I think it was the proper response. Only I would have made him pay the whole thing and he wouldn't get the money back. Real life doesn't work that way. My son was about that age when he decided money grew on trees. I got a bunch of $1 bills, piled up the household bills and had him pay them from the stack. Well he soon learned that it didn't even come close. No more asking for money. :-)
I got a lot of flack for making my kids learn the reality of life . Like nothing in life is free. No chores no allowance. And allowance was only for extra chores. Not everyday ones.