What is the role of business in the economy?

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pohnpei397 eNotes educator| Certified Educator

In any market economy, business plays a huge role.  Business is the engine of an economy.  Business provides jobs that allow people to make money and goods and services that people can buy with the money they make.  Without business, the economy would be very inefficient and/or very primitive.

In any economy, people need jobs.  In any but the most primitive economies, people need to be able to buy goods and services.  Businesses provide for both of these needs.  Most businesses provide people with jobs.  If I open a restaurant, I will need to hire cooks, wait staff, dishwashers, and other people.  My business is providing jobs for many people.  Now imagine how many people get their jobs from large companies.  A large company can provide thousands of jobs. This is incredibly important to an economy.

These businesses also provide the things that people need to buy.  If you need a cell phone, you have to buy it from a business because you certainly cannot make your own. Most people cannot make their own clothes and must buy them from a business.  Most people do not cut their own hair and must pay a business for their haircuts.  Without businesses, people would not have goods and services that they could buy.

Economies can exist without businesses, but they are not nearly as strong.  Imagine an economy where every person works only for themselves.  No one starts a business and hires other people.  This economy would be very primitive as people would only buy and sell things they could make themselves.  Alternatively, imagine an economy where there are no businesses because the government is in charge of the economy.  The government will provide jobs and goods and services, but it will not do so efficiently.  The government might not provide the things that people want.  It might run its factories and other operations poorly because they could not go broke if they failed to satisfy their customers. This would be an inefficient economy.

Business, then, plays a central role in any market economy. It is the engine that allows an economy to run because it provides jobs as well as goods and services.