Economic Analysis

Economic reasoning makes the incentives and trade-offs behind a decision explicit - and shows which assumption the whole conclusion hangs on. The costly failure this skill prevents is the confident recommendation built on an unstated elasticity guess: small changes in that one number flip "raise prices" into "lose the market," and nobody notices until revenue does.

Inputs to collect

1. The decision: the specific choice being made (raise price, enter market, add capacity, respond to a rival).
2. The actors: buyers, sellers, regulators - and who the analysis is for.
3. The good or service and its closest substitutes and complements.
4. Market structure evidence: number of competitors, differentiation, entry barriers.
5. Any real data: past price changes and volume responses, cost breakdowns, competitor prices. Real data beats framework defaults; where data is absent, state the assumed value and label it a guess.

Operating procedure

Step 1: Frame the problem economically

Identify the actors, the good, the market structure (competitive, monopolistic competition, oligopoly, monopoly), and the decision. Write the decision as a comparison of two states of the world, because every economic recommendation is ultimately "A beats B under these assumptions."

Step 2: Map supply and demand