Role of an Entrepreneur in an Economy

Role of an Entrepreneur in an Economy

Courses Info

Level: AS Levels, A Level, GCSE – Exam Boards: Edexcel, AQA, OCR, WJEC, IB, Eduqas – Economics Revision Notes 

The process of Creative Destruction

  • Creative destruction leads to the development of new goods / services through innovation and advanced technology
  • Firms may be incentivised to enter the market if they see firms possessing monopoly power and making supernormal profits
  • Creative destruction encourages competition in the market
  • Technological change is influenced by creative destruction

Making decisions to operate, expand, and develop a business

  • Entrepreneurs take risks while creating ideas and putting them into action
  • Entrepreneurs take into consideration past mistakes, potential profitability and potential gaps in the market when making decisions
  • Entrepreneurs also have to consider the opportunity cost of the capital they may have to give up, the implications and whether the investment will produce a greater return
  • Offering a larger product range, taking over / merging with another firm, or employing more workers are ways in which entrepreneurs can expand their business

Adding Value

  • Entrepreneurs take risks and are rewarded with the profit gained from doing so
  • Entrepreneurs want to gain profit and avoid making a loss, encouraging them to innovate


Quick Fire Questions – Knowledge Check

1. Explain the process of ‘Creative Destruction’ (4 marks)

2. Explain how entrepreneurs make decisions to operate, expand, and develop a business (4 marks)

3. Explain how entrepreneurs add value to a business (2 marks)


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