1. In the tablet space, companies like Amazon and Google are competing on price because they can't compete against Apple's iPad on awareness. Non-iPad tablets didn't catch on until they were impulse-priced below $200 in a market outside Apple's focus.
2. Tablets got smaller because competing on price necessitated a product differentiator: Companies needed something that would still qualify as a tablet but which could be assembled more cheaply than a full-sized tablet. Portability or consumer demand didn't (initially) have anything to do with it, despite what you may have read. 

The problem:

1. Companies that sell tablets (even mini tablets) for $249 or $199 simply aren't making money selling those tablets. Google hopes to make that loss of revenue back by selling ads and Amazon hopes to make it back by selling everything else. (Services.) Their mileage may vary because...
2. ...we've yet to see evidence or an earnings call showing that either plan will actually work. (Either short term or long term.)

Apple:

1. Apple is widely expected to announce an iPad (Air, Mini, whatever) at tomorrow's event. The internet is all abuzz because pricing for said iPad with comparatively (rumored) weak specs (screen resolution, for example) is expected to be at or over $299. For those keeping track that's at least a $50 premium over a Kindle Fire. People who hate Apple and weren't going to buy one anyway call this the Apple Tax.
2. At that price, Apple is maintaining its status quo. It's selling hardware at a price that people are almost certainly willing to pay at a margin that drives actual, immediate profit. Apple didn't cram in more RAM, NFC, or LTE just because everyone else did, and they didn't lower the price of any product that didn't have those features. Those features appeared when Apple was ready and the trade-offs were acceptable to Apple's strategy. Tim Cook is betting that Apple can compete without competing on price. Always bet on the company that is in the black.
3. It's easy to drop a price. It's almost impossible to raise one. Apple can always sell a cheaper iPad. Amazon can't ever sell a more expensive Kindle.
4. If we're all going to pretend we care about how our products are made and the migrant workers in China who make them, we need to stop expecting those products to be dirt cheap. If Apple, Google, Samsung, Amazon and every other company fights to see who can sell the cheapest (lowest-margin) product, Chinese workers lose. What does it say when people keep claiming that they're willing to pay "a little more" for a product if it's made ethically (or in the USA) while also complaining that Apple needs to meet Amazon and Google's unsustainably-low pricing strategies? In what reality can every company sacrifice their profit margins on the platform of the future, ramp up production to compensate by selling more volume, and still provide a safe workplace offering fair pay and humane treatment?