1.2.1 The role of an entrepreneur in the economy

Question 1

Entrepreneur

Answer 1

Someone who takes the risk of organising and operating a new business venture

Question 2

Creative destruction

Answer 2

Businesses grow and sweep away competitors who are less competitive (out of date tech? Rendering them less productive)

Question 3

Disrupters

Answer 3

Innovative businesses that create new ways of production that make slow-to-change businesses obsolete

Question 4

Added value

Answer 4

Difference between the price of a finished good or service and the cost of the material inputs involved in making it

Question 5

enterprise

Answer 5

The actions of someone who shows some initiative by taking risk by setting up, investing in and running a business

Question 6

what is creative destruction

Answer 6

process where new businesses grow

Question 7

what is the process of creative destruction

Answer 7

• Free market economy goes under periods of dynamic technological innovation, changing products and markets dramatically
• Well established businesses become powerful
• New entrants to the maket **introduce new ideas and technologies, enhancing competition and offering new products anc sosts reducing production strategies **
• Some products become obsolete → jobs are lost
• Some businesses fail and industries vanish as change occurs
• In turn, new jobs are created: entrepreneurs introduce new products and technologies driven by the profit motive

Question 8

benefits of Creative D

Answer 8

• Economy prospers in the LONG RUN and grows despite short term pain –> Attempts to protect jobs and industries lead to stagnation and decline (free market)
• Economies that allow CD grow more productive and richer
• citizens see the benefits of new products, better working conditions and higher living standards

Question 9

firms that respond quickly to change with CD

(things to do to survive creative destruction)

Answer 9

• Reacting quickly to change, discontinuing production when profits fall and switching to new, adapted products that sell can give a business an advantage over competitors that are slow-adapting and have cumbersome management structures
• Schumpeter sees the constant birth/death of business demonstrates that capitalism is dynamic

Question 10

entrepreneurs deciding what is best for their company

(things to consider)

Answer 10

Entrepreneurs have to consider what the best steps are for a business. In order to decide, they might consider past mistakes, potential profitability and potential gaps in the market.

The decision also depends on personal circumstances.
- entrepreneurs have to consider what capital they might have to give up for a business, the implications of this for themselves and whether it will produce a high return.
- Entrepreneurs could expand a business by widening their product range, taking over or merging with another firm or employing more workers
- They need to ensure they have the necessary capital to do this, and that any means of growing is sustainable.

Question 11

what is competitive advantage

Answer 11

using any factor that will help the business succeed when competing with rivals

Question 12

what are examples of competitive advantage

Answer 12

1. Lower price
2. Successful advertising
3. Higher quality
4. More convenient
5. Customer service

Question 13

what is adding value

Answer 13

altering the product to increase irs value to the customer

Question 14

what does added value of a product come from

Answer 14

• Inputs (raw materials, components or final products that are going to be marketed and sold)
• E uses factors of production to add value so the product can be sold for a good price
• Dynamic markets: value added by employees that design and innovate products

All businesses will add value but more successful businesses add more value

Question 15

what are examples of things that can add value to a product

Answer 15

• Improvement
• Placing in desirable locations
• Reliability
• Branding
• Training staff