Question

Explain what entrepreneurship is and why it is considered a factor of production.

Answer 1

The businessman is the one who begins the production process by mobilizing the other production factors. He organizes, manages and controls the company's business. He is the risk-bearer and also the profit-maker in this regard. Simply put, the business owner is the entrepreneur. These are specialization days, though. So we often see a division between ownership and management. To executives and businessmen, we now have a different set of roles.

This is the entrepreneur's first function to actually start a business. First, the entrepreneur is spotting business opportunities in the economy he can take advantage of. Then he develops the ideas for the project and decides on the business scale. Finally, in order to get the ball rolling, he must obtain the different production factors. The entrepreneur has to dynamically build up his business. He has to coordinate the production factors and use them in the right proportions. The aim of these factors is to generate higher productivity. So the entrepreneur must get the greatest yield for the lowest cost from these factors of production.

This may be the most important entrepreneurial function. In exchange for the company's profits, the entrepreneurs bear the risk of failure. Things can change very rapidly in the complex economic model. The entrepreneur's business plans should therefore be able to adapt to the changes. The taste of the customer may change, there may be new market entrants, taxes may increase, etc. All of these will affect the product's demand and supply. And in exchange, the businessman could suffer some financial losses. These financial risks must be borne by entrepreneurs.

The continuous innovation is one of the other important functions of entrepreneurs. In the field of new products, new manufacturing methods / technology, new business models, exciting and new promotion tactics, exploring new markets, etc. This will help businesses with the company's economic growth. Any new innovation or technology, however, also comes with its own share of new risks. Managing these risks in exchange for the potential for higher returns and higher profits will be the entrepreneur's task.