ABSTRACT
Entrepreneurship occurs when an individual acts to take advantage of a profit opportunity that presents itself in the economy. The entrepreneur’s activity benefits the economy by allocating resources in a way that increases their total value to the economy’s consumers. Furthermore, the entrepreneur’s profit signals potential suppliers and demanders about their market opportunities, and even signals other potential middlemen of the profit opportunity for facilitating exchanges. Eventually the ability to earn above-normal profits will be competed away, but only after those profits have served their role in signaling a way in which resources could be more efficiently allocated in the economy. Entrepreneurship is indispensable for economic progress, but entrepreneurial activity is possible only when profit opportunities are available to the entrepreneur. This chapter discusses the ways in which those profit opportunities can arise in an economy.
