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Telangana TSBIE TS Inter 1st Year Commerce Study Material 2nd Lesson Business Activities Textbook Questions and Answers.

TS Inter 1st Year Commerce Study Material 2nd Lesson Business Activities

Long Answer Questions

Question 1.
What is meant by industry? Explain various types of industries with suitable examples.
Answer:
Industry is concerned with the making or manufacturing of goods. It is that part of the production which is involved in changing the form of goods at any stage from raw material to the finished product. E.g.: Weaving woollen yam into cloth. Thus industry imparts form utility in goods.

Classification or types of industries: The industries may be classified as follows.
1) Primary industry: Primary industry is concerned with production of goods with the help of nature. It is nature-oriented industry, which requires very little human effort. E.g: Agriculture, Farming, Fishing, Horticulture etc.

2) Genetic industry: Genetic industry is related to the reproducing and multiplying of certain species of animals and plants with the object of earning profits from their sale. E.g: Nurseries, cattle breeding poultry, fish hatcheries etc.

3) Extractive industry: It is engaged in raising some form of wealth from the soil, cli-mate, air, water or from beneath the surface of the earth. Generally the products of extractive industries comes in raw farm and they are used by manufacturing and construction industries for producing finished products. E.g: Mining, coal, mineral, iron ore, oil industry, extraction of timber and rubber from forests.

4) Construction industry: The industry is engaged in the creation of infrastructure for the smooth development of the economy. It is concerned with the construction, erection or fabrication of products. These industries are engaged in the construction of buildings, roads, dams, bridges and canals.

5) Manufacturing industry: This industry is engaged in the conversion of raw material into semifinished or finished goods. This industry creates form utility in goods by making them suitable for human uses. E.g: Cement industry, Sugar industry, Cotton textile industry, Iron and steel industry, Fertiliser industry etc.

6) Service industry: In modern times, service sector plays an important role in the development of the nation and therefore it is named as service industry. These are engaged in the provision of essential services to the community. E.g: Banking, trans-port, insurance etc.

Question 2.
What is commerce? Describe its branches.
Answer:
Commerce is concerned with exchange of goods. It includes all those activities which are related to transfer of goods from the places of production to the ultimate consumer. Commerce embraces all those processes which help to break the barriers between producers and consumers. It is the sum total of those processes which are engaged in the removal of hindrances of persons, place, time and exchange.

Branches of commerce:
The activities of commerce may be classified into following two broad categories.

• Trade
• Aids to trade

I) Trade: Trade is a branch of commerce. It connects with buying and selling of goods and services. An individual who does trade is called a trader. Trader transfers the goods from the producer to the consumer.

Trade may be classified into a) Home trade, b) Foreign trade. Home trade may again sub-divided into (i) Wholesale trade and (ii) Retail trade.

a) Home trade: Home trade is also known as ‘domestic trade’ or ‘Internal trade’ Home trade is carried on within the boundaries of a nation. Home trade again is of two types: wholesale trade and retail trade.

• Wholesale trade: It implies buying and selling of goods in large quantities. Traders who engage themselves in whole sale trade are called ‘wholesalers’. Wholesale serves as a connecting link between the producers and the retailers.
• Retail trade: It involves buying and selling of goods in small quantities. Traders engaged in retail trade are called ‘retailers’. They serve as a connecting link between wholesalers and consumers.

b) Foreign trade: It refers to buying and selling of goods and services between two or more countries through international air ports and sea ports. Foreign trade is also known as ‘external trade’ or ‘International trade’.

• Export trade: It means the sale of goods to foreign countries. For example India exports tea to the U.K.
• Import trade: It refers to the purchase of goods from foreign countries. For instance India buys petrol from Iran.
• Entrepot trade: Importing (buying) goods from one country for the purpose of ex-porting (selling) them to another country is called entrepot trade. This type of trade is also known as re-export trade.

II) Aids to trade: Trade or exchange of goods involves several difficulties, which can be removed by auxiliaries are known as aids to trade. It refers to all those activities, which directly or indirectly facilitate smooth exchange of goods and services.

Aids to trade includes transport, Communication, Warehousing, Banking, Insurance, Advertising. These ensure smooth flow of goods from producers to the consumers. The various aids to trade in commerce are explained in below:

1) Transport: There will be a vast distance between centers of production and centres of consumption. This difficulty is removed by transport. Transport creates place utility. There are several kinds of transport such as air, water and land transport. The geo-graphical distance between producers and consumers is removed with the help of following means of transport.

2) Communication: Communication means transmitting or exchange of information froth one person to another. It can be oral or in writing. It is necessary to communicate information from one to another. Modern means of communication like telephone, email, video conference etc play an important role in establishing contact between businessmen, producers and consumers.

3) Warehousing: There is a time gap between production and consumption. It becomes necessary to make arrangements for storage or warehousing. The goods such as umbrellas and woolen clothes are produced throughout the year but are demanded only during particular seasons like rainy and winter season. Therefore goods need to be stored in warehouses till they are demanded. So, it creates time utility by supplying the goods at right time to consumer.

4) Insurance: Insurance reduces the problem of risks. Business is subject to risks and uncertainities. Risks may be due to fire, theft, accident or any other natural calamity. Insurance companies who act as risk bearer cover risks. Insurance tries to reduce risks by spreading them out over a larger number of people by encouraging them to take insurance policies.

