I stopped doing art and craft shows back in 2003 for the same reasons you all have sited. I used to do the "average" shows as well as "upscale" shows. What I did notice was that back in 2001, when the economy began to slump and the dot.com era failed (I'm in IT, what can I say?), many people went into art, especially jewelry. The market became flooded with jewelry. Check out Etsy.com as proof! I used to be the only jewelry person at many shows, or at least one of a few. The next thing I knew, most of the shows were comprised of jewelry. People have so many choices now. In order to make a sale, having a beautiful selection is the first thing. It captures the customer's eye. Pricing is the hard thing. If it is too low, you'll attract only bargain hunters, and many of them will ask for an additional discount (my experience). Others will wonder what's wrong with your work or think that the gemstones are fake. If it is too high, well, they won't buy.
You are right to talk with customers and discuss your materials. They need to realize that you are in business. You paid for the show, your tables, tablecloths, displays, gasoline, etc. You also paid for the materials and your time to create your beautiful jewelry. Everyone can appreciate that all prices have gone up - especially in gemstones and precious metals. Do check around different jewelry websites to see the prices other artists are selling similar pieces. Check out catalogs and find out their prices. Take the catalog with you to show customers that your price is less than if they purchased through XYZ catalog.
When I did do shows, I kept a variety of different pieces at different prices. I even had my "leader". I had purchased a big bag of undrilled, different sized, assorted gemstone rounds on a special from one of my wholesalers. I then purchased gold and silver plated ear studs with a cup. I matched the gemstones and glued them into the ear studs. I sold the 4mm pairs for $1.00, the 6mm pairs for $3.00, and the 8mm pairs for $5.00. Every show, I sold enough of these to cover most, if not all, of the show expenses. This was perfect for children who only had a few dollars and wanted to buy something for their mother, i.e., Christmas and Hannukah. I sold these in multiples, telling people that these made wonderful presents to have on hand for the holidays, birthdays, etc. If I hadn't had these items, my sales wouldn't have been as good. I know the other argument is that you don't want to sell the inexpensive items only. However, having a leader boosted my sales at these shows.
My high end pieces were displayed on neckboards situated on top of risers on my tables, so they stood out from my average priced pieces. On the rare occasion, I would sell a higher end piece. It was these high-end items that got customers into my booth. These are just some ideas for you to consider. If a person wants something bad enough, they will pay for it.
Have you tried introducing your work as "One of a kind"? It is a piece of art. It is made with your wonderful imagination and your gifted hands. It is also an investment. It could also be introduced as a piece that will be an hierloom. Perhaps it was entered in a jewelry contest? Take a little pride in letting your customers know it was a finalist, or came in first place, or whatever, in a contest. People want to know that other people have also admired your work. That helps to sell.
Speaking of which - have some friends come into your booth, act like customers, and have them talk about a few of your top pieces. Let them go on about not being able to make up their mind because two or three pieces are so beautiful and considering the workmanship and materials, the price is very reasonable! This also worked for me. People are drawn to a crowded booth. Especially when they hear positive remarks from people already there.
Please do keep in mind that people aren't spending too much money right now, especially on "non-essentials". The economy is hurting. It isn't you at all! It is the economy. Be positive. And, please don't undersell yourself. I know times are hard, but take pride in your work and yourself. People will appreciate you.
Good luck!