Business Glossary

compensation for the expertise and successful effort of a skilled businessperson. In accounting, any and all profit could be attributed to this effort. In economics, this is the portion over and above a normal profit for typically competent management.

compensation for the expertise and successful effort of a skilled businessperson. In accounting, any and all profit could be attributed to this effort. In economics, this is the portion over and above a normal profit for typically competent management.

Example: A business run by an entrepreneur sells each product for $450. For each unit sold it pays $100 rent, $100 for labor, and $100 interest on capital employed. The entrepreneurial (accounting) profit is therefore $150. An economist would point out that the owner-operator could get a competent manager to run the business for $100; the special expertise of the entrepreneur therefore provided $50 in entrepreneurial profit.

See also agents of production