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Economics The power of money
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Topic 3: What is the Role of Profit/Risk-Entrepreneurship Profit is defined as the difference between total revenue and total cost. Economic profit is the payment for entrepreneurial ability. The entrepreneur is rewarded for identifying a profit opportunity and taking advantage of it. There are four theories that explain how the entrepreneur earns their profit: as a risk taker, innovator, monopolist and as an exploiter of labor. These are the theories of profit and how the entrepreneur takes advantage of profit in these situations in different business situations. Franklin Knight, an entrepreneur saw profit as a reward for risk bearing. The higher the risk, the higher the profit will be. The only way to get people to make risky investments is to offer them high rates of return. This is where the theory of the entrepreneur as a risk taker is formed. An innovation is the act of putting a invention to practical use; an invention is a new idea, a new product or a new way of producing things. At times an inventor may not market their invention due to a shortage of capital; another person may steal their idea and accept it as their own. Joseph Schumpeter, an American economist stated that innovation is the basis for economic advance.
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Paper Information
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Title: Economics The power of money
Words: 987
Rating: None
Pages: 3.9
submitted by: pinkladybug84
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