Final answer:
A generic product retailer in a perfectly competitive market, like a business selling bottled water, would lose revenue if it raised its prices because customers would switch to lower-priced competitors, leading to lost sales and potentially driving the business out of the market.
Step-by-step explanation:
One business that might lose revenue if it raised its prices is a generic product retailer, such as a company that sells commodities with no differentiation from competitors' products. For instance, if a business sells bottled water, which is identical to others in the market, raising prices would likely cause customers to switch to competitors offering lower prices. This scenario is a classic example of a perfectly competitive market, where products are the same across different sellers, and the only competitive advantage is price. Consequently, a price increase would result in lost sales.
In addition to losing customers, such competition dynamics could lead to a reduction in business profits and might even drive the business out of market if it persists in maintaining higher prices than its competitors. Competition from firms with better or cheaper products poses a significant threat, potentially leading to loss of income for the business and its workers.
An interesting example is when a large airline competes with a small start-up airline by slashing prices so significantly that the new entrant cannot survive financially. This predatory pricing strategy is a way to eliminate competition but is contingent on being able to bear the short-term losses of low prices.