That's called "Apple price ladder". Basically pushing consumer in small increments up the range of products with " but with just $$amount you can get X product with 2*Y of Z!" until consumer hits their limit instead of buying the cheapest working option.

The newest entry-level Air is $1100, this is $600, or $500 difference. It's significant.

Apple released the M1 MBA for $999 and it was considered insane value, and it had 8GB of RAM as well.

I don't think it's criminal, sufficient for plenty of casual users. Of course not for everyone.

Where is a $699 Air available?

I agree. Especially now, with the insane RAM prices.