You don’t need an MBA from a university to improve your business literacy. But you do need a basic understanding of economics to know if you’re designing at the right speed. These are typically taught in great detail during the first year of MBA programs and are essential for evaluating your market.
| Concept | Description |
|---|---|
| Economies of scale | When a company makes more stuff and it costs less to make each one. If you make 10 cupcakes, it's cheaper than making just 1 cupcake. In software, when a company gets more customers and needs to create more features, it can spread the cost of making the features across all customers, so each customer pays less. |
| Opportunity costs | What you give up by choosing one thing over another. Like if you use your allowance to buy a game, you don't have that money for something else. In everyday life, it means that every time you make a choice, there's a cost of the next best option that you didn't choose. |
| Time value of money | This means that money is worth more now than later. Like, if you had a dollar now or a dollar in a year, you'd rather have the dollar now. This is because you can use the dollar now, but if you wait a year you might be able to buy more with that dollar due to interest earned. |
| Law of supply and demand | How prices are determined for goods and services. When there's more demand for something than there is supply, the price goes up. When there's more supply than demand, the price goes down. It’s like a popularity contest for products, the more people want it, the more expensive it will be. |
| Zero marginal cost of production | Means making more doesn't cost extra, like making one copy of a video game once versus making a million copies. Once you've made one, it doesn't cost a lot to make more. This is different from a toy, which costs the same amount to make one as it does to make many. |
| Network effects | When the value of something increases as more people use it. Like if all your friends use a certain app, it's more fun to use because they are using it. For example, social media products where the more people that are on it, the more interesting it is to use. |
| Diseconomies of scale | Happens when a company gets too big and making stuff becomes more costly. In software development, it may become harder to manage and coordinate all the developers, leading to increased costs and less efficiency. |
| Economies of scope | When it's cheaper to do multiple things at once, like when you make cookies and brownies at the same time so you only have to clean up once. For example, developing different software products but using the same tools, programming languages, or frameworks. |
| Veblen goods | Things that people want to buy more of when the price goes up. Like designer clothes that are expensive because they're trendy. In software, you might see this with certain apps that are priced higher because they are considered premium or luxury. |
| The invisible hand | The idea that the market can self-regulate and make everything better for everyone on its own. Like when a group of friends decide on a place to eat without a leader. You might see this when new apps come out and people choose the best ones while the rest lose out. |