That was dealer price, not retail price. A C64 system having the monitor and floppy drive retailed for $1,000. It was the highest-selling computer at the time (technically of all time) and yes, Jobs was obsessed with it. Jobs believed taking the C64 with its serial expansion bus, and adding in a mouse and a GUI would make a computer "for the rest of us." Also, that price you quoted is after the release of the Mac, which subdued C64 sales.
The Mac was released in January of 1984. These are prices from Christmas of 1984 - several months after the Mac was released. The design of the Mac began in 1982, when the C64 was retailing for $595 and was seriously affecting Apple II sales. What these catalog prices reveal is the impact the Mac had on C64 sales in a very short period of time, which forced Commodore to respond with the Amiga. But that's a story for another day.
Yeah, you just neglected to mention it was the arrival of the Mac that forced Commodore to slash their prices by over 66%. That "bottom feeder" you spoke of is the top-selling machine in history and was a major factor in Apple's pivot. Maybe it's just me but I think those facts are important in understanding the why's and wherefore's for how we got to where we are now.