Touseef Raza Khowaja
Business Economics-ECON545
Professor: Jhon Hinric hs
23 January 2015

Introduction
My dear cousin Aly, who often switches from one business venture to the next, is now seeking to invest in two gas stations and has asked me for my educational perspective. His rationale for this business venture is that American consumers have officially accepted the insanely high gasoline prices and what he doesn’t earn in gas sales, he will compensate with convenience item sales. Willing to do anything to assist my family and also not quite sure if it is a smart investment, I told Aly I would do my research and relay my findings. In order to effectively help ALy, there are certain relevant economic principles that must be assessed and determined. The issues to be addressed when starting a business, such as a gas station, are: demand determinants, supply determinants, costs of production, pricing, and normal or economic profit or loss.
Demand Determinants
Before any business can begin, regardless of the type of business, the potential business owners and investors must first determine if the demand for the products and/or services the business is providing is high or low. As gas consumers, certain factors are assessed in determining their reactivity to gas prices. Gas consumers must ask themselves: What factors would make them more or less susceptible to price changes in the gasoline industry? Has he/sheresponded differently to price changes in gasoline during certain periods in their life? Why is it that gas price changes at certain stations seem to affect them more than gas price changes in the industry as a whole?
In consideration to these questions, the determinants may be a number of things. The most important of these determinants is the income of the household. For instance, if a family of four has a monthly income of $2200 and $1700 of that