ECONOMIC APPLICATIONS

NOTES

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Entrepren
eur

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Meaning and Definition

Introduction
Functions of an Entrepreneur
Role of an Entrepreneur
in Economic Development
Difference between an
Entrepreneur and an
Organizer
Difference between an
Entrepreneur and a Laborer
Conclusion
Quiz

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What is an entrepreneurship?
Entrepreneurship
Entrepreneurship is
is the
the process
process of
of creating
creating
something
something new
new of
of value
value by
by devoting
devoting (giving)
(giving)
the
the necessary
necessary time
time and
and effort.
effort. By
By accepting
accepting
and
and acknowledging
acknowledging the
the necessary
necessary financial,
financial,
psychological,
psychological, and
and social
social risks,
risks, and
and finally
finally
receiving
receiving the
the resulting
resulting rewards,
rewards, be
be it
it
monetary
monetary and
and personal
personal satisfaction
satisfaction and
and
freedom
freedom to
to do
do what
what you
you want.
want.
~
~ Robert
Robert D.
D. Hisrich,
Hisrich, M.
M. Peters
Peters &
& D.A.
D.A.
Shepherd
Shepherd

& Me
D an
e fi i
n
n g
it
io
n

What/who is an entrepreneur?
He
He or
or she
she is
is an
an individual
individual who
who actively
actively forms
forms or
or leads
leads their
their own
own business
business and
and
nurtures
nurtures itit for
for growth
growth and
and prosperity.
prosperity.
~
~ UiTM
UiTM Entrepreneurship
Entrepreneurship Study
Study Group
Group
OR
OR
AA person
person who
who creates
creates and
and manages
manages change
change by
by the
the recognition
recognition of
of opportunities
opportunities
(needs,
(needs, wants,
wants, opportunities,
opportunities, problems,
problems, and
and challenges)
challenges) and
and develops
develops people
people
and
and manages
manages resources
resources and
and thus,
thus, creates
creates aa venture
venture (profitable
(profitable business).
business).
~
~ Eston
Eston Kimani,
Kimani, MIT
MIT

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Introduction
What is the need for an entrepreneur?
In order for the firm or organization to carry out its tasks in a planned
manner, a person who is willing to take responsibility for the firms
decisions and risks is needed.

What does an entrepreneur do?

An entrepreneur basically manages the whole firm
and organizes the production, takes important
decisions regarding production, hires/purchases
factors of production, and bears the risks and
uncertainties involved therein.

What does it require to become an entrepreneur?

Not just anybody can become an entrepreneur. A person should have
the leadership qualities, desire to innovate, and the willingness to take
risks in order to become a successful entrepreneur.

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Functions
type of functions does an entrepreneur perform?
According
According to
to some
some economists,
economists, the
the functions
functions of
of an
an entrepreneur
entrepreneur are
are
classified
classified into
into five
five broad
broad categories
categories ::
Risk
Risk Bearing
Bearing -- Involves
Involves uncertainties
uncertainties related
related to
to production,
production, investments,
investments,
and
and profits.
profits.
Organizational
Organizational -- Involves
Involves bringing
bringing together
together factors
factors of
of production
production and
and
organizing
organizing them.
them. In
In the
the proper
proper combination.
combination.
Innovative
Innovative -- Involves
Involves choosing
choosing and
and introducing
introducing profitable
profitable innovations
innovations
and
and applying
applying them
them to
to earn
earn more
more profits.
profits.
Managerial
Managerial -- Involves
Involves rewarding
rewarding the
the factors
factors of
of production
production with
with
acknowledgement
acknowledgement of
of their
their relative
relative contribution
contribution to
to the
the production
production
process.
process.
Decision
Decision Making
Making -- Involves
Involves making
making decisions
decisions regarding
regarding selection
selection of
of the
the
commodity
commodity to
to be
be produced,
produced, selection
selection of
of design
design and
and quality
quality of
of the
the
product,
product, selection
selection of
of location
location of
of the
the factory/base,
factory/base, scale
scale of
of production,
production,
and
and techniques
techniques of
of production.
production.

