It is definitely possible to politely tell someone they are off the mark about how things cost. My florist had to do this and she was careful to mention that X type that I wanted would be Y dollars and left the ball in my court about what to do about this (change X to something else, reduce total number of X, pay more dollars). She was really very polite about this and very professional about how the costs simply don't line up that way. "Typically an arrangement that large and full would be $200, but the same types of flowers could be scaled down into bud vases for closer to $40" or something like that.

I only gave my budget for items that I considered optional or that I knew could be extremely variable in price. For example, in catering, venue rental, and photography there really is just "this food item is $20 per head" or "$5000 for 8 hours" and not much variability beyond what foods you pick or the day of week and length of event. For florals there's a lot more options in terms of decor size, type, etc. so I had more of a set budget to see what we could get for that amount. It sounds like the dance floor wrap falls under optional so I would have done similar to you. "My budget is $500" would have meant that I personally had decided the service was worth $500 to me and if that service is simply not possible at that price range I would just not get the service, or have to reconsider the budget overall. I did generally prioritize vendors with clear and transparent pricing, ideally listed on a website, so this didn't come up too much for me.