Cambridge International as and a level Economics Ebook

4
Entrepreneur: 
This factor carries out two functions. First, 
the enterprise factor organises the other three factors of 
production. Second, enterprise involves taking the risk 
of production, which exists in a free enterprise economy. 
Some firms are small with few resources. The functions 
of enterprise are undertaken by a single individual, the 
entrepreneur. In larger, more complex firms the functions 
are divided, with salaried managers organising the other 
factors and shareholders taking the risk. The return for 
enterprise is the profits that are made.
Labour: 
human resources available in an economy.
Capital: 
a man-made aid to production.
Entrepreneur: 
organises production and is willing to 
take risks.
KEY TERMS
Some economies have a large quantity of high-quality 
factors of production at their disposal. Th
ey can 
create lots of goods and services to satisfy the wants of 
their population. Th
ey are said to have a good factor 
endowment. Other economies lack suffi
cient quantities 
of one or more of the factors. Developing countries, for 
example, might have large quantities of land and labour 
but lack suffi
cient capital and enterprise. Th
e former 
planned economies of Eastern Europe, such as Poland and 
Slovakia, found it diffi
cult to develop because they had few 
people with entrepreneurial experience as well as a lack of 
business capital. Entrepreneurship was not encouraged in 
their socialist economic systems. Th
is has now changed 
with the move to a market economy and the opportunities 
presented through membership of the European Union. 
Poland, Slovakia and other former planned economies 
have benefi ted from increased foreign investment from 
the rest of the EU and elsewhere. Firms have been able to 
make good use of skilled labour especially.