NCERT Solutions Class 11 Business Studies Chapter 1 Business, Trade and Commerce
NCERT Solutions Class 11 Business Studies Chapter 1 Business, Trade and Commerce: National Council of Educational Research and Training (NCERT) Class 11 Business Studies Chapter 1 Solutions – Business, Trade and Commerce.
Board |
NCERT |
Class |
11 |
Subject |
Business Studies |
Chapter |
1 |
Chapter Name |
Business, Trade and Commerce |
Topic |
Exercise Solutions |
Short answer question:
(1) Why is business considered as economic activity?
Ans: Business is considered as an economic activity because the main objective of business is to earn money or creation of wealth.
(2) How does business contribute to the economic development of a country?
Ans: The main aim of business is to earn profit and maximise its wealth, which inturn leads to increasing of GDP of country leading to economic development.
(3) State the different type of economic activities.
Ans: The different type of economic activities are – Business, Profession and employment.
(4) State the meaning of business.
Ans: Business means those economic activities that are related to production or selling or distributing of goods and services with the objective of earning profit.
(5) How would you classify business activities.
Ans: Business activities can be broadly classified into two types – Industry and commerce. Industry can be classified under three types – Primary, secondary and Tertiary. Commerce can be classified under two types – Trade and Auxiliaries to Trade.
(6) What are the various types Industries?
Ans: The various types of industries are as follows:
(i) Primary industry – These include all those activities which are concerned with extraction and production of natural resources. eg – fishing.
(ii) Secondary Industry – These industries process the materials produced by primary industry to produce goods for final consumption. eg – state mfg.
(iii) Tertiary Industry – These are considered with providing support services to primary & secondary industry. eg – transport etc.
(7) Explain any two business activities which are auxiliaries to trade.
Ans: Two business activities that are auxiliaries to trade are – Banking and finance, transportation.
(8) What is the role of profit in business?
Ans: The basic role of profit in business is for its survival because in order to sustain for a long period of time it is necessary to earn adequate profit and for its growth.
(9) What is meant by business risk?
Ans: Business risk refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.
(10) State the causes of business risk involved in business?
Ans: The causes of business risk are – Natural cause, human cause, economic cause and physical cause.
Long answer questions:
(1) Discuss the development of indigenous banking system in Indian subcontinent.
Ans: Indian subcontinent enjoyed the fruits of favourable balance of trade, where exports exceeded imports with large margins and the indigenous banking system benefitted the manufactures, traders and merchants with additional capital fund for expansion and development. Commercial and industrial banks later evolved to finance trade and agricultural banks to provide both short and long-term loans to finance agriculturist.
(2) Define business. Describe its important characteristics.
Ans: Business can be defined as an economic activity that is concerned with production and selling of goods and services for the objective of earning profit.
The important characteristics of business are as follows:
(a) Production and procurement of goods and services –
The goods must be produced or procured by business enterprises before they are offered to people for consumption. Business either manufactures goods or acquire it from other producer in order to further sell it to the consumers.
(b) It is an economic activity –
Business is considered to be an economic activity as it is undertaken with an objective of earning money.
(c) Dealing in goods and services on a regular basis –
Business involves dealing of good and services on a regular basis as single transaction of sale or purchase does not constitute business.
(3) Compare business with profession and employment.
Ans: The comparison between business, profession and employment are as follows:
Basis | Business | Profession | Employment |
(i) Meaning | (i) It refers to those economic activity that are connected with production and distribution of goods and services with a aim of earning profit. | (i) It refers to those activities that acquire special knowledge and skilled to be applied by an individual to earn a living. | (i) It refers to an activity in which an individual works regularly for another person and gets remuneration in refers. |
(ii) Reward | (ii) The reward or outcome of business is profit. | (ii) Reward or income from or profession is called fees. | (ii) Reward for employment is called salary. |
(iii) Risk | (iii) There is always a risk involved in business. | (iii) There is a little amount of risk involved. | (iii) There is no risk involved. |
(iv) Objective | (iv) The main objectives to earn profit. | (iv) The main objective is to provide service | (iv) The main objective is to earn income. |
(4) Define Industry. Explain various types of industries giving examples.
Ans: Industries refers to economic activities that are connected with conversion of resources into useful goods.
