Also the latest patch made the difference less dramatic. In 1.00 it was like: uh?

I agree the prices need to be balanced, but maybe the dagger costs more because it does piercing damage? I read somewhere that different weapons do different types of damage, and different armors counteract it. Too bad it says nothing about it in-game, nor does it display these properties. You know, so we could actually make use of it.

I feel items are well balanced. Checkout http://elementalwarofmagic.wikidot.com/weapons-armor-equipment

The no-tech armor (padded) is more expensive since it's available from the start and some pieces even have the same armor rating. This gives your first tech armor some type of benefit without making them too powerful for early equipment. Some weapons are two-handed such as staves and spears. You can't equip a shield with a 2-hand weapon. The dagger (should probably have a speed boost and/or outside combat movement boost since they are light (it would give it more of a thief unit feeling too), but it's weaken than the fang version. The axe has a speed penalty. The mace is a bit powerful for it's cost though, so it could do with being changed to 2h or reduced a couple point in attack. I love the look of mace/shield and would hate to see it weakened, but it honestly is a little more powerful even with the metal cost. It'd be nice to have a weapon that gives a small defense boost.

There are separate branches for armor and weapons on the empire tech tree. Light plate is only a few techs for empire, but a bit further for kingdom.