I'm not sure which fantasy land you live in, but it must be nice.
Yes - there is a price people are willing to pay for things, and yes an increase in costs can be absorbed by a decrease in profits - to a point. Margins on A LOT of things right now are razor thin. You can't decrease the profit to negative. So prices go up, and people pay more. And companies find ways to fool you into doing it.
Why is ice cream sold in 1.5 quart containers now than 1/2 gallons? Because the price of ice cream has gone up considerably. Ice cream manufacturers know you won't pay $8 for a half gallon of ice cream. But if they change the shape so it looks about the same size but only holds 1.5 quarts they know they can still get away with charging $5.99. This same thing has happened with countless food products.
Or take fast food. Used to be, there were no combo meals. You bought everything a la carte. And any price change was immediately noticeable. So they introduce combos - you can SAVE $.20 by buying a meal instead of the component parts. In doing so you create a more confusing price structure. And it's way easier to inch up prices across the board. These days when I take my family to McDonald's we spend ~$30. Five years ago it was $18.
So retailers are jacking up prices. If not for the shale energy boom, things would be far more noticeably bad. Cheap energy has been a savior of this economy. But if you institute new pollution controls, you add yet one more cost to everything to negate those benefits we've been enjoying. And it's the poor who will suffer the most.