Role of an entrepreneur in the economy

• An entrepreneur has a business idea and organises resources to make and sell a product or service

• they can accept risk and make key start-up decisions (finance, pricing, hiring, premises)

Creative destruction: Organising factors of production to create and set up an enterprise

• creative destruction happens when innovation creates better products or processes that win customers, while older ones shrink or exit ( e.g. computers replacing typewriters: supermarkets out competing small shops)

• Technological change can result in improvements in efficiency and productivity, which would lower cost of production for firms. The quality and quantity of goods and services produced might improve

• for example, mobile phones have become cheaper to produce, which is why their price has fallen. more importantly, their quality has improved significantly. this is due to improvements in technology

• Technological change can lead to development of new markets, the development of new markets and may destroy existing markets. for example the development of DVDs, then blu-rays, and now the rise of downloadable films, has essentially destroyed the market for VHS video tapes

Selling the output for more than the cost of the inputs (adding value)

• for the entrepreneur in a firm, the incentive for taking risk is profit. An entrepreneur wants to avoid loos and gain profit, which makes them want to innovate. they can reduce their production and improve quality of their products. Entrepreneurs seek to maximise their profits.