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4964283
Enterprise and Profit
Description
Leaving Certificate Economics Mind Map on Enterprise and Profit, created by james liew on 28/03/2016.
No tags specified
enterprise
profit
leaving cert
economy
entrepreneurs
loss
rent of ability
supernormal profits
normal profits
economics
leaving certificate
Mind Map by
james liew
, updated more than 1 year ago
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Created by
james liew
over 8 years ago
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Resource summary
Enterprise and Profit
Enterprise is the factor of production that takes the initiative and bears the risk involved in setting up a business to produce goods
How Enterprise Differs from the Other Factors of Production?
It can Earn a Loss
Return Can Vary: From Supernormal Profit to to losses
Return is Residual: Enterprise receives its return after all other factors have received their payments
Risks Involved in Running a Business
Insurable Risks: these are risks that can be mathematically estimated
Theft of Stock
Fire to Premises
Non-Insurable Risks: these are risks the entrepreneur can't insure against occuring
Loss of Profit
Bad-decision making
Changes in Trends or fashion
Profits
Normal Profits: the minimum amount of profit an entrepreneur must receive to stay in production in long run
Supernormal Profits: any profit earned in excess of normal profit
Why Are Profits Important in a Market Economy?
Encourage Investment
Provide Funds for Expansion
Source of Revenue for Government
Continuity of Production
Encourage Risk-taking
The Importance of Entrepreneurs in an Economy
They Create Employment
They Create Wealth in the Country
Generate Revenue for Government
They Organise the other factors of production
Encourage Further Investment
Rent of Ability: is the economic rent (SNP) earned by an entrepreneur due to their innate talent
How Can Enterprise Be Encouraged?
Giving incentives & tax breaks to new start-up companies
Availability of credit & low interest repayments
Mass media highlighting successful companies to create an optimistic economic outlook
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