Final answer:
Ms. Jones should consider 'menu costs', customer reaction, and the elasticity of demand before making a decision on changing menu prices. There is not enough information to definitively recommend an action; she needs to analyze her market and customer base thoroughly.
Step-by-step explanation:
When deciding whether Ms. Jones should increase the prices on her menu, several factors need to be taken into account that go beyond the simplistic view of raising prices to make more money. Modern economists assert that prices, much like wages, can be sticky and don’t change frequently due to the costs associated with such changes, known as 'menu costs'. If Ms. Jones increases her prices, she may face expenses related to updating sales materials, billing records, and redoing product and price labels. Additionally, there’s a risk that customers may react negatively to the price increase if they feel it is unjustified. These considerations reflect a Keynesian perspective on the elasticity of demand and the competitive nature of the market.
If Ms. Jones’s products are not differentiated and customers can easily find the same offerings at a lower price elsewhere, as mentioned in Chapter 8, raising prices could lead to loss of sales and customers. However, if her products are unique or if the demand for her products is inelastic—meaning customers will continue to buy even if prices increase—then Ms. Jones could consider a price increase. This decision will also depend on the price elasticity of demand for her products, and the local market conditions, such as whether the minimum wage has increased or whether her competitors have also raised their prices.
Given the information provided, there is not enough information to definitively recommend an action for Ms. Jones. To reach an informed decision, Ms. Jones would need to carefully analyze her specific market situation, customer base, the uniqueness and demand elasticity of her offerings, and potential reactions from competitors and customers.