lesson
Entrepreneurship and income from entrepreneurship
Introduction
Entrepreneurship is the willingness to take risks and develop, organise and manage a business venture in a competitive global marketplace that is constantly evolving. Entrepreneurs are pioneers, innovators, leaders and inventors.
The way in which land, labour and capital are combined and organised in the production process is the function of the entrepreneur (from the French word entrepreneur – someone who undertakes). Without the vision of the entrepreneur, labour and other resources would remain largely unrealised potential. The entrepreneur is also the innovator who comes to the fore with new goods or new production techniques. That is why he or she is at the same time the bearer of risk – his or her time, effort, reputation and own funds (and those of others) are at stake should the innovation fail. The entrepreneur is also responsible for the taking of non-routine decisions in the management of the enterprise.
Capable, energetic and imaginative entrepreneurs are perhaps the most valuable of all productive resources.
Income from entrepreneurship
Profit is the remuneration of the entrepreneur, who is the driving force in a market economy. In all the activities undertaken by entrepreneurs, they face the risk of failure. Why do you think they are willing to undertake this risk of failure?
In a market economy, the possibility of making a profit is a strong incentive for entrepreneurs to undertake the risk associated with the establishment of new enterprises. Typically, an entrepreneur will weigh the risk of failure against the probability of making a profit. If the probability of making a profit outweighs the risk involved, the entrepreneur will be willing to undertake the enterprise. If the entrepreneur is successful in providing the right product, at the right price and the right time, to the right consumers, he or she will be able to make a profit.
Profits are the difference between the revenue received from selling the good or service to the market and the cost of producing the good or service. If revenue exceeds the cost of production, a profit is made. If the revenue is less than the cost of production, a loss is made. The amount of profit a business makes is determined by how successful the business is. It is not possible to determine beforehand what the profit will be. The amount earned by the entrepreneur might change from one period to the next. There is no guarantee that a profit will be made. Whether or not a profit is made depends on how successful the entrepreneur is. The more successful the entrepreneur is, the higher his or her profits will be.
Activity
Do the following activity which deals with the factors of production:
Individuals who are willing to take risks, bring resources together, develop new products and start new businesses are referred to as _______
You are right!
It is the entrepreneurs in a market economy who are willing to take risks, bring resources together, develop new products and start new businesses.
Think again.
It is the entrepreneurs in a market economy who are willing to take risks, bring resources together, develop new products and start new businesses.
Indicate whether the following statement is true or false:
Without entrepreneurship economic success cannot be guaranteed.
You are right! The statement is true.
Entrepreneurs are the driving force in combining and organising the other factors of production. They are the people who identify opportunities and then exploit them.
Think again. The statement is true.
Entrepreneurs are the driving force in combining and organising the other factors of production. They are the people who identify opportunities and then exploit them.
The payment for entrepreneurship is _________
Think again.
The payment for entrepreneurship is profits.
You are right!
The payment for entrepreneurship is profits.
Choose the appropriate factor of production in brackets:
One of the best known entrepreneurs in South Africa is Sol Kerzner, who developed the Sun City/Lost City hotel complex near Rustenburg. He saw the opportunity to provide a service with which he could help to satisfy people's needs for tourism and entertainment. He bought land, which is (a natural resource, capital, labour) to build the hotel complex on.
He then bought or hired the necessary machines and tools (natural resources, capital, labour) to have the complex built, and employed people (natural resources, capital, labour) to construct the hotels and maintain them afterwards. Services are constantly being supplied to the guests with the help of devices such as cleaning equipment, refrigerators, buses, boats (natural resources, capital, labour) for pleasure rides, and so on.
One of the best known entrepreneurs in South Africa is Sol Kerzner, who developed the Sun City/Lost City hotel complex near Rustenburg. He saw the opportunity to provide a service with which he could help to satisfy people's needs for tourism and entertainment. He bought land, which is (a natural resource) to build the hotel complex on.
He then bought or hired the necessary machines and tools (capital) to have the complex built, and employed people (labour) to construct the hotels and maintain them afterwards. Services are constantly being supplied to the guests with the help of devices such as cleaning equipment, refrigerators, buses, boats (capital) for pleasure rides, and so on.