Silicon Valley is increasingly turning to economics for insights into how to solve business problems—from pricing and product development to strategy.

Understand Micro and Macro Economics:

Macroeconomics is about the interactions and aggregate behavior of all the individual actors in the economy. To understand the big picture, we first need to understand who all the individuals act. That is the realm of microeconomics.

Microeconomics is about the behavior, decisions, and choices of individuals. There are four main parts of microeconomics:

· Individual Behavior

· Supply and Demand

· Theory of the Firm

· Competition

There are two main assumptions made in classical economics:

· That we are rational actors and we always optimize our allocation decisions

· Resources are scarce, and allocating them most efficiently is critical

Both these assumptions are being challenged with more nuanced thinking as everything becomes digital.

Understand how Capitalism works:

Capitalism is a modern economic system where goods and services are sold for profit. The exchange between buyer and seller is called the market. In a capitalist economy, the parties in a transaction determine the price at which assets, goods, and services are exchanged.

Capitalism is characterized by capital accumulation, competitive markets, and wage labor.

Capitalism has existed under various forms of government and in different times, places, and cultures. Following the demise of feudalism, capitalism became, and has remained, the dominant economic system in the Western world.

Characteristics of Market Systems:

· Private property

· Freedom of enterprise and choice

· Self-Interest

· Competition

Understand the basics of Economics:

How People Make Decisions

–People Face Trade-offs

–Rational People Think at the Margin

–People Respond to Incentives

How People Interact

–Trade Can Make Everyone Better off

–Markets Are usually a Good Way to Organize Economic Activity

–Government Can Sometimes Improve Market Outcomes

How the Economy as a Whole Works

–A Country’s Standard of Living Depends on its Ability to Produce Goods and Services

–Prices Rise When the Government Prints Too Much Money

–Society Faces a Short-Run Trade-off between Inflation and Unemployment