5) Banking: Banking solves the problem of finance. Banking and financial institutions solves the problem of payment and facilitate exchange between buyer and seller. Banks provide such finance to them. Banks also advance loans in the form of overdraft, cash credit and discounting of bills of exchange.

6) Advertising: Advertising fills the knowledge gap. Exchange of goods and services is possible only if producers can bring the products to the consumers. Advertising and publicity are important medias of mass communication. Advertising helps the consumers to know about the various brands manufactured by several manufacturers. The medias used to advertise products are Radio, Newspapers, Magazines, TV, Internet etc.

Question 3.
Discuss the significance of commerce in the present scenario.
Answer:
Commerce can also be defined as The sum total of those processes. Which are engaged in the removal of hindrances of person, place and time in the exchange of commodities’.

Importance of commerce:
The importance of commerce is explained below:
1) Commerce tries to satisfy increasing human wants: Human wants and desires are never ending. Commerce has made distribution and movement of goods possible from one part of the world to the other. Today we can buy anything produced anywhere in the world. Hence commerce facilitates the people to satisfy their needs, desires and wants by distribution and exchange of the goods and services.

2) Commerce helps us to increase our standard of living: Standard of living refers to quality of life enjoyed by the members of a society. When a man consumes more products his standard of living improves. Commerce helps us to get what we want at the right time, right place and at the right price and thus helps in improving our standard of living.

3) Commerce links producers and consumers: Commerce makes a link between producers and consumers through retailers and wholesalers and also through the aids to trade. Thus it creates and facilitates the contact between the centres of production and consumption.

4) Commerce generates employment opportunities: The growth of commerce and trade cause the growth of agencies of trade such as banking, transport, warehousing, insurance, advertising etc. Thus, development of commerce generates more and more employment opportunities.

5) Commerce increases national income and wealth: When production increases, national income also increases. It also helps to earn foreign exchange by way of exports and duties levied on imports.

6) Commerce helps in expansion of aids-to-trade: With the growth in trade and commerce there is a growing need for expansion and modernization of aids to trade. Aids to trade such as banking communication, advertising and publicity, transport, insurance etc. are expanded and modernised for the smooth conduct of commerce.

7) Commerce encourages international trade: With the help of transport and communication development, countries can exchange their surplus. Commodities and earn foreign exchange. Thus, the commerce ensures faster economic growth of the country.

8) Commerce benefit underdeveloped countries: Underdeveloped countries can import skilled labour and technical knowhow from developed countries, while the advanced countries can import raw materials from underdeveloped countries. This helps in laying down the seeds of industrialisation in the underdeveloped countries.

9) Commerce helps during emergencies: During emergencies like floods, earthquakes and wars, commerce helps in reaching the essential requirements like food stuff, medicines and relief measures to the affected area.

Question 4.
Define trade and explain various types of aids to trade.
Answer:
Trade: Buying and selling of goods and services to earn profit is called trade. The person who undertakes this job is known as trader. It is a branch of commerce.

Aids to trade:
Trade or exchange / distribution of goods involves several difficulties, which can be removed by auxiliaries are known as aids to trade. It refers to all those activities which directly or indirectly facilitate smooth exchange of goods and services.

Aids to trade includes Transport, Communication, Warehousing, Banking, Insurance, Advertising. These ensure smooth flow of goods from producers to the consumers. The various aids to trade in commerce are explained in following points.

1) Transport: There will be a vast distance between centres of production and centres of consumption. This difficulty is removed by transport. Transport creates place utility. There are several kinds of transport such as air, water and land transport. The geo-graphical distance between producers and consumers is removed with the help of following means of transport, (i) Land (ii) Water (iii) Air.

2) Communication: Communication means transmitting or exchange of information from one person to another. It can be oral or in writing. It is necessary to communicate information from one to another. Modem means of communication like telephone, email, teleconference, video-conference etc. play an important role in establishing contact between businessmen, producers and consumers.

3) Warehousing: There is a time gap between production & consumption. It becomes necessary to make arrangements for storage or warehousing. The goods such as umbrellas and woolen clothes are produced throughout the year but are demanded only during particular seasons like rainy and winter season. Therefore goods need to be stored in warehouses till they are demanded. So it creates time utility by supplying the goods at right time to consumers.

4) Insurance: Insurance reduces the problems of risks. Business is subject to risks and uncertainities. Risks may be due to fire, theft, accident or any other natural calamity. Insurance companies who act as risk bearer cover risks. Insurance tries to reduce risks by spreading them out over a large number of people by encouraging them to take insurance policies.

5) Banking: Banking solves the problem of finance. Banking and financial institutions solves the problem of payment and facilitate exchange between buyer and seller. Banks provide such finance to them. Banks also advance loans in the form of overdraft, cash credit and discounting of bills of exchange.

6) Advertising: Exchange of goods and services is possible only if producers can bring the products to the consumers. Advertising and publicity are important medias of mass communication. Advertising helps the consumers to know about the various brands manufactured by several manufacturers. The medias used to advertise products are Radio, Newspaper, Magazines, TV; Internet etc.

Question 5.
Explain inter-relationship between industry, commerce and trade.
Answer:
Business is divided into two categories: Industry and commerce. Commerce is again sub-divided into trade and aids to trade practically all of them are closely related to each other. They are inseparable. All of them are parts of the whole business system. Industry and commerce are closely related to each other. Industry cannot exist without commerce and commerce cannot exist without industry because every producer has to find his market for his product to sell. But the producer has no direct connection with the buyer or consumers. Hence, industry needs commerce.

