Supply and demand, yes. But demand is bottlenecked by set holiday dates (which State has some control over). So prices higher during those periods.
What can be done?
Allow more flexibility in school holiday dates, but you then have other major issues...around school/exam planning, term time working, viability of holiday camps, different family members having different holiday dates...not to mention who wants to have their Xmas holiday in February.
Force holiday companies to lower their prices? A tad Stalinist (even if legal) and would probably result in many ceasing to trade. Most work on low margins in any case. And if you're thinking of foreign holidays, forget it. Probably not one worth launcing the battleships over (even if we had any left).
Possibilities-
State holiday camps (again a tad Stalinist, although I could see Cleggy making a successful second career as a Red Coat).
Make the best of it (and don't get too P* off when you see photos of the PM sunning it up in the Med somewhere during that very long Parliamentary Recess).
Or, go back to what we used to have....headteachers having the ability to use their discretion to agree up to a fortnights absence in certain circumstances.
This is something that the goverment has recently changed via The Education (Pupil Registration) (England) (Amendment) Regulations 2013. Now permission can only be granted in exceptional circumstances and I think holidays are expressly excluded as a reason.
Whilst I agree that attendance is very important, I do feel desperately sorry for the family recently fined.....
I haven't checked out the petition yet, and think the options (realistically) are limited, but equally there is scope for change and clearer guidance. The recent changes don't strike me as family friendly and seem a bit of another covert kick in the teeth from the Coalition.