I live in a rural area in Western North Carolina,  I have just started making cakes to sell after alot of people have asked.  I have done a lot of reading and I would say the  average is $4 Per person for a standard tiered cake....no one will even think of paying that here.  The nearest bakery that does modern cakes is about an hour from where I live. What are your thoughts?

Small towns are an entirely different animal than larger ones. You're going to have to figure out what people are willing to pay on the high end and go for that, because there's no way that you'll be able to get the prices that people are charging in larger cities. You might want to sit down and figure out if it's even worth your time to sell custom cakes once you take all of your time into account, because you might only end up making $3 an hour if you're not careful.

 Are there any other custom cake bakers in the area at all? How much is the place that's an hour away charging, and what city are they in? My son goes to college in Danville VA, and there's no way that I'd be able to charge what I charge here in Richmond if I lived in Danville. Three hours away and it's a different story.

I bet there is no Rolls Royce or Porsche dealerships either? ;)

That is to say, maybe there is a market for less time consuming, and therefor less expensive bakery items? The high end custom bakery products may not fly, but is there a reasonable alternative? Then again, if the WalMart sheet cake satisfies, it is impossible to compete with that. 

There is definitely a lot of interest in my cakes,  no one around here does much other than basic buttercream sheet cakes.  I am getting between $2 and $3 pp. I'm ok with that. 

I am just starting out in a rural area and I charge $2 per serving which includes basic decorations. My prices go up from there depending in how fancy the customer wants it. 

 If you're okay with that, and you're charging when someone wants something extra, then you're fine. There's no reason to try to get pricing from other parts of the country to fit your area because that just won't work all the time. Marketing will only go so far to allow you to raise your prices if the economy is slow or people are happy with very basic cakes where you are. Like I said, I'm in Richmond, and two and a half hours north of me is Washington, where people can charge more than I can because it's Washington. And north of that is New York and Boston, which are both more expensive so people can charge more there. If I tried to charge Boston prices I'd get about 1/25th of the customers I have now, if any. If your pricing is appropriate for your area then don't worry about it.

 Just make sure that when you add stuff on to your basic designs you're charging extra for it. That's how you can gradually get people used to paying more if that's what you want to do. Don't train your customers to expect a super elaborate design for Walmart pricing! 

Thank you so much for the feedback.