Entrepreneur
This is a person who manages Co-ordinate and supervises the other factor of production land, Labour and capital to achieve the goods of a firm. The reward for the entrepreneur is profit.
Functions of Entrepreneur
- He raises the capital needed for the operation of the business unit
- He co-ordinates (organizes) the other employs these factors assign specific task to them.
- He manages the business that is takes the final decision on what, how, and for whom to produce
- He is a risk bearer; such risk include insurable and non-insurable risk can be covered by the insurance company are called insurable risk.
Combination of factors of production
The various factors of production are combined in order to get the desire returns output.
In a long run all factors of production are variable and output obtained is called return to scale. But in the short run at least one factor remains fixed while the other factors are variable. The output obtained in the short run is called return to variable proportion return to variable proportion.
This is the output obtained by a firm in the short run when at least one factor of production is fixed while others are varied. It is observed that when a fixed factor is added unto a variable factor, the output varies. These leads to the law of diminishing return.
Law of diminishing returns.
This law states that when additional unit of a variable factor is added to a fixed factor, the marginal product will first rise and starts to fall. When marginal product falls, it means diminishing returns has set in.
