[With that in mind I think it was a dumb move to make a iPad mini at $330 price point they should have shot for $200 to dominate the high quality section of the lower end tablets which is filled with Kindle Fire, Nooks, Nexus, etc. Because at their current price point you can get a full size tablet quite easily in comparison to a gimped iPad mini.]
Apple is in a tight spot. If they have offered a cheaper iPad at very low price, it will compete against its own iPad and reduce sales for it. For instance, at $200 for a 8Gb iPad mini, means the public can buy 2 iPad mini for $400 and has same amount of storage as the $500 iPad. Without a doubt the profit margin at $200 will not be 40%, which is current average profit margin for Apple. If the cheaper model is very successful, it may even mean Apple ends up having less profit even though the market share grows. Also, there is the possibility of cutting too much corner and getting bad rep for it that affect all product lines as a whole. It is not a easy situation for a company that is so used to selling high margin, premium product to get out of.