Question

Discuss the three functions of an entrepreneur.

State two important functions of an entrepreneur.

Answer 1

An entrepreneur performs many types of functions. We may list them as follows:

1. Risk-Bearing: The risk-bearing function is the most important function of an entrepreneur. Uncertainties related to production, investment, and profits are what cause the risk. Another big risk is technological obsolescence and frequent changes in government policies.
2. Decision-Making Functions: Decision-making is an important function of an entrepreneur. He has to take several decisions regarding his business. These decisions may be regarding the following:
   1. selection of the commodity to be produced.
   2. selection of the design and quality of the product.
   3. selection of the location of the plant.
   4. decision regarding the scale of production.
   5. selection of techniques of production to be employed in the business (i.e., choice between labour intensive and capital-intensive techniques of production).
3. Distributive Functions: The entrepreneur has to decide the reward that each factor of production should get. In deciding this, he has to bear in mind their relative contributions to production.
4. Innovative Function: Innovation is considered an important function of an entrepreneur. The practical application of an invention is called innovation. The entrepreneur has to choose profitable innovations and apply them to earn more and more profits. A progressive entrepreneur always takes the lead in introducing a new product or a new technique of production.
5. Delegation Function: It involves giving the right task to the right person for the right reason. Delegation allows for the best use of time and skills.