What is the role of the Entrepreneur in the economy and how do interest and profits affect the economy? How much is too much?
Entrepreneurs are businessmen, they create employment, pay taxes, most often than not they start something new in the market which stimulates the economy. Like new stuffs to franchise and then it becomes a multiplier, some other businessmen now have other business opportunities. New entrepreneurs are given more choices in terms of what business to get in to. all of which helps the economy somehow. Interests is how much people/businesses are willing to pay for the cost of money. Profit, without profit there is no use in continuing a business. Why do business without profit? When it is outright crazy and unreasonable that is too much. It's not easy to quantify how much and it's relative depending on the individual.
Entrepreneurs create products and services. They are usually the source of most new ideas in the economy. For example, Steve Jobs and partners created Apple computers n their garage and made computers a household item using technology that some big companies didn't see the value of. Entrepreneurial companies usually grow quickly and are responsible for much of the job creation in our economy. They take risks where big companies won't, and change where big companies won't.
'Profits' simply mean that the output of a business was more valuable than the input, which means that something of value to the economy has been created.There isn't much point in pursuing a business without profits (you would be no better off than when you started -- or, if you have losses, even worse off). The profits are always either invested in new businesses or spent - and both of these activities help the economy.
Interest is the cost of borrowing money. If, for example, you want to start a limo company, and the interest rate is so high that the payments for your limo are so big that you can't possibly make a profit, then the limo business won't go ahead. If interest rates are high for the whole economy, lots of businesses won't make a profit and will start to shut down. Profits won't be made, and spending and investment will decrease, which is not good for the economy.
How much is too much? Really big profits mean that there is a lot of demand for that company's products. Others will want to get into the business and more companies will rush to fill the need. Competition will eventually force prices down. Take computers, for instance. The price was very high to start, but lots of companies started making them, and the price keeps falling. So, from an economic point of view, there is no such thing as "too much."
Role Of An Entrepreneur
A capitalist economy has, in the extreme aggregate, a theoretical level of infinite demand (stay with me here). Entrepreneurs and capitalists meet that demand by creating goods and services with the hopes of generating a profit. Importantly, the consumer and supplier are two sides of the same coin. One does not exist without the other. Henry Ford doesn’t exist without demand for automobiles. Steve Jobs doesn’t exist without demand for tech gadgets. Clearly, if there is no demand for the goods and services in a capitalist economy then there can be no capitalists and there can be no corporations that employ workers. So, the argument over “job creators” is a chicken and egg argument. Clearly, the capitalist needs the consumer and the consumers needs the capitalist. That’s simply how the trade works. You buy an iPhone from Apple corporation because the product will serve some role that you demand in your life. This gives Apple Corporation the potential to generate a profit and leverage their business operation, expand their business, employ more workers and generate higher profits.
advantages and disadvantages