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A small corner store is located on an island. When a storm made it difficult to cross over into mainland, there was sharply increased demand for some items, among them flashlights. The store owner decided to increase the price by 30%.
When the owner's daughter challenged him, he replied "you are a business major and must have learned about demand-price curves; as demand increases and supply is limited, price increases also".
Do you agree with the store owner that he was justified in increasing prices since demand had increased and supply was limited (his store was the only one selling flashlights in town)? Explain your answer
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