PM Lecture #7: Impact of Risk and Entrepreneurship on Economic
Monday, April 7, 2014
Why Do Managers Care?
- A country's standard of living depends on its ability to produce goods and services
○ Rich countries can produce more than poor countries
- The higher the standard of living, the bigger the market for products
Why Are Some Countries Rich and Others Poor?
- According to economist,Jean Baptiste Say, what a country produced was based on the following:
○ Amount o land it had (Land)
○ Number of people (Labor)
○ Factories (Capital)
○ Number and quality of risk-taking entrepreneurs
- Articulated the economicidea of laissez-faire
○ Gov't should not interfere with the economy.By leaving the economyalong, the economic
pie would naturally end up as large as possible
How Can a Country Grow?
- One method is to make a country's citizens take more risk
○ Why is risk important to macroeconomics?
Entrepreneurs help a country dramatically increase GDP
□ Entrepreneurs are risk taking people
□ Counter Point: Malcom Gladwell does not believe that entrepreneurs are risk
taking, instead, they are people who recognize great low risk opportunities that
has a good pay off
New companies are important in the economy
□ Number of new businesses formed
Most people are risk adverse, because of diminishing marginal utility
◊ Shown by d