BUSINESS = INDUSTRY + COMMERCE
Commerce is concerned with the sale, transfer or exchange of goods and services. Hence commerce needs industry for the production of goods and services. Commerce makes the necessary arrangement for linking between producers and ultimate consumers. It includes all those activities that are involved in buying, selling, transporting, banking, warehousing of goods, and insurance of safeguarding the goods.

COMMERCE = TRADE + AIDS TO TRADE
Thus industry, commerce, and trade are closely related to one another and are inter-dependent as shown in the figure below. In conclusion, we can say that industry, trade and commerce are inter-related with each other. Industry is concered with production of goods and services and commerce arranges its sales; but the actual operation of sales is in the hands of trade. So they cannot work independently.

Question 6.
Describe the various Hindrances of Commerce.
Answer:
Commerce is concerned with exchange of goods. It includes all those activities which are related to transfer of goods from the place of production to the ultimate consumers. Whereas trade involves buying and selling of goods, commerce has a wider meaning. Commerce include trade and aids to trade. The aids to trade include transport, banking, insurance, warehousing, advertisement and salesmanship.

Hindrances of trade: In the course of exchange of goods various problems are encountered. The hindrances in the way of smooth trade may be place, person, finance, time, knowledge and risk.

1) Hindrances of place: Generally, all the goods are not consumed at the same place where are produced. The goods are to be taken from a place where there is less demand, to the place where there is more demand. The activity of movement of the goods is called transportation. Thus transport eliminates the hindrances of place.

2) Hindrances of persons: In the present day world the consumers are in millions and it is not possible for the producers to know the consumers who are in need of goods produced by them. A chain of middlemen like wholesalers, retailers, dealers etc. Purchase goods from the producers and take them to the customers. Thus, middlemen remove the hindrances of persons.

3) Hindrances of finance: There is always time lag between the production and sale of goods. It takes time to collect money and hence need finance for trade. Commerce makes exchange of goods and services possible by removing these hindrances through the agency of banks.

4) Hindrances of time: As the goods are produced in anticipation of demand, there is a need to store the until they are required for consumption. Warehousing eliminates the hindrances of time and provides time utility to goods.

5) Hindrances of knowledge: The consumers may not be aware of the availability of various goods in the market. The absence of information is another hindrance. This is eliminated through advertising. Advertisement is done through T.V., radio, news papers, magazines, wall posters, hoardings etc.

6) Hindrances of risk: There are risks involved in production, transporting goods from one place to another, warehousing. The businessmen would like to cover these risks. Insurance companies undertake to compensate the loss suffered due to such risks. So, insurances eliminates hindrances of risks.

Question 7.
Distinguish between trade, commerce and industry.
Answer:
Differences between trade, commerce and industry.

Short Answer Questions

Question 1.
Define Industry.
Answer:
Industry is concerned with the making or manufacturing of goods. It is that part of the production which is involved in changing the form of goods at any stage from raw material to the finished product. E.g.: Weaving woollen yam into cloth. Thus industry imparts form utility in goods.

Question 2.
What is Trade?
Answer:
Trade: Buying and selling of goods and services to earn profit is called trade. The person who undertakes this job is known as trader. It is a branch of commerce.

Trade is a branch of commerce. It connects with buying and selling of goods and services. An individual who does trade is called a trader. Trader transfers the goods from the producer to the consumer.

Trade is classified into two types: (I) Home trade (II) Foreign trade

I) Home trade: Home trade is also known as ‘domestic trade’ or ‘Internal trade’. Home trade is carried on within the boundaries of a nation.
Home trade is again divided into two types:

• Wholesale trade and
• Retail trade

(i) Wholesale trade: It implies buying and selling of goods in large quantities. Traders who engage themselves in wholesale trade are called ‘wholesalers’. Wholesale serves as a connecting link between the producers and the retailers.

(ii) Retail trade: It involves buying and selling of goods in small quantities. Traders en-gaged in retail trade are called ‘retailers’. They serve as a connecting link between wholesalers and consumers.

(II) Foreign trade: It refers to buying and selling of goods and services between two or more countries through international air ports and sea ports. Foreign trade is also known as ‘external trade’ or ‘international trade’. Foreign trade is again may be classified into three categories as mentioned below.

• Export trade: It means the sale of goods to foreign countries. For example India exports tea to the united kingdom.
• Import trade: It refers to the purchase of goods from foreign countries. For instance India buys petrol from Iran.
• Entrepot trade: Importing (buying) goods from one country for the purpose of ex-porting (selling) them to another country is called entrepot trade. This type of trade is also known as ‘re-export’ trade.

Question 3.
State the types of foreign trade.
Answer:
When trade takes place between two countries it is called foreign trade or external trade or international trade. Two countries are involved in foreign trade. External trade generally requires permission from the respective countries. The hindrances of place, time, risk, exchange are overcome with the help of various agencies. Foreign trade may be classified into export trade, import trade and entrepot trade.

1) Export trade: This trade refers to sale of goods to foreign countries.
E.g.: India exports tea to U.K.

2) Import trade: The purchase of goods from other countries is known as import trade.
Ex: India buys petrol from Iran.

3) Entrepot trade: When goods are imported (purchased) from one country with a view to exporting (selling) them to other country, it is called entrepot trade or re-export trade.
Ex: India imported petrol from Iran and export the same to Nepal.

