Questions and Answers
What are the classical theories of entrepreneurship mainly focused on?
What is the main focus of the Marshall analysis?
To sustain the equilibrium and only when markets become too competitive that profit becomes zero leading producers to innovate
The demand price is _______ to the supply price, the amount produced has no tendency either to be increased or to be diminished so it is in ___________
Equal ; Equilibrium
What does 'entrepreneur' mean in French?
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Classical theories of entrepreneurship majorly focused on the virtues of...________, __________, _________
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According to classical theories of entrepreneurship, what is the role of the entrepreneur?
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Who are the two theorists associated with the remarkable classical theories of entrepreneurship?
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According to Richard Cantillon, entrepreneur is someone who uses _____________ without being able to foresee which product will pay the best price depending on the forces of supply and demand.
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What are the three functions of an entrepreneur?
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What is the importance of time in providing consumers with desired goods?
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What does the form of utility refer to in transformation?
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What is involved in service utility?
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What does possession utility involve?
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What role do entrepreneurs play in pre-classical economic theories?
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What factors besides demand and supply influence the market value of labor according to pre-classical economic theories?
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What does the equi-marginal principle refer to?
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What does Richard Cantillon believe regarding entrepreneurs?
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Without entrepreneurs taking and overcoming the risks of business ventures, economic progress would have slowly stopped a long time ago.
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The value of unskilled labor is higher than skilled labor since there is an opportunity cost of time and preparation.
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In what theory is the entrepreneur said to possess perfect knowledge and purely competitive markets?
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Study Notes
Classical Theories of Entrepreneurship
- Focus on accumulation and allocation of surplus output.
- Emphasizes free trade, competition, and specialization as key virtues.
Marshall Analysis
- Sustains market equilibrium; innovation occurs when markets become too competitive and profits reach zero.
Market Conditions
- Demand price is equal to supply price, leading to a stable production level in equilibrium.
Definition of an Entrepreneur
- Derived from French, meaning "ability to take charge" in business contexts.
Role of Entrepreneurs
- Entrepreneurs bridge market supply and demand, facilitating the exchange of products and services.
Key Theorists
- Richard Cantillon (1775) and Joseph Alois Schumacher (1942) are notable figures in classical entrepreneurship theories.
Entrepreneurial Judgement
- According to Cantillon, entrepreneurs make decisions without precise forecasts on product demand and pricing based on supply and demand forces.
Functions of an Entrepreneur
- Involves buying and selling goods between villages and cities, and producing goods and services for sale in these areas.
Forms of Utility
- Time: Availability during specific periods like holidays affects consumer access to goods.
- Form: Transformation of raw materials into finished products.
- Service: Utility derived from resources like electricity and transportation in production and distribution.
- Possession: Transfer of ownership through cash exchange.
Pre-Classical Economic Theories
- Entrepreneurs play crucial roles in coordinating product and resource markets, emphasizing their authority and responsibility.
- Opportunity cost and risk contribute significantly to determining labor market value, challenging traditional supply and demand theories.
Value Theory
- Intrinsic value of goods as a counterpoint to modern economic perspectives on value.
Circular Flow Model
- Concept emphasizes interdependence among property owners and the role of entrepreneurs in aggregating goods and services.
Price-Specie Flow Mechanism
- Analyzed how variations in money volume influence the relative prices of goods, impacting economic conditions.
Equi-Marginal Principle
- Entrepreneurs optimize land and labor combinations for maximum output in production.
Significance of Entrepreneurs
- Cantillon argues that entrepreneurs' risk-taking is essential for economic progress.
Labor Value Insights
- The value of skilled labor exceeds unskilled labor, reflecting the opportunity cost associated with time and preparation.
Marshallian Theory Considerations
- Proposes that entrepreneurs possess perfect knowledge in purely competitive markets, shaping their business strategies.
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Description
Test your understanding of classical theories of entrepreneurship with this interactive quiz. Dive into key concepts such as market equilibrium and the role of innovation in competitive markets. Perfect for students and enthusiasts of economic theory.
