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Econ Help

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Please help! Trying to study for exam!

An article in the New York Times (Oct. 18, 1990) described a successful marketing campaign by the French champagne industry. The article also noted that “many executives felt giddy about the stratospheric champagne prices. But they also feared that such sharp price increases would cause demand to decline, which would then cause prices to plunge.”

What mistakes are the executives making in their analysis of the situation? Illustrate your answer with a demand and supply diagram.

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