Question

Jason, a high-school student, mows lawns for families in his neighborhood. The going rate is $12 for each lawn-mowing service. Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen if Jason raised his price? Do the participants in the market agree that his experience is relevant if the market is perfectly competitive?

Answer 1

As in the perfect competition market, the seller has to take the market price as the product price because in the perfect competition, the seller cannot charge a price of his own because the product being offered is homogenous that means that all the sellers in the market are offering the same product without any differentiation so if Jason will increase his price to $20 from $12 then he will lose all of his customers who will instead buy the lawn moving service from other students at a lower rate than Jason's.