Question 4.
Explain the classification of industries.
Answer:
Classification or types of industries: The industries may be classified as follows.
1) Primary industry: Primary industry is concerned with production of goods with the help of nature. It is nature-oriented industry, which requires very little human effort.
E.g: Agriculture, Farming, Fishing, Horticulture etc.

2) Genetic industry: Genetic industry is related to the reproducing and multiplying of certain species of animals and plants with the object of earning profits from their sale.
E.g: Nurseries, cattle breeding poultry, fish hatcheries etc.

3) Extractive industry: It is engaged in raising some form of wealth from the soil, cli-mate, air, water or from beneath the surface of the earth. Generally the products of extractive industries comes in raw farm and they are used by manufacturing and construction industries for producing finished products.
E.g: Mining, coal, mineral, iron ore, oil industry, extraction of timber and rubber from forests.

4) Construction industry: The industry is engaged in the creation of infrastructure for the smooth development of the economy. It is concerned with the construction, erection or fabrication of products. These industries are engaged in the construction of buildings, roads, dams, bridges and canals.

5) Manufacturing industry: This industry is engaged in the conversion of raw material into semifinished or finished goods. This industry creates form utility in goods by making them suitable for human uses.
E.g: Cement industry, Sugar industry, Cotton textile industry, Iron and Steel industry, Fertiliser industry etc.

6) Service industry: In modern times, service sector plays an important role in the development of the nation and therefore it is named as service industry. These are engaged in the provision of essential services to the community.
E.g: Banking, Trans-port, Insurance etc.

Question 5.
Define ‘Entrepot trade’ with example.
Answer:
When goods are imported from one country and the same are exported to another country, such trade is called entrepot trade.
E.g.:

• India importing wheat from U.S. and exporting the same to Srilanka.
• India imports petrol from Iran and export the same to Nepal.

Very Short Answer Questions

Question 1.
Industry.
Answer:
Industry is concerned with the making or manufacturing of goods. It is that part of the production which is involved in changing the form of goods from raw material to the finished product.
E.g.: Weaving woollen yam into cloth. Thus industry creates form utility in goods.

Question 2.
Commerce.
Answer:

• Commerce is concerned with exchange of goods. It includes all those activities which are related to transfer of goods from the places of production to the ultimate consumer. Commerce embraces all those processes which help to break the barriers between producers and consumers.
• It is the sum total of those processes which are engaged in the removal of hindrances of persons, place, time and exchange.

Question 3.
Trade.
Answer:

• All the activities engaged in buying and selling of goods and services a re called trade.
• Therefore trade includes sale, transfer or exchange of goods and services with the intention of making profit. The object of trade is to make goods available to those who need them and willing to pay for them.
• Trade is the final stage of business activities and involves transfer of ownership.

Question 4.
Home Trade.
Answer:

• The trade is carried on within the boundaries of the nation is called Home Trade. Home trade is also called as internal trade or domestic trade.
• Home trade refers to a trade where buying and selling of goods takes place between the persons who belong to the same country. So, home For movement of goods internal transport system is used.

Question 5.
Entrepot trade.
Answer:

• When goods are imported from one country and the same are exported to another country, such trade is called entrepot trade.
• E.g.: India importing wheat from U.S. and exporting the same to Srilanka.

Question 6.
Transportation.
Answer:
There is a vast distance between centres of production and centres of consumption. Goods are to be moved from the places of production to the place where they are demanded.

• The activity which is concerned with movement of goods is called transportation. Trans-port create place utility.
• There are several kinds of transport such as air, water and land transport. The geo-graphical distance between producers and consumers is removed with the help of transport.

Question 7.
Warehousing.
Answer:

• There is time gap between production and consumption. Hence, it became necessary to make arrangements for storage or warehousing.
• It is one of the aid to trade, which facilitates to store the goods until they get demand or consumed.
• Some goods are to be stored in warehouses till they are demanded. Warehousing creates time utility.

Question 8.
Genetic Industries.
Answer:

• Genetic industry is related to the reproducing and multiplying certain species of animals and plants with the object of earning profit from their sale.
• E.g.: Nurseries, cattle breeding, poultry farm, fish hatcheries etc.

Question 9.
Extractive industries.
Answer:

• These industries are engaged in raising some form of wealth from the soil, climate, air, water or from beneath the surface of the earth. Generally the products of extractive industry comes in raw form and they are used by manufacturing and construction industries for producing finished products.
• E.g.: Mining, coal, mineral, iron ore oil, extraction of timber and rubber from forests.

Question 10.
Banking.
Answer:

• Banking solve the problem of finance.
• Producers and traders require money for carrying on production and trade. Banks are the institutions which supply funds for industries and trade.
• They pool savings from the public and make them available to industry. So, banking is an important function of commerce.

Telangana TSBIE TS Inter 1st Year Commerce Study Material 1st Lesson Introduction to Business Textbook Questions and Answers.

TS Inter 1st Year Commerce Study Material 1st Lesson Introduction to Business

Long Answer Questions

Question 1.
Define Business. Explain its characteristic features.
Answer:
Meaning:

• Business means the state of being busy.
• Business is an economic activity involving production, exchange, distribution and sale of goods and services with an objective of making profits and maximization of wealth.
• The primary intention of business is making profits.

Definitions:

• L.H. Haney: Defined business as “A human activity directed towards producing or acquiring wealth through buying and selling of goods”.
• Stephen son: Defines business as, “The regular production or purchase and sale of goods undertaken with an objective of earning profits and acquiring wealth through the satisfaction of human wants”.
• According to keith and carlo: “Business is a sum of all activities involved in the production and distribution of goods and services for private profits”.

