Then you want the display to be small but of high resolution (and quality!), so 1080 pixels in width is necessary to have at least 320 to 350 dpi. My Samsung A40, which I bought for 220€ in 2019. has 440dpi (with 1080 pixels width), and this is marvellous because I cannot see single pixels anymore.
Third reason is the processor. There are still enough cheap ones built-in, that cause stutter and pauses.
I don't want just a small phone, I want a nice and reasonably-priced small phone. It was sold for less than 250€, so even in smaller batches it should be possible to reach a 500€ mark.