Final answer:
The general rule of thumb for pricing in food retail is markup based on cost, which includes the cost of production and a profit margin. This approach considers menu costs and the gradual response of prices to supply and demand.
Step-by-step explanation:
The general rule of thumb for pricing in food retail is markup based on cost. This entails setting a price that covers the cost of production and adds a desired profit margin. It is a strategic approach that ensures the sustainability of a business. Modern economic theories, influenced by Keynesian economics, suggest that prices may be 'sticky' and do not change rapidly in response to market trends due to certain costs associated with changing prices, referred to as menu costs. These costs include expending resources on market analysis, updating sales materials, and potentially causing customer dissatisfaction due to unexpected price changes. Therefore, while prices do respond to supply and demand, the adaptation process in the economy is gradual.