Linden Economy Fundamentals
The Linden Economy is driven by the Linden dollar, which is also worth a little in terms of the US Dollar. The LindeX is a method of trading these dollars for real money and can be found at https://secondlife.com/currency/. This is important for a few reasons.
?It’s the easiest way to get Ls. You can buy to your heart’s content, at the going exchange rate. ($USD 3 – 4 for $L 1000)
?Be a trader. Buy $Ls when they’re low relative to the dollar, and sell them when their high vs. the dollar. You can then use your profits to buy more $Ls or use the $USDs to do the laundry.
?Drives in game prices for what you sell. For instance, let’s say you make furniture, and your Cherry Armoire sold for $L 500 a month ago. Today, the $L is worth half as much as it was a month ago. You should adjust your prices to be near $L 1000. This shouldn’t be done in a vacuum – you should take into account what your direct competition is doing as well.
If you’re willing to put up your own, cold hard cash as an investment to buy land or sell the $Ls later, or you’re just willing to pony up the dough whenever you want to buy something, the LindeX is something you should become very familiar with. Historically, the Linden has only gone down vs. the USD, so I wouldn’t recommend buying and reselling currency to make your profits.
Every once and awhile, Linden Labs takes certain actions to control the supply of Lindens and make it more valuable. Pay attention to any action by them that results in less $Ls in the marketplace. For example, a system that rewarded folks for having a positive rating with money was removed recently, which caused less $Ls to be paid out. The currency exchange jumped a full dollar. Use caution, as in the stock market, there are no guarantees.

Selling What People Want To Buy
Since avatars have zero physical needs in SL, all the products and services sold in SL are completely emotionally and logically driven. Like in real life, people like having unique, good looking items in their home. People like to be entertained. People want to have fun in SL. What you sell should meet those basic needs. You could make a really cool broom that does the Macarena whenever an avatar comes within a few steps of it…but does anyone really want that?

Recognizing Demand
To figure out if people will actually want to buy what you’re going to sell, a little analysis of demand is necessary. Is there a big market for your product? Since everyone has an avatar, there is a huge market for hair, skins, clothes, etc. Is the market fairly small? A missile launcher that rains flowers on a region would be an example of something that only a few people would like to buy. Here’s a table that outlines the different types of products/services that exist in SL, how hard it is to get started within them, and the price level you can expect to charge.
Price      level
$0-500     Low
$500-1500  Medium
$1500+     High