Does Apple know what budget means?? I don't understand why we don't see an entry level mac for under $500..
Partially, because that, $500 is where the zone iPhone and iPad are priced. Yes they are not direct equivalents, but Apple certainly wants to give them breathing room to grow. Rightly or wrongly they may be counting on some folks selecting an iPad is hard pressed to a $550 budget cap. Either that or used/refurbed. They also want them separated but not tooooo far from the iMacs. Put a large enough gap between mini and iMac and will start to get some cannibalization effect on bottom end of the iMac.
Notice how the server can't get any higher so stuck at $999. (least it creep into iMac space which it cannot enter). While can't go too low also can't get too high either. mini: $999 , $699 ... a $300 gap. Very similar to the approx $300 gap between the iMac. and $300-400 gap between MacBookPros and between MacPros.
there is a budget. The budget is $300 between offerings. Appears the mini design blew a good chunk of it on an expensive case.
However, more importantly because Apple holds it targeted margin roughly the same across the all the product lines. A $500 computer with 30-40% margins would be hobbled against the competition (even if let MacOS claim a good chunk just like Windows does). The higher the price the more flexibility have to add parts to give value. In this case they are selling 'small and compact' as a value. Dell has a "small compact green" offering that is about just as high if not higher in some configs.
Strategy is quite different when compared against vendors who drop the margins on the lower end and raise them higher above Apple's on the highest end and hope for some average blended return across the ranges. In Apple's approach, one product line is not supporting the other.
The mini is still in part aimed at folks who already have established commitments to keyboards and monitors to differentiate it from the iMac.
As long as year over year mac sales go up each quarter going to be tough to argue with them that they are somehow restricting the flow of people onto the mac platform.