Here are a couple of factors.
* As other mentioned just like code golfing, minimizing size, cost, resource usage can be valid ways to make hobby project more interesting. I remember having a lot of fun during high school trying to squeeze in code for the project into micro with 1k memory and the whole device into matchbox.
* Not everyone is a silicon valley programmer with 100k salary. While cost of food and other living expenses is mostly also lower in the rest of world, the relative cost of various electronic gadgets and other things for hobbies is a lot more fixed. And with 50x price difference even at small quantities, you will always find some part of world where one side is affordable, but other side if not expensive then at least something that's not cheap anymore and you wouldn't want to waste too many times.
* When you make are hobby project you don't just buy single piece of each component. You buy at least 2-3 in case you mess up, so that you can try again. Especially for highschooler or student difference between $0.13 and $35=$15 can difference between something that is still throwaway and something you would think twice whether you are getting the right thing. Add 2-3 iterations and that $15 becomes $45.
* Just because it's a hobby project doesn't mean it contains single submodule. If you are making a grid of modular things, having a matrix of 10x10 is still cheap with a 0.1 micro, but 500$ is already serious money for a hobby project. You don't need to be mass manufacturing for 50x price difference to matter. Having a small cheap option, opens opportunity for new kind of projects.
* Some people mentioned the time cost of time factor, and that 5$ difference isn't worth it means spending more time. I disagree. The fact that you are doing a hardware hobby project already means that you are wasting time. If you only cared about end result in many cases it would be more efficient to just buy off the shelf product. In many cases the whole point of hobby is to waste time in enjoyable way and it doesn't matter if project is finished in 1 week or 2. And if you can learn more, by solving interesting problems during a process, doing things the hard way is a benefit not a downside.
* A lot of projects could be made even simpler and cheaper (if you take into account cost of development time). If you instead of replacing 0.1$ micro with 5$, replaced whole thing with 100 line python script running on a computer with screen. You can make a lot more impressive visual things on a computer, than blinky LED widgets. But it's so easy it's not fun anymore (there are plenty of fun with computer graphics but it's a completely different kind of thing). Similar thing with people messing with pen plotters. Just pressing print on inkjet printer will produce much better results much faster. People are still making their own CPUs from relays, transistors or logic blocks in computer games, even though
* People have different interests and they can find different aspects of process enjoyable. interesting. It can even vary between projects what challenges the person wants to focus on, and which ones they choose to skip by spending more money.