That's true with differentiated products. Besides price, what is the differentiation of Google's service over AWS?
They are differentiated by processing power, RAM, etc.
To, continue the RAM analogy Honda created the Acura brand to have higher levels of customer service so their 30,000$ TSX could better compete with BMW's 30,000$ M3. Thus, Google by only offering relatively expensive instances can better target the Amazon's most valuable customers.
Your Honda versus Acura muddies the comparison. Acura is a luxury brand. The consumer gets clear value-add through additional comfort, improved build quality, better customer service, etc. The differentiation is clear. The target customers are also different.
In the Google/AWS example, additional power/capacity can either be incremental (10% more RAM, etc), or class defining (web server versus super computer). There may be other attributes that stand apart, but everybody seems focused on price and cpu/ram. I don't know AWS well enough to honestly compare, but is Google's service incrementally different, or does it provide a capability that AWS doesn't offer?
Sorry, it's just that the "$X for the cheapest Y" argument's always bothered me as a particularly false comparison. I remember the same in the Dell vs Apple arguments a few years ago.