Question

2. a) Discuss why small firms and entrepreneurs serve as agents of change in the economy.

b) You are a policy-maker of an EU country with a relatively high GDP per capita. How can your policy-making impact small- and medium-size enterprises and their contribution to the level of economic development in the country?

Answer 1

a) Small firms serve as agents of change in the economy by :

• Creating new jobs and employment
• Providing goods and services which may serve a niche area and not compatible for mass scale production
• Development of new products through innovation
• Acting as suppliers and vendors to bigger corporations
• Contribution to government revenue through taxes
• Contributing to overall development of the area and locality in which they operate

b) Policy-making can impact small- and medium-size enterprises by:

• Creating stable laws that support entrepreneurship and starting new businesses
• Providing tax benefits and lower tax rates to small and medium sized enterprises
• Creating better communication and transport networks in the areas in which these firms start operating
• Giving access to infrastructure and technology to small firms in order to enable them to start functioning
• Providing financial support to new firms in the form of loans at low interest rates