Why is a bigger car tire way more expensive than a smaller tire?

The economy of scale - the market for 16” tires is larger than that of 17” cf 18” cf 19”.

As no one from the tire industry has given a valid reason why a tire with less material should cost more than one with less material one can assume it market is forces (i.e. people are willing to pay more for the a tire that goes on a 19” rim). If they can get more money for less material it makes sense. After all making money is why they went into business.

While there is an element of truth in that pricing will be steered by demand, in reality it's all about structure, strength and reinforcing. The design and build of a lower profile tire requires significantly more strength in some areas, such as the side wall, as they don't have as much rubber (and pressurised air inside) to absorb impacts before the wheel is hit - so the reinforcing wire in the sidewall has to be significantly stiffer and stronger.

Consequently, cornering then can cause greater shear along the footprint in contact with the road, so that may also require extra lamination or reinforcing. The increased tread movement may also lead to greater temperatures, so different rubber compounds may be needed.