question_answer 12)

Examine the nature of relationship between entrepreneurship and economic development. 

Answer:

There is a mutual relationship between economic development and entrepreneurship. Entrepreneurship development leads to economic development of the country by contributing in GDP and process of economic development gives an opportunity for expansion and growth. Following points explain the relationship between economic development and entrepreneurship (i) Contributing to Gross Domestic Product (GDP) Income is Generated in the process of production. Entrepreneurs generate income via organization of production, it results in increasing the value of GDP directly. (ii) Capital Formation Entrepreneurs use their own funds and encourage various investment opportunities to invest in companies. This leads to capital formation. (iii) Generation of Employment Every new business gives the opportunity of employment to the people with different abilities, skills and qualifications. It becomes a source of livelihood to those who do neither have capital to earn interest or nor have the land to earn rent. (iv) Improves Economic Efficiency Entrepreneurs improve economic efficiency by improving the process, reducing waste, increasing yield and bring technical progress. In this way, entrepreneurship results in economic development. On the other hand, economic development provides following opportunities for the growth and expansion of enterprise.        (a) Well developed financial in the economy.        (b) Opportunities to raise and avail funds from various financial institutions.        (c) Lower rate of interest and moderate inflation.        (d) Availability of factors of production.