B3 Importance of Entrepreneurs to the Economy
Economic growth
The production of goods and services that meet the needs of the consumer creates spending. The entrepreneur creates spending in the economy through employing staff, paying suppliers and through their own personal spending. This drives economic growth which increases the national income.
Balance of Payments
When goods and services are produced and sold by domestic businesses, it reduces the demand for imported goods and services. This reduces the amount of money leaving the economy and has a positive impact on the balance of payments.
Job creation
As entrepreneurs expand their business, they need to hire staff to take on roles they can no longer complete themselves. This reduces unemployment in the economy which alleviates the burden on the economy. It also gives people more disposable income which increases spending.
Improved standards of living
As entrepreneurs seek to differentiate themselves and their products from those on the market, they create goods and services that expand the range available to consumers. This may include products that differ in prices, features and quality. As consumers are exposed to a wider range of choices, they are more likely to have access to goods and services that best meet their individual needs.
Innovation
Entrepreneurs typically strive to find gaps in markets and aim to create goods and services that meet the changing needs of consumers. This inevitably leads to creative thinking to solve problems, create new products and implement new processes. This puts pressure on competition which drives innovation throughout industries.
Market Competition
The goods and services that entrepreneurs provide increase competition for existing businesses. This drives them to improve quality, productivity and efficiency to remain competitive.
Regional Development
When entrepreneurs start businesses in areas with little economic activity, they can stimulate the local economy. This is due to generating spending through offering goods and services and providing jobs. When a local economy is stimulated, it can attract further investment from other businesses.