Business may be defined as an economic activity which involves regular transfer or exchange of goods or services for a price.

Characteristics (or) Features:
Following are the main characteristic features of business:
i) Economic Activity: Business is an economic activity. It is performed with the main motive of earning money or profit. It does not include the activities undertaken out of love, affection, charity and religious commitments etc.

ii) Deals with goods and services: Every business enterprise produces or buys goods and services with the intention of selling them to others, to earn profit. Goods deals in business, may be consumer goods or capital goods.

• Consumer goods are meant for direct use by the ultimate consumers, e.g. cloths, note books, tea, bread, etc.
• Capital goods also known as producer goods, which are not intended for direct consumption but used for production of other goods, Equipment, Tools, Raw mate-rials, Machinery etc.

Services like transport, warehousing, banking, insurance, etc. may be considered as intangible and invisible goods. Services facilitate buying and selling of goods by over coming various hindrances in trade.

iii) Creation of utilities: Business makes goods more useful to satisfy human wants. It adds, time, place, form and possession utilities to various types of goods.
For example: It carries goods from place of production to the place of consumption (place utility). It makes goods available for use in future through storage (time utility).

iv) Continuity in dealings: Dealings in goods and services become business only if undertaken on a regular basis. A single isolated transaction of purchase and sale does not constitute business.
Therefore, regulartity of dealings is an essential feature of business.

v) Sale, transfer or exchange: All business activities involve transfer or exchange of goods and services for some consideration. The consideration called price, which is expressed in terms of money.
For example: If a person cooks and serves food to his family, it is not business. But when he cooks food and sells it to others for a price, it becomes business.

vi) Profit motive: The primary objective of business is to earn profits. Profits are essential for the survival as well as growth of any business. Profits must be earned through legal and fair means. Business should never exploit any part of the society to make money.

vii) Risk and uncertainity: Risk means fear of loss. It implies the uncertainly of profit or the possibility of loss. Business enterprises function in uncertain and uncontrollable environment.

Changes in customers tastes and fashions, demand, competition, government policies etc., create risk, flood, fire, earthquake, strike by employees, theft etc., also cause loss. A businessman can reduce risks through correct forecasting and insurance.

viii) Business is also a social institution: Business is also a social institution because it helps to improve the living standards of people through effective utilisation of scarce resources of the society.

ix) Art as well as science: Business can be pressumed as an art as well as science. It is art because it requires personal skills and experience. It is also a science because it is based m certain principles and laws.

Question 2.
Describe various objectives of a business.
Answer:
“An objective is a goal or motive directed towards achievement of predetermined purpose or aim. Hence, every business enterprise has certain objectives. These objectives are broadly classified into four categories viz, economic objectives, social objectives, human objectives and national objectives.

I. Economic Objectives:
Business is basically an economic activity. Therefore, its primary objectives are economic in nature. The main economic objectives of business are as follows.
i) Earning profits:

• Any business enterprise is established for earning some profits. It is the main in-centive and hope to start business.
• Just as a person cannot live without food, a business firm cannot survive without profits.
• Profit is also necessary for the expansion and growth of business.
• Profit also serves as the barometer of economic stability, efficiency and progress of a business enterprise.
• Therefore, profit is essential for the survival of every business.

ii) Creating customers:

• A business man can earn profits only when there are enough customers to buy and pay for his goods and services.
• In the words of peter F. Drucker, “There is only one valid definition of business purpose; to create a customer.
• The customer is the foundation of business and keeps it in existence.
• In order to earn profits, business must supply better quality goods and services at reasonable prices. Therefore, creation and satisfaction of customers is an important economic objective of business.

iii) Innovation:

• Application and adoption of new methods, devices and technologies is called innovation. It also refers to creation of new things resulting from the study and experimentation, research and development.
• It comprises all efforts made in perfecting the product, minimising the costs and maximizing benefits to customers. Business firms invest money, time and efforts in Research and Development (R&D) to introduce innovation.

iv) Optimum Utilization of Resources:

• The best usage of resources like material, machine, men and money is called optimum utilization of resources. It is also one of the important economic objectives.
• Waste control and reprocessing mechanism, providing proper training to its workers and effective spending of money may prompt the business concern to reach the objective of optimum utilization of resources.

II. Social Objectives:
Business does not exist in a vaccum. It is part of society. It cannot survive and grow without the support of society. Business must therefore discharge social responsibilities in addition to earning profits.

According to Henry Ford, ‘The primary aim of business should be service and subsidiary aim should be earning of profits.”

The social objectives of business are as follows:
i) Supplying desired goods and Services at reasonable prices: Supply of goods and services to consumers at reasonable price with the accepted quality is the responsibility of any business entity. It is also the social obligation of business to avoid malpractices like, adulteration, smuggling, black marketing and misleading advertising.

ii) Fair Remuneration to employees: Business must give fair remuneration and compensation to employees for their work. In addition to wages and salary a reasonable part of profits should be distributed among employees by way of bonus. Such sharing of profits will help to increase the motivation and efficiency of employees. It is the obligation of business to provide healthy and safe work environment for employees.

iii) Employment creation: In a country like India unemployment Has become a serious problem and no government can offer jobs to all. Therefore, provision of adequate and full employment opportunities is a significant service to society.

iv) Promotion of social welfare: Business should provide support to social, cultural and religious, organisation. Biteiness enterprise can build schools, college, Libraria, dharmashalas, Hospitals, sports bodies, and research institutions. They can help non-government organisations (NGOs) like CRY (Child Relief and You), Help Age, and other which render services to weaker sections of society.

v) Payment of dues and Taxes to government: Every business enterprise should pay taxes and dues (income tax and GST) to the government honestly and at the right time.

