N3 is expected to shrink a chip by about 25%. Apple usually adds more transistors to increase performance (M2 has 25% transistors than M1). Since N3 wafer costs are much higher, the end result is M3 is probably a more expensive chip than M2.
Inflation may slow down, but I don't see price drops happening. $1,199 is not expensive given current global market conditions. Maybe when recession hits later this year, things will be different.