FORTUNE — There were a lot of eyebrows raised by a German blog‘s leak last week of what purported to be price points — in euros — of 16 iPad mini configurations, from 8GB Wi-Fi only to 64GB Wi-Fi and cellular. Converting the currency, subtracting Germany’s 19% value added tax and doing some rounding, the price grid in dollars looks something like this:
8GB Wi-Fi Black/White, $250
8GB Cellular & Wi-Fi Black/White $350
16GB Wi-Fi Black/White $350
16GB Cellular & Wi-Fi Black/White $450
32GB Wi-Fi Black/White $450
32GB Cellular & Wi-Fi Black/White$550
64GB Wi-Fi Black/White $550
64GB Cellular & Wi-Fi Black/White $650
Others saw $249 as too low. After all, the new iPod touch starts at $299. How in the world can Apple (AAPL) sell a 7.85-inch iPad for $50 less than a 4-inch iPod?
Gruber’s answer comes in two parts. First he argues that although bigger often costs more than smaller, miniature carries a premium. “Gadget prices tend to follow a U-shaped curve,” he writes. “Big is expensive, small is cheap, miniature is expensive. The iPad (3) is near the beginning of the curve. The iPhone and iPod Touch are at the end. This new smaller iPad will be in the middle.”
Dediu begins by reminding us that Apple still sells a 16GB fourth-generation iPod touch for $199. When that device is added to the mix, the price chart he draws — and which I’ve copied below — makes a lot more sense.
w = Wi-Fi only; c = Wi-Fi plus cellular. Source: Asymco
Dediu has created an interactive Pixxa “padcast” that shows how much iOS you can buy depending on how much you are willing to spend. If you have access to an iPad, you can get the padcast here.