III. Human objectives: Human objectives are concerned with the well being of labour, satisfaction of customers and shareholders. The human objective are as follows.
i) Welfare of workers or staff: The workers should be provided win physical comfort, appreciation and dignity of labour and conditions which will motivate the workers to give their best. Adequate provisions should be made for their health, safety and social security.

ii) Development of human resources: Human resources are the most valuable asset of business and their development will help in the growth of the business. This can be done by training the employees and conducting workshops on skill development and attitude.

iii) Labour participation: The workers should be allowed to take part in decision making process and helps them in their development.

iv) Labour management co-operation: The employees should be looked upon as human beings. The employees help in increasing probability and should be rewarded for their hardwork.

IV. National objectives: The following are the national objectives of the business.
i) Optimum utilisation of resources: Juditions allocation and optimum utilisation of scarce resources is essential for rapid economic growth of the country.

ii) National Self-reliance: It is the duty of the business to help the government, in increasing exports and in reducing dependence on imports. It will help nation to become self-reliant.

iii) Development of small scale industries and MSMEs : Small scale industries are necessary for generating employment opportunities and for providing inputs to large scale industries.

iv) Development of backward areas: In order to achieve balanced regional development, industries should be started at backward regions which helps to raise the standard of living in backward areas.

Question 3.
Discuss the social responsibility of business.
Answer:
Meaning: Every business operates within a society. It uses the resources of the society and depends on the society for its functioning. This creates an obligation on the part of the business to look after the welfare of the society. Therefore, all the activities of the business should be that they will protect and contribute to the interests of the society. Social responsibility of business refers to all such duties and obligations of business directed towards the welfare of the society.

Responsibility towards different interested groups: The business is associated with owners, employees, suppliers, customers, government and society. They are called as interested groups because, every activity of the business will affect the interests directly or indirectly. Various responsibilities of business towards different groups given below:

1) Responsibility towards owners: Owners are the persons who own the business. They contribute the capital and bears the business risks. The responsibilities of business towards them are:

• Running the business efficiently.
• Proper utilisation of capital and other resources.
• Growth and appreciation of capital
• Regular and fair returns on capital invested by way of dividends.

2) Responsibility towards employees: The future of the business depends on the efforts and efficiency of the employees. So, it is the responsibility of the take care of their interest. The responsibilities are:

• Regular and fair payment of their wages and salaries.
• Better working conditions and welfare amenities.
• To improve the skill and efficiency by providing proper training.
• Job security and social security like group insurance, pension, retirement benefits etc.

3) Responsibility towards suppliers: Suppliers are those persons who supply raw ma-terials and other items to the business. The responsibilites towards them are:

• Timely payment of dues.
• Dealing on fair terms and conditions.
• Availing reasonable credit period.

4) Responsibility towards customers: In order to survive, the business responsibility is to provide following facilities of customers:

• Providing qualitative goods and services.
• Charging reasonable prices.
• Giving delivery of goods within stipulated time.
• After sale service.
• Avoiding unfair means like under weighing the product, adulteration etc.

5) Responsibility towards government: Business is governed by the rules and regulations framed by the government. The responsibilities towards government are:

• Payment of fees, duties and taxes honestly and regularly.
• Setting up units as per guidelines of the government.
• Following the pollution control norms.
• Not to indulge in unlawful activities.

6. Responsibility towards society: Business, being a part of the society has to maintain relationship with other members of the society. The responsibility of business towards society is:

• To help weaker and backward sections of the society.
• To generate employment.
• To protect environment.
• To conserve natural resources and wild life.
• To promote sports, social and cultural values.

Question 4.
Classify and describe each type of Economic activities.
Answer:
All human activities are directed towards satisfying human wants. Depending upon the nature of wants, human activities may be categorised as economic and non-economic. Economic activities are undertaken to create utilities. Non – economic activities do not have economic values and these are primarily tend to satisfy social, religious, cultural or sentimental requirements of human beings.

Classification of economic activities: Economic activities are broadly classified into three. They are:

• Business
• Profession
• Employment

1) Business: The business is an activity which is primarily pursued with the object of earning profit. A business activity involves production, exchange of goods and services to earn profits or to earn a living. The word business literally means a state of being busy. Every person is engaged in some kind of occupation, a farmer works in the field, a worker works in the factory, a clerk does his work in the office, a teacher teaches in the class, a salesman is busy in selling the goods and an entrepreneur is busy in running his factory. The primary aim of all these persons is to earn their live¬lihood while doing some work.

2) Profession: Profession is an occupation involving the provision of personal services of a specialised and expert nature. The services are based on professional service of specialised nature. The service is based on professional education, knowledge, train¬ing etc. The specialised service is provided for a professional fees charged from the clients. For instance, a doctor helps his patients through his expert knowledge of the science of medicine and charges a fees for the service. Minimum educational qualifications are prescribed for entry into a profession and every profession requires a high degree of formal education and specialised training in a particular field. For example, a chartered accountant needs to be a member of the Institute of Chartered Accountants of India (ICA1). A person entering law profession has to acquire LL.B degree in order to become a lawyer.

