Class 41 - Entrepreneurs

Society only cares about the distribution of wealth, not the accumulation.

Entrepreneurs

Factors of production = land, labor, capital

Land = explicit cost = rent

         = implicit cost = forgone opportunities

Labor = explicit cost = wages

           = implicit cost = forgone wages

Capital = explicit cost = rent (materials)

             = implicit cost = forgone rent

Profitability = rental rate + appreciation rate – interest rate

Benefits of buying assets = forgone rental payments

Annual [(rental payments) / (price)] + [(change in asset price) / (price)] – 10% = 2.5%

2.5% = how much richer you get each year by owning a car compared to renting it. Positive = buy it, negative = rent it.