Class 11 Business Studies NotesNature and Purpose of BusinessAHSEC Class 11 Notes
Unit – 1: Nature and Purpose of Business
Short Question and Answer
(1/2/3 Marks)
Q.1. Define business. 1999, 2001
Ans: Business is an economic activity, which is related with
continuous and regular production and distribution of goods and services for
satisfying human wants.
Q.2. What are non-
economic activities? 2008,
2010
Ans: Non-economic
activities are those activities, which are pursued by human beings because of
social, psychological and religions sentiments. For example: working in own
garden, cooking for family members.
Q.3. What are
economic
activities?
Ans: Economic
activities are those that are concerned with production, exchange and distribution
of goods and rendering of services to earn money.
Q.4. What is
business
risk?
Ans: Business Risk: Business
risk means possibility of some occurrence, which might lead to some loss for
the business.
Q.5. What is meant
by Profession? Explain with
examples. 1999, 2004, 2010
Ans: A
profession is a specialised occupation, which involves rendering of personal
services by using professional knowledge. Code of conduct it the
characteristics of profession. The examples of professionals are doctors,
lawyers, accountants, engineers etc.
Q.6. What term is used to refer to
physical arrangement of machines and equipment needed to manufacture a product?
Ans: Plant layout
Q.7. ABC Ltd. is planting trees on
roadside. Which objective is trying to achieve?
Ans: Social Objective.
Q.8. What type of industry is banking?
Ans. Tertiary
Q.9. Define human
objectives
of business.
Ans: The human
objectives of business are given below:
a)
The employees are treated as partners in
business and not as inferior lot.
b)
They should get fair wages and healthy working
conditions.
c)
They should be able to acquire and develop new
skills in the process of employment.
d)
They should derive job satisfaction.
Long
answer type questions
Q.1. Define the term Business. What
are its characteristics? Distinguish between business, Profession and
employment.
Ans: Business is an economic activity, which is related with
continuous and regular production and distribution of goods and services for
satisfying human wants.
Lewis Henry defines business as,
"Human activity directed towards producing or acquiring wealth through
buying and selling of goods."
Thus, the term business means continuous
production and distribution of goods and services with the aim of earning
profits under uncertain market conditions.
Characteristics or features of business are
discussed in following points: (1999,
01, 06, 10, 15)
a)
Exchange of goods and services: All business
activities are directly or indirectly concerned with the exchange of goods or
services for money or money's worth.
b)
Deals in numerous transactions: A businessman
regularly deals in a number of transactions and not just one or two
transactions.
c)
Profit is the main Objective: The business is
carried on with the intention of earning a profit.
d)
Business skills for economic success: To be a
good businessman, one needs to have good business qualities and skills.
e)
Risks and Uncertainties: Business is subject
to risks and uncertainties.
Q.2. Define Business, Profession and
Employment. Mention its features. Distinguish between Business, Profession and
employment. 2003, 05,
06, 09
Ans: Business: Business is an economic activity, which is
related with continuous and regular production and distribution of goods and
services for satisfying human wants.
Profession: A profession is a specialised occupation, which
involves rendering of personal services by using professional knowledge.
Employment: Employment is a type of occupation in which employee
has to perform work as per service contract or according to the direction of
the employer. 2009
Nature
of business, profession and employment: Points given in difference can also be
used as their respective nature.
Comparison
of Business, Profession and Employment: 2018
|
Basis |
Business |
Profession |
Employment |
|
1. How to Start? |
Based on owners decision. |
Getting membership of a professional body |
Getting an appointment letter. |
|
2. What is its nature? |
Providing goods and services to the public. |
Rendering of personalized expert services. |
Performing work as per service contract |
|
3. Who can start? |
No minimum qualification |
Requires qualification and training in a specific field. |
Requires qualification and training. |
|
4. Return/What will we get? |
Profit. |
Professional Fees. |
Salary. |
|
5. Capital |
Requires Capital as per size of the business. |
Requires limited capital. |
Not capital required. |
|
6. Risk involved |
More risk |
Less Risk |
No Risk |
Q.3. What are economic and
non-economic activities? What are various classes of business activities?
Distinguish between Commerce, Trade and industry.
