Why does indicated airspeed change with altitude? I know that if you fly at a low altitude and at a high altitude at the same TAS, your IAS will be lower at the high altitude than at the low altitude.   Why is this though?   Wouldn't the static vent account for the change in pressure?   I have heard it has to do with the change in density but why would this effect the system as it measures pressure not density?   Maybe because ram air pressure (measured by the pitot tube) is affected by density?
As you state, IAS is simply based upon the difference between total pressure and static pressure. For low subsonic conditions:

$$ p_t = p_s + p_q = p_s + \frac {1}{2} \cdot \rho \cdot V^2$$

$\rho$ is the air density, which is a function of air temperature: $\rho = \frac {p_s}{R \cdot T}$. For indicated airspeed, the density at sea level $\rho_{SL}$ at 15 degC is taken:

$$ V_i = \sqrt {\frac{2 \cdot (p_t - p_s)}{\rho_{SL}}}$$

However, the actual dynamic pressure measured by the pitot tube is caused by actual density.


When temperature decreases, density increases.
So at colder temperatures, some of the dynamic pressure is due to higher $\rho$
Therefore, the $V_{ind}$ bit decreases. The pitot only measures dynamic pressure and does not know what is due to temperature 


Air is colder at higher altitude if we stay in the troposphere - climb to over 33,000 ft and the IAS does not change anymore.