3) Employment or Service: Employment or service involves working under a contract of employment for or under someone known as employer in return for a wage or salary. The person engaged under employment works as per the directions of the employer. There is an employer – employee relationship. A professional may also work under the contract of employment. A Chartered Accountant may be employed by the company The service may be of government department or in a private organisation.

Short Answer Questions

Question 1.
What are the Business objectives?
Answer:
Business objectives are classified as economic, Social, human and national objectives.
1. Economic objectives:

• Earning profit
• Creation of customers
• Innovation
• Optimum utilization of resources.

2. Social objectives:

• Supplying desired goods and services at reasonable prices.
• Fair remuneration to employees
• Creation of employment opportunities
• Promotion of social welfare
• Payment of dues and taxes to Government.

3. Human objectives:

• Welfare of workers or staff
• Development of human resources
• Labour participation in management
• Labour management co-operation.

4. National objectives:

• Optimum utilisation of natural resources
• Self-reliance.
• Development of small scale industries and MSMES
• Development of backward regions.

Question 2.
What are the economic activities.
Answer:
Economic activities are broadly classified into business, profession and employment.

Business: The word business literally means a state of being busy. Every person is engaged in some kind of occupation or other work. The business is an activity which is primarily pursued with the object of earning profit. So, a business activity involves production, exchange of goods and services to earn profits or to earn a living.

Profession: Profession is an occupation involving the provision of personal services of a specialised and expert nature. The service is based on professional education, knowledge, training etc. The specialised service is provided for a professional fees charged from the clients. For example, a doctor helps his patients through his expert knowledge of science of medicine and charges a fees for the service.

Employment: Employment involves working under a contract of employment for or under someone known as employer in return for a salary. The person engaged under employment works as per the directions of the employer.

Question 3.
What are the social objectives?
Answer:
Business does not exist in a vaccum. It is a part of society. It cannot survive and grow without the support of society. Business must therefore discharge social responsibilities in addition to earning profits.

According to Henry Ford, “The primary aim of business should be service and subsidiary aim should be earning of profit”.

The social objectives of business are as follows:
i) Supplying desired goods and services at reasonable prices: Supply of goods and services to consumers at reasonable price with the accepted quality is the responsibility of any business entity. It is also the social obligation of business to avoid malpractices like, adulteration, smuggling, black marketing and misleading advertising.

ii) Fair Remuneration to employees: Business must be given fair remuneration and compensation to employees for their work. In addition to wages and salary a reasonable part of profits should be distributed among employees by way of bonus. Such sharing of profits will help to increase the motivation and efficiency of employees. It is the obligation of business to provide healthy and safe work environment for employees.

iii) Employment Generation: In a country like India unemployment has become a serious problem and no government can offer jobs to all. Therefore, provision of adequate and full employment opportunities is a significant service to society.

iv) Promotion of social welfare: Business should provide support to social, cultural and religious organisations. Business enterprise can build schools, colleges, libraries, dharamashalas, hospitals, sports bodies and research institutions. They can help NGO’s like CRY (Child Relief and You). Help Age, and others which render services to weaker sections of society.

v) Payment of dues and taxes to government: Every business enterprise should pay taxes and dues (income tax and GST) to the government honestly and at the right time.

Question 4.
What are the National objectives?
Answer:
National objectives of business are as follows:
i) Optimum utilisation of resources: Business should use the nation’s resources in the best possible manner. Judicious allocation and optimum utilisation of scarce resources is essential for rapid and balanced economic growth of the country.

ii) National self-reliance: It is the duty of business to help the government in increasing exports and in reducing dependance on imports. This will help a country to achieve economic independence.

iii) Development of MSMEs: Big business firms are expected to encourage growth of micro, small and medium enterprises (MSMEs) which are necessary for generating employment. MSMEs can be developed as ancillaries which provide inputs to large scale industries.

iv) Development of backward classes: Business is expected to give preference to the industrialisation of backward regions of the country. It will also help to raise standard of living in backward areas. Balanced regional development is necessary for peace and progress in the country. Government offers special incentives to the businessmen who setup factories in notified backward areas.

Question 5.
What is the role of profit in business?.
Answer:
Earning profit is necessary not only to pay adequate returns to the investors, but also to maintain the stability of the business. The role of profit in business is given below:

• Profits ensure adequate funds for future expansion and innovation, there by increasing the wealth of country.
• Profits are also helpful to attract new capital from outside sources like banks, Financial Institutions and Investors.
• Profits are serves as the barometer of economic stability, efficiency and progress of a business enterprise.
• Profits enable a businessman to stay in business by maintaining intact the wealth producing capacity of its resources.
• Profits ensure continuous flow of capital for the modernisation of business.

Just as a person cannot line without food, a businesss firm cannot survive without profit. Therefore, profits are essential for every business organisation.

