer with money to spend so reducing your prices and coming up with budget plans aren't destined to improve sales as you're trying to target a customer that doesn't have money to burn, with a product they don't need.