The various types of industries are as follows:
(i) Primary Industry: These include all those activities which are concerned with the extraction and reproduction of living organism. E.g. – fishing, mining.
This type of industry can be classified as:
(a) Extractive industry: These type of industry extract product from natural sources. E.g. – forming, lumbering etc.
(b) Genetic industry: These industry is engaged in breeding plants and animals for their use in further reproduction. E.g. – Poultry farms, hatchery etc.
(ii) Secondary industry: These industries are concerned with using materials which have already been extracted at the primary sector in order to process into consumable from. E.g. – manufacturing steel.
This industry can be classified as follows:
(a) Manufacturing industries – These are engaged in producing goods through processing of raw materials and creates form utility.
(b) Construction Industry – These industry involves construction of buildings, dams, bridges etc.
(iii) Tertiary Industry – This industry is concerned with providing support services to primary and secondary industry. E.g. – Banking.
(5) Describe the activities relating to commerce.
Ans: The activities related to commerce are trade and Auxiliaries to trade. Trade is an essential part of commerce which refers to sale, transfer or exchange of goods and services. Trade can be divided into two parts – Internal trade and external trade. Internal trade refers to buying and selling of goods or services within a country, whereas external trade refers to buying and selling of goods and services outside the geographical boundaries of a country. Internal trade is further divided into two parts – Wholesale trade and Retail trade. External trade can be subdivided into three parts – Export, Import and Extrepot.
Auxiliaries to trade is also a part of commerce which involves those activities that helps in smooth flow of trade. These activities involves – transport and communication banking and finance, insurance warehousing and advertising.
(6) Explain any five objectives of business.
Ans: The various objectives of business are as follows:
(i) Innovation – It is mandatory for the growth of any business and helps to scale up and give competitive edge to the business in the market. It is defined as introduction of a new idea or method in the way something is done or produced.
(ii) Market standing – It means maintaining the goodwill or reputation of one’s business and forming a distinct identity in the market.
(iii) Productivity – It is measured by comparing the value of output with the value of inputs and also a standard for ascertaining the efficiency of the business.
(iv) Profit earning – One of the basic objective of business is to earn profit on the capital employed. Profitability refers to profit in relation to capital investment.
(v) Social responsibility – It refers to the obligation of the business to contribute resources for solving social problems, and work in socially desirable manner.
(7) Explain the concept of business risk and its cause.
Ans: The term “business risk” refers to the possibility of inadequate profit or even losses due to uncertainities in a business situation. For e.g. – decrease in demand due to change in consumer’s choice, damage of product due to flood etc.
The causes of business risk are discussed below:
(i) Natural cause – Humans have little or no control over natural calamities like – flood, earthquake, famine etc and these causes damage to the property and income of the business.
(ii) Human cause – These includes unexpected events like dishonesty, negligence of employees strikes by employees etc which leads to disruption in the production process of the business.
(iii) Economic – These involve uncertainities like – Change in demand for goods, competition, price, change in technology etc that results in higher unexpected cost of operation of the business.
(iv) Other causes – These causes include – political disturbances, mechanical failure, change in exchange rates etc that leads to possibility of loss in business.
(8) What factors are to be considered before starting a business? Explain.
Ans: Factors to be considered before starting a business are as follows:
(i) Selection of type of business – The first thing to be decided by the entrepreneur is the nature and type of business. The decision will be influenced by the customer requirement in the market and technological knowledge possessed by the businessman.
(ii) Size of business – size or scale of operation is an important decision to be taken before starting the business. It depends on whether the business wants to operate as MSME sector or a large scale enterprise, tertiary sector or manufacturing sector etc.
(iii) Location of the business – The place where the business enterprise will be located is an important factor to be considered before setting up of business because availability of resources, labour cost, power supply, transportation facility etc is an important factor for running the business. Hence, a business must be located in a convenient location.
(iv) Financing the proposition – Financing is concerned with providing the necessary capital for starting and continuing the project. Hence, before starting the business, the cost of financing must be carefully analysed by the entrepreneur. The taxation cost must also be considered.
(v) Physical facilities – Availability of physical facilities like machine and equipment, building and supportive services is an important factor to be considered before starting the business.
(vi) Tax planning – This is an important factor to be considered before starting a business is modern days because there are a number of tax laws in the country and they have a direct impact in the functioning of modern business and hence tax liability is to be considered very effectively by the entrepreneur.
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