Ans: Economic
activities are those that are concerned with production, exchange and
distribution of goods and rendering of services to earn money.
Non-economic
activities are those activities, which are pursued by human beings because of
social, psychological and religions sentiments.
Classification of Business Activities:
a)
Industry
b)
Commerce
c)
Trade
a)
Industry: It includes production or processing
of goods and services. It is concerned with changing the form of the products.
It gives form utility to the products. 2007
b)
Commerce: It includes all those activities
which are concerned with removing all the hindrances in the movement of goods
from the manufacturer to the consumers. It includes trade and auxiliaries to
trade.
c)
Trade: Trade means exchange of goods and
services between sellers and buyers with profit motive.
Q.4. What is industry? Mention its
various types. 2017
Ans: Industry: It includes production or processing of goods and
services. It is concerned with changing the form of the products. It gives
utility form to the products.
Types of industry:
1. Primary Industry: Extraction and production
of natural resources and reproduction and development of living organisms,
plants etc.
2. Secondary Industry: Processing the
materials got in the primary industries
3. Tertiary Industry: Support services to
primary and secondary industries. It includes auxiliaries to trade.
Types of Primary industry: 2008
Primary Industry is further divided into two
parts:
a. Extractive Industry: E.g. Mining,
lumbering, hunting and fishing operations
b. Genetic Industry: E.g. Breeding plants and
animals, Poultry farming and fish hatchery
Types of Secondary Industry 2009
Secondary industry is further divided into two
parts:
a. Manufacturing
Industry: Production and processing of goods creating form utilities.
b. Construction
Industry: Construction of Buildings, dams, bridges, etc.
Q.5. What is commerce? Mention it
various types.
Ans: Commerce: It includes all those activities which are
concerned with removing all the hindrances in the movement of goods from the
manufacturer to the consumers. It includes trade and auxiliaries to trade.
(1999, 05, 08)
Commerce includes the following activities:
a)
Trade
b)
Auxiliaries or aids to trade
a)
Trade: Trade means exchange of goods and
services between sellers and buyers with profit motive. Trade may internal
trade and external trade. Internal trade includes wholesale trade and retail
trade and external trade includes import, export and entrepot trade.
b)
Auxiliaries to Trade: Auxiliaries of trade refer to the integration of all the agency
services, which facilitate the distribution of goods and services. It includes:
2004,
07, 09
1.
Transport and communication: Physical movement of goods from the place
where there is no demand to the place where there is demand. Creates place utility to the product.
2.
Banking and Finance: Helps in removing
financial hindrances. Facilitates
production, buying and selling by providing funds by way of loans.
3.
Insurance: It facilitates business by ensuring
compensation for various types of risks.
4.
Warehousing: It keeps the goods in tact till
they are in demand. It creates time
utility to the product.
5.
Advertising: It provides information about
availability of goods and services. It
induces the consumers to buy the product.
Q.5. What is business risk? What is
its nature? Explain its causes. 2017,
2019
Ans: Business Risk: Business
risk means possibility of some occurrence, which might lead to some loss for
the business.
The nature of
business risks shall be clear from the following features:
a)
Uncertainty gives rise to business
risk: Uncertainty is an important feature of
any business. Fluctuations in demand or prices, wrong estimates of demand and
supply, changes in government policies are some
of the examples of uncertainly, which influence the business.
b)
Risk is an essential element: No business can run
without some element of risk in it. In fact business means assuming risk.
c)
Reward for undertaking risks in
profit: “No risk, no
gain” is an important principle which is applicable to all types of businesses.
d)
Degree of risk depends upon the
nature of business: The nature of
business and the volume of operations determine the degree of risk.
Causes of
business risks may be classified as follows:
a)
Natural Causes: Human beings have no control over the nature. Unforeseen events
like heavy rains, famine, earthquake etc. affects business adversely.
b)
Human causes: These include dishonesty, carelessness and negligence of employee,
riots, strikes etc.
c)
Economic Causes: Economic causes relate to fluctuations in demand and price or
changes in the market conditions.
d)
Physical Causes: These include all technical or mechanical causes, which affect the
working of the business.
