This is complicated. There are so many things at play. Others have addressed the issue of instruments made in high wage economies by craftsmen/women who are paid properly vs. those built in highly mechanised Far Eastern factories staffed by people who are paid the equivalent of a tin of beans a day.
Price and "value/worth" are not the same thing. Modern manufacturing means you can buy a budget instrument which will be as good a functional tool (albeit with a bit of fettling) as something handmade and expensive. If that's the case, why doesn't everyone play a Squier (other brands are available)?
The list of reasons is long - pride of ownership, scarcity, desire to own something unique or unusual, disposable income, fashion, resale value, etc, etc.
If people want to treat themselves to something nice or expensive that makes them happy, that's great. It's their money after all.