Cousin Edgar is always thinking of the next business idea. This time, he plans to invest in buying two gas
stations. He reckons American consumers have come to accept the high gasoline prices, and estimates world prices for gasoline will increase even further due to increasing high demand from India and China. Besides, Cousin Edgar thinks he will make a good profit on the sale of convenience items at each station. But before buying the gas stations, he decides to ask for your advice since you are taking this course in Business Economics.
You recall reading about making pricing decisions for gasoline on pages 173-174 of the textbook. You also recall reading about perfectly competitive markets in Chapter 12, and the need for differentiation in Chapter 13. Being skeptical of Cousin Edgar’s optimism on the profitability of selling gasoline and convenience items, you decide to research the market in terms of supply and demand, elasticity, costs of production, pricing, and normal profit. You want to provide Cousin Edgar with the most informed advice possible.