IJMB 2026 Economics Paper I Answers – Question 5 (Entrepreneurship)

Use the images below together with the written answers to cross-check your work for IJMB 2026 Economics Paper I, Question 5.

QUESTION 5

(5a) Definition of an Entrepreneur (Pick Any One)

• An entrepreneur is a person who organizes, manages, and assumes the risks of a business enterprise. The entrepreneur is the fourth factor of production that brings together land, labour, and capital to produce goods and services.
• An entrepreneur is an economic agent who perceives market opportunities and organizes productive resources to exploit those opportunities under conditions of uncertainty.
• An entrepreneur is defined as an individual who conceives a business idea, mobilizes the necessary resources, and establishes an enterprise with the primary aim of making profit while bearing the risks involved.

(5b) Functions/Roles of an Entrepreneur

• Risk bearing: The entrepreneur bears the uncertainty of business. If the venture fails, they lose their capital. This willingness to take risk makes production possible.
• Innovation: Entrepreneurs introduce new goods, new techniques, new sources of raw materials, and new markets. This drives economic growth and technological progress.
• Organization of production: They combine land, labour, and capital in the right proportions to produce goods and services. Without this coordination, production cannot take place.
• Decision making: Entrepreneurs decide what to produce based on consumer demand, how to produce using least-cost methods, and how much to produce. These decisions allocate scarce resources.
• Employment creation: By establishing businesses, entrepreneurs create jobs for themselves and others, reducing unemployment in the economy.
• Capital formation: Entrepreneurs mobilize savings and invest them in productive ventures, increasing the stock of capital in the economy.
• Improving standard of living: Through production of goods/services and innovation, they increase availability of products, improve quality, and often reduce prices, raising living standards.
• Wealth creation and distribution: Successful entrepreneurs generate profits, pay wages, rents, and interest, which distributes income to other factors of production. They also pay taxes to government.
• Promotes economic development: By exploring new opportunities and markets, entrepreneurs open up backward areas, encourage regional balance, and contribute to GDP growth.

QUESTION 6

(6a) Why Economics is Regarded as a Science (Pick Any One)

ANSWER 1:
Economics is regarded as a science because it is a systematic study of human behaviour in relation to the production, distribution, and consumption of goods and services. Like other sciences, economics follows scientific methods in collecting data, formulating hypotheses, testing theories, and drawing conclusions. It establishes principles and laws, such as the law of demand and the law of supply, which help explain and predict economic behaviour.

Economics is also objective in its analysis of economic problems. It relies on observation, measurement, and logical reasoning to explain economic phenomena. Through research and empirical investigation, economists develop theories that can be tested and verified. For these reasons, economics is often described as a social science.

OR

ANSWER 2:
Economics is regarded as a science because it studies human behaviour in relation to the production, distribution, and consumption of goods and services in a systematic and organized manner. Like other sciences, economics uses observation, data collection, classification, analysis, and testing of hypotheses to formulate principles and theories. Economic laws such as the law of demand and the law of supply are developed through scientific investigation and are used to explain and predict economic behaviour. Economics is therefore considered a social science because it applies scientific methods to the study of human activities.

OR

ANSWER 3:
Economics is regarded as a science because it involves the systematic study of human behaviour in relation to the allocation of scarce resources. It follows scientific procedures such as observation, data collection, classification of facts, analysis, and the formulation of theories and principles. Economists use these methods to explain economic events and establish laws that help predict human economic behaviour.

Economics is also based on cause-and-effect relationships. For instance, it explains how changes in price affect demand and how changes in supply influence market prices. The use of logical reasoning, statistical tools, and empirical evidence further strengthens its scientific nature. Because it applies scientific methods to social issues, economics is classified as a social science.

(6b) Limitations of Economics as a Science (Pick Any One)

ANSWER 1:
Although economics is regarded as a science, it has certain limitations. Unlike the natural sciences, economic experiments cannot be conducted under completely controlled conditions because human behaviour is unpredictable and constantly changing. Economic laws are therefore not as exact or universal as the laws of physics or chemistry.

Another limitation is that economic predictions may not always be accurate because they depend on assumptions that may not hold in real life. Factors such as culture, religion, politics, and individual preferences can influence economic behaviour and make precise forecasting difficult.

Furthermore, many economic theories are based on the assumption that individuals act rationally, whereas in reality people often make decisions based on emotions, habits, or incomplete information. As a result, economic laws are generally applicable only under certain conditions, making economics an inexact science.

OR

ANSWER 2:
Although economics is regarded as a science, it has certain limitations. Unlike natural sciences, economics deals with human beings whose behaviour is unpredictable and subject to change. Economic laws are therefore not universally true under all circumstances, as they are based on certain assumptions. Controlled experiments, which are common in natural sciences, are difficult to conduct in economics because economic events occur in a complex social environment. In addition, personal values, political influences, customs, and cultural factors often affect economic decisions and make accurate predictions difficult. As a result, economic conclusions may not always be exact or certain.

QUESTION 3

An isoquant is a graphical representation of the various combinations of factors of production that can produce a given level of output. The shape of an isoquant depends largely on the degree to which one factor can be substituted for another in the production process.

Where factors are highly substitutable, the isoquant appears less curved and approaches a straight line. This indicates that a producer can easily replace one factor with another without causing any significant change in output. Such flexibility allows firms to choose combinations of inputs based on relative costs and availability.

In many production activities, factors are substitutable only to a limited extent. Consequently, the isoquant is convex to the origin, showing that as the use of one factor increases, increasingly larger amounts are required to replace units of the other factor. This reflects the principle that substitution becomes more difficult as production relies more heavily on one input.

In situations where factors must be used jointly and in fixed proportions, the isoquant takes an L-shaped form. Here, substitution between factors is impossible because one factor cannot perform the function of the other. Output can only be increased when both factors are increased together in the required ratio.

There are also cases where the possibility of substitution exists but is very small. In such situations, the isoquant becomes strongly curved, indicating that a substantial increase in one factor is necessary to compensate for a small reduction in another factor.

The different shapes of isoquants therefore reveal the nature of the relationship between production inputs. They help producers understand the degree of flexibility available in combining resources and assist in selecting the most efficient input combinations. Consequently, isoquants are important tools in production analysis and decision-making.

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