It seems that you can get a good dynamic microphone for < $100, such as a Shure SM58, which is a very widely-used and well-regarded mic. However, even low end condenser mics seem to start at around $400-500.
Why do condenser mics cost so much more than dynamics? Are they more difficult to manufacture, or do they use more expensive materials?
I think your question is sort of backwards. The cheapest condenser mics are very inexpensive. Electret condenser designs are used for small and cheap headset mics, phone mics, and PC/laptop mics.
I think what you really want to ask is why the most expensive dynamic mics are still less than $1000 (excluding ribbon mics), while so many condenser designs are much more than that.
There's only so complicated a dynamic mic can be. A lot of money can be spent on a large diaphragm for a dynamic mic, and transformer design can be costly, but that's about all you can do to make a dynamic mic sound better. Both Sennheiser and Neumann make high-end dynamic mics.
Condenser mics start very cheap, but they can get very expensive. A lot of money can go into the diaphragm, and then there's the electronics. A quality solid-state amp can be expensive, and a high quality tube amp, even more so. I'm not sure why multi-pattern dynamic mics are virtually nonexistent compared to multi-pattern condenser mics, but adding that feature also adds cost.
And overall, there's at least the perception (that seems to be based in reality to a great degree) that the highest quality condenser microphones can sound better than the best quality dynamic microphones, so there's not a market for $1000+ dynamic mics.
One thing that is true about condenser microphones that is objectively better than dynamic mics is sensitivity. A dynamic mic, by definition, has to have a coil attached to the diaphragm, which gives the diaphragm added mass and inertia and lowers the overall sensitivity. A condenser can have a very lightweight diaphragm assembly and therefore much lower air pressures can move it more effectively. Of course, building a lightweight diaphragm assembly that also sounds good and has an even frequency response costs money, so that's a major aspect of condenser mic prices - their greatest advantage is expensive.
So again, it's not that condensers aren't cheaper than dynamics, some of them are. It's that dynamics don't get nearly as expensive as the most expensive condensers.
There's plenty of condenser mics under $400. But you're half right - there does seem to be a ceiling on the price of dynamic mics whereas for condensers the sky's the limit! Leaving aside the special case of over-priced vintage Neumanns - it's hard to believe there's really a 'lost art' of microphone design that modern technology couldn't reproduce - perhaps there isn't THAT much differential between the top dynamics and top condensers. And a lot of what there is is about what the market will bear rather than manufacturing cost.