Q.6. Can profit be
the sole objective of Business? 2015
Ans: According
to Urwick, “Earning of profits cannot be the objective of a business any more
than eating is the objective of living”
Arguments in favour of profit as the sole objective: Earning
of profits is essential for a business due to the following reasons:-
a)
It is source of income for the business man.
b)
It provides funds for expansion
c)
It is an indicator of efficiency of business
man.
d)
It builds up reputation.
Arguments against profit maximization: Profit
maximization should not be the sole motive of any business:
a)
Profit maximisation ignores the interest of
labour, customers, society etc.
b)
Unfair means such as hoarding, black marketing
or adulteration may be practiced to maximise profit.
c)
Long-term interest of the business may be
ignored to maximise profits in the short run.
d)
In short, a business must pursue not only
economic (profit) objectives but also the social and human objectives.
Q.7. Write a short note on role of
profit in an organisation. 2019
Ans: Role of Profit in Business:
a)
It is source of income for the business man.
b)
It provides funds for expansion
c)
It is an indicator of efficiency of business
man.
d)
It builds up reputation.
Q. 8. Explain the Objectives of
Business. 2004,
08, 10, 2016, 2018
Ans: The main objective of a business undertaking is to earn
profits. Profit earning is considered necessary for the survival of the
business. The objectives of the business may be categorised under these
headings:
(a) Economic Objectives
(b) Human Objectives 2016
(c) Social Objectives 2016
(a) Economic Objectives: Economic objectives
of a business are
1. Profit earning for existence and expansion
of business.
2. Production and sale of Goods to earn
profit.
3. Creating Markets to sell products.
4. Technological Improvement to keep pace with
the changing business world.
(b) Human Objectives: Human
objectives of business are that a workable balance should be maintained among
the claims of various interested groups like employees, shareholders and
consumers. These objectives can be discussed as follows.
1. Welfare of employees by providing physical
comfort, material incentives, appreciation, and dignity of labour.
2. Satisfaction of Consumers should be given
due weightage.
3. Satisfaction of Shareholders by giving
reasonable return on the money invested by the shareholders.
(C) Social Objectives or Social
Responsibility of the Business: The social responsibility of the
business can be studied as follows.
1. To make Goods and Services
available to meet requirements of the society.
2. To Supply Quality Goods at reasonable
price.
3. Co-operation with the Government.
4. To make proper Financial Planning to make
sure that adequate funds are raised at the minimum cost.
Q.9. Compare and contrast between
Industry, trade and Commerce. 2004
Ans: Comparison between Industry, Trade and
Commerce:
1) MEANING: Industry-
Extraction, reproduction, conversion, processing and construction of useful products.
Commerce- Activities
involving distribution of goods and services.
Trade - Purchase and sale of
goods and services.
2) SCOPE: Industry- Consists
of all activities involving conversion of materials and semi-finished products into finished products.
Commerce - Comprises trade
and auxiliaries to trade.
Trade - Comprises exchange of
goods and services.
3) CAPITAL: Industry-
Generally large amount of capital is required.
Commerce- Need for capital is
comparatively less.
Trade - Capital is needed to
maintain stock and grant credit.
4) RISK: Industry- Risk
involved is usually high.
Commerce- Relatively less
risk is involved.
Trade - Relatively less risk
is involved.
Q.10. Distinguish
between economic and non-economic activities. 2007
Ans: Economic and non-economic activities are undertaken with a
different object and purpose and they are different from each other in the following
ways:
1. Objective: Economic activities are performed to
earn money. Non- economic activities are performed out of love and affection or
out of duty. The purpose of undertaking these activities is to get some
satisfaction.
2. Scope: Economic activities may take place between
employers and employees or between producers and consumers. Non-economic
activities may be among members of a family, social worker and those being
served etc.
3. Money Measurement: Economic activities are measured in
money or money’s worth while non-economic activities have no money value.
4. Philosophy: Economic activities are backed by
pragmatic philosophy of earning something out of them. Non-economic activities
are performed with idealistic philosophy of attaching more importance to human
values and less to money.
5. Expectation: The expectation of performing economic activities is to earn income or profit. Non-economic activities are performed to get mental satisfaction.