Uh yeah, Photoshop is really the only game in town. Why does it cost so much?
Well:
A) people will pay that much for it.
B) it's marketed at professionals or semi-professionals. MOst people don't need photoshop, and wouldn't pay for it. A smaller market means a higher price point to recover the investment.
C) It's the only game in town.
Of course,
GIMP, the open-source alternative, seems to be gaining popularity and ground.