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Question - The Sugar Plum Inn has an average dinner cover charge of $8.75 during the month of June, when 3,000 patrons were served. E.L. Plum, the owner/manager, increased the dinner menu prices by an average of $.50 per item. During the first 30 days of July, the average cover charge was $9.25 for the 2,900 patrons who were served dinner.
Required -
1. Compute the price elasticity of demand?
2. How is demand characterized based on your calculations?
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