Why Is Hi Fi Gear So Darn Expensive?

It's expensive when new and resale value is terrible for most of this stuff which is great for buyers, less so for sellers.

People who own small businesses need to make a large enough profit for them and their employees to live.

Because so few people buy it. 

@sounds_real_audio +1.

Simple supply and demand. Low demand, low supply = Higher prices and great margins. 

Never in my life has "high fidelity" been so inexpensive. It's really incredible. Near perfect DACs for not much more than a high end dinner for two with wine and a tip. Near perfect amps for about 2 weeks of the average US salary. No one knew what a waveguide was when I started out. Now an amazing 2 way with flat response, great dispersion, low distortion for an average months salary. It may even come with the amp built in.  Almost no one used acoustic panels 20 years ago. Now for another weeks salary you can get quite a few for your room. DSP Room correction? Total game changer and inexpensive.  A couple reasonable priced subs, some good 2 ways, some panels, room correction and you have a system most audiophiles could only dream about 20 years ago for probably less than they spent just on their inflation adjusted speakers.

"High Fidelity Darn Expensive"?  Heck no. "High Fashion"?  Yes, that has yet to find it's upper limit.