i can't see how an iPad 2 is still $399? Why not make the iPad 3 the new low end model? At least that has Retina display. Better yet, make last years the low end since it has lightning instead of the old aged 30 pin connector.
Really good question!
The answer is twofold. First- they quit making the iPad 3 two generations ago now.. & do not have facilities up and running with those parts.. many of which are not being produced any more as they are in NO product (not to mention the cost difference/differentiation component between one retina & one non-retina model... & consistency between the two mini models)
However, MUCH more importantly (and I'm VERY surprised I'm the first to mention this), Apple has just made an incredibly smart production decision!!
Imagine their economy of scale & how cheap it is going to get, per unit now that they have only two processors across SIX products!!!!!!!!!!
High End:
iPad air - A7
iPad mini Retina - A7
iPhone 5S - A7
Low End:
iPad 2 - A5
iPad mini - A5
iPhone 4S - A5
Genius of them, right?!