If ebooks cost 10% of what books used to cost, but everyone buys 10x as many books because of the lower cost, convenience of buying and storing them, etc., then the costs can be covered the same as today.
People are very unlikely to buy more books because they're cheaper. Yes probably one out of ten people will buy more books, however the majority won't. I don't buy a book because it's priced $9.99 I buy it because of the Author, like most readers do. In fact I bought my wife a book last week that cost $9.95, why? Because I'd been recommended the author, price had nothing to do with the purchase.
Why was the book I bought $9.95 brand new? Because the production cost was lower, because I know for a fact this is the authors debut and the publisher prices it lower to help the author get a following. Her next book is already priced at $19.95.
This is a pointless argument. Go ask Microsoft why they don't price their product at 10% of what they currently do. They'll tell you because 90% of people are stealing their product and when Gates tried lower pricing, 90% of people still stole his software. I'd say 90% of people already get their books new at $5, it's only the fans who are willing to pay $30+ for a new book.