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does an entrepreneur help in the

nomic development of a country?

Role of an Entreprene
in Economic Developm

The
The economic
economic development
development of
of aa country
country is
is
determined
determined by
by the
the number
number and
and quality
quality of
of
its
its entrepreneurs.
entrepreneurs. Thus
Thus entrepreneurs
entrepreneurs
play
play aa definitive
definitive role
role in
in the
the economic
economic
development
development of
of aa country
country in
in the
the following
following
ways:
ways:

Increasing
Increasing the
the per
per capita
capita output
output and
and
income
income of
of the
the people
people of
of the
the country.
country.
Initiating
Initiating and
and creating
creating change
change in
in the
the
structure
structure of
of business
business and
and society.
society.
Generation
Generation of
of innovation
innovation that
that leads
leads to
to
the
the creation
creation of
of new
new product
product and
and service.
service.
Improvisation
Improvisation and
and modification
modification on
on
existing
existing product
product to
to better
better suit
suit market
market
and
and customers
customers needs.
needs.
Creation
Creation of
of self
self employment
employment and
and to
to cut
cut
back
back the
the dependency
dependency of
of potential
potential
employment
employment of
of new
new workers
workers in
in
government
government sectors.
sectors.
Streamline
Streamline of
of the
the private
private sector
sector and
and
encourage
encourage the
the inclusion
inclusion of
of new
new
technology
technology that
that is
is less
less labor
labor dependent.
dependent.

Increase
Increase in
in the
the national
national output
output
which
which in
in turn
turn lead
lead to
to greater
greater and
and
stronger
stronger economic
economic growth.
growth.
Laying
Laying the
the seed
seed bed
bed for
for creating
creating
new
new entrepreneur
entrepreneur in
in various
various new
new
technologies
technologies such
such as
as Bio
Bio
Technology,
Technology, Bio
Bio Technology
Technology
Medicine,
Medicine, Nano
Nano Technology
Technology ,, New
New
Material
Material Technology
Technology etc.
etc.

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Difference b/w
n Entrepreneur and An Organize
The organizer begins manufacture of goods in expectation of compensation
The
begins
manufacture
of goods
in expectation
of compensation
but
is organizer
not obligatory
that
he may always
get gain.
Occasionally
the organizer
but
is
not
obligatory
that
he
may
always
get
gain.
Occasionally
thejeopardy
organizer
has to abide some defeat also. Whereas, the work of embarking on
to abide
some defeat also. Whereas, the work of embarking on jeopardy
ishas
termed
as enterprise.
is termed as enterprise.
Before machines came into existence, manufacture was accepted on a small
Before
came industries.
into existence,
manufacture
was accepted
scale
andmachines
in the cottage
There
was no disparity
amidst on a small
scale and inand
theenterprise
cottage industries.
Therethat
wasthe
no disparity
amidst
organization
for the reason
work of organizing
and
organization
and
enterprise
for
the
reason
that
the
work
of
organizing
and
risk taking was executed by the same person.
risk taking was executed by the same person.
However, with the materialization of large scale industries the joint stock
However, have
with the
materialization
of large and
scale
industries
theIn
joint
companies
detached
the organization
the
enterprise.
JSC,stock
companies
detached
theprofit
organization
the the
enterprise.
In JSC,
investors
are have
careful
regarding
and loss.and
Hence
enterprise
is related
investors
are
careful
regarding
profit
and
loss.
Hence
the
enterprise
is related
to the investors.
to the investors.
The actual work of organization and administration is approved by the paid
The actual
of organization
and administration
is approved
by the paid
managers
orwork
directors.
Thus organizers
and entrepreneurs
are dissociate
in
managers
or
directors.
Thus
organizers
and
entrepreneurs
are
dissociate
in
modern productive system such as JSCs. Here the charge of organization and
modern productive
system
such
JSCs. Here
the charge
organization
and
administration
and the
task of
riskas
abiding
are embarked
onofby
various
administration and the task of risk abiding are embarked on by various
persons.
persons.

Whereas in small scale industries, the entrepreneur himself is the organizer.

in small scale
entrepreneur
himself
is the organizer.
www.icsehelpline101.wordpress
InWhereas
such a situation,
whereindustries,
operationsthe
of By
organization
and
enterprise
are

Difference b/w
Entrepreneur and A Labor
Entrepreneur
An
An entrepreneur
entrepreneur
hopes
hopes to
to get
get profit.
profit.
An
An entrepreneur
entrepreneur
has
has to
to bear
bear all
all the
the
risks
risks of
of business
business
and
and his
his income
income is
is
not
not certain
certain and
and
fixed.
fixed.
An
An entrepreneur
entrepreneur
has
has to
to perform
perform all
all
jobs
jobs concerning
concerning
with
with the
the business.
business.

Laborers
Laborers get
get
Laborer
wages
wages for
for the
the
tasks
tasks they
they
perform.
perform.
Laborers
Laborers have
have
nothing
nothing to
to do
do with
with
the
the risks
risks involved
involved
in
in the
the business.
business.
They
They will
will be
be sure
sure
to
to get
get wages.
wages.
Laborers
Laborers are
are
supposed
supposed to
to
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perform
perform activities
activities

All in all, we may say that other factors

of production have a role as important
as that of an entrepreneur. However,
we fail to consider the fact that
without an entrepreneur to take the
initiative and decide on the starting of
a company and its production process,
land, capital, and labor would not be
required. Thus, we can see now, what
a big role the entrepreneur plays in the
setting up of a company, no matter
how big or small. This is why it is
rightly said that entrepreneurship is
an indispensable factor of production.

Conclusio
n

You may also realizeBywhy

it is
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Quiz Time!

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erms, what is an entrepr

The act of creating something
The act of working under a firm
new, of value, and
and being paid a salary.
accepting the risks involved therein.

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Try Again!

What is the need for an entrepreneur?

To look after other factors of production

and make sure that they are
used appropriately.

To organize a company and manage it

while accepting the risks involved.

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Try Again!

True or False:
An entrepreneur is an
Indispensable factor
Of production.
True

False

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Try Again!

me two main functions of an entrepreneu

Managerial
Labor Work

Supervising
Setting Up Firm

Decision Making
Risk Bearing

Organizational
Producing Goods

Try Again!

What qualities are

required in an
Entrepreneur?
Willingness to bear risks
Good communication skills

Leadership
Willingness to Innovate

Leadership
Willing to travel

Social Nature
Readiness to take risks

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Try Again!

True or False:

n small scale industries,

ntrepreneur and the orga
are not the same person
True

False

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Try Again!

modern productive system, are entrepre

d organizers the one and the same perso

Yes

No

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Try Again!

Why is an entrepreneur
important for the
economic development
of a country?
To help people start new companies
To increase national output To create awareness about
To create self-employment
the production of goods
To streamline the public industry
To increase per capita income
To increase use of new
To decrease national output
technology

Try Again!

What does the entrepreneur do in

the innovative function?
Invents new factors of Makes projects and
production
plans for the company

Introduces profitableImplements new setup

innovations
plans

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Try Again!

True or False
An entrepreneur always
earns profit.
True

False

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Try Again!

an just anybody become

successful entrepreneur
Why, or why not?
Yes

No

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Try Again!

Can a company function

without an entrepreneur?

Yes

No

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Try Again!

ve one difference betwe

entrepreneur and a labo
Entrepreneur has to bear risks.Entrepreneur earns wages.
Laborer does not have to
Laborer does not
bear risks.
earn wages.
Entrepreneur gets profit.
Laborer earns wages.

Entrepreneur works
under supervision.
Laborer manages the firm.

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Try Again!

You Have Finished the Quiz!

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