Question 6.
Explain the History of commerce.
Answer:
Commerce is a wider system which is the custome of a gradual evolution spread over a long period of human history and it passes through the following different stages.
i) Household economy: This is the first stage of economic development. At this stage, division of labour was unknown concept at the family level. There was no commercial inter relationship between families. While men engaged in jobs like hunting, fishing, making weapons for hunting etc, women were engaged in fruit gathering, cultivation of lands etc. Therefore, commerce was unknown at this stage.

ii) Primitive Barter Economy: Gradually the need of the families increased and families started specializing in different occupations and the need for exchange of goods, etc., between different families. Thus, commerce originated with introduction of barter systesms. In barter system, the goods are exchanged only. Hence barter system was considered as a popular element of commerce.

iii) The raise of trade: In course of time, the needs of people increased. In the begining, goods were exchanged at particular fixed places, but gradually trade appeared on the scene. Home trade began to develop and assume importance and money appeared as an instrument and medium of exchange. Further, the systems of weights and measurement also came into existence.

iv) Town Economy: At this stage, trade began to be undertaken for catering to the needs of local markets which gradually developed into large town. Further, traders were divided into wholesale and retail merchants. Division of labour become significant and prices for goods began to be fixed regularly and traders started using the credit system in their transactions.

v) International Trade: At this stage, goods were produced not only for selling in the local markets but also in foreign markets. This expansion of trade was due to the industrial revolution which made large scale manufacturing of goods possible. Commercial banks, insurance companies, transport companies, warehousing companies etc began to setup.

vi) E-commerce: It is an innovative business idea in the modem economy e-commerce means electronic commerce. It is the process of buy and sell the goods and services through an electronic medium electric commerce emerged in the early 1990s, and its use has increased at a rapid rate.

Question 7.
What are the economic objectives of the business?
Answer:
Economic objectives:
Business is basically an economic activity. Therefore, its primary objectives are economic in nature. The main economic objectives of business are as follows:

i) Earning profits: Any business enterprise is established for earning some profits. It is the main incentive and hope to start business. Just as a person cannot live without food, a business firm cannot survive without profit. Profit also serves as the barometer of economic activity, efficiency and progress of a business enterprise. Therefore profit is essential for the survival of every business.

ii) Creating customers: A business man can earn profits only when there are enough customers to buy and pay for his goods and services. In the words of Peter F. Drucker, ‘There is only one valid definition of business purpose, to create a customer. The customer is the foundation of business and keeps it in existence. In order to earn profit, business must supply better quality, goods and services at reasonable prices. Therefore, creation and satisfaction of customers is an important economic objective of business.

iii) Innovation: Application and Adoption of new methods, devices and technologies is called Innovation. It also refers to creation of new things resulting from the study and experimentation, research and development. It comprises all efforts made in prefecting the product, minimising the costs and maximizing benefits to customers. Business firms invest money, time and efforts in Research and Development (R and D) to introduce innovation.

iv) Optimum Utilization of Resources: The best usage of resources like material, machine men and money is called optimum utilization of resources. It is also one of the important economic objectives waste control and reprocessing mechanism, providing proper training to its workers and effective spending of money may prompt the business concern to reach the objective of optimum utilization of resources.

Question 8.
What is profession and explain features and objectives of profession.
Answer:
Profession: A profession is an occupation or vocation intended to render personal service of a specialised and expert nature. Profession is based on educational qualification, knowledge and competencies. For providing this service, the service provider may be a doctor, an engineer, lawyer, or a chartered accountant will charge fee on their clients which will be their primary earning.

Following are the salient features of profession:

• A person enters into any particular profession should have Specialized qualification, knowledge and training in that respective profession.
• Person enters into the specialized profession must be the member of respective professional body.
  Ex: Doctors in IMA (Indian Medical Association), Lawyers in Indian Bar Council and chartered Accountant in ICA (Institute of Charatered Accountants of India).
• Person choosing the profession must follows the ethics.
• Professional fee from the clients for providing their specialized services.
• Rendering service legibly is the key factor in any profession.
• Service motive must be an integral part of any profession.
• Some professionals instead of work on their own may also work in organizations as employees and consultants.

Following are the important objectives of any profession:

• To secure respected position in the society.
• To spread the efficiency, skill and knowledge possessed, for the needy people.
• To build career and register growth and development in their respective field.
• To render service.
• To enjoy the freedom of work at the cost low risk.

Question 9.
What is employment and explain the features and objectives of employment.
Answer:
Employment: An employment is a contract of service. A person who works under the contract for a salary or wage is called an employee and the person who has given the job to the employee is called employer. An employee works under an agreement as per the rules of service and performs tasks assigned to him by the employer.

The relationship between two parties will be employer – employee. Working in Banks, offices, hotels, schools and companies are the examples of employment.

Following are the important features of employment:

• Employment contract commences when employee signs the agreement and joins organisation.
• It involves rendering service for periodical remuneration called wage or salary.
• Employment is the contractual relationship between employee and employer.
• Employment will have very low risk and uncertainty, when compared with other economic activities.
• Employee need not invest any capital.
• Employees need to follow service rules and regulations framed by the employer strictly.
• Certain employments required necessary qualifications too.
• There are certain terms and conditions, of work like hours of work, duration of work, leave facility, salary / wages and place of worts in employment, which must be followed by the both employer and employee.

The important object of employment can be prevented as under:

• The basic objective of employment is to earn for their livelihood and support family.
• To get secured and assured wages and salaries.
• To free from risk and uncertainty.
• To keep away from disputes, conflicts and devastations.
• To focus on skill development and career paths for job seekers.

Very Short Answer Questions

Question 1.
Business.
Answer:

• Business means the state of being busy.
• Business is an economic activity involving production, exchange, distribution and sale of goods and services with an objective of making profits and maximization of wealth. The primary intension of business is making profits.

Definition: L.H.Maney defined business as “a human activity directed towards producing or acquiring wealth through buying and selling of goods”.

Question 2.
Human activities.
Answer:

• The activities performed by the human being in their daily life are called human activities. These are undertaken by them to fulfill their needs, desires, wants and luxuries.
• Human activities are divided into two types:
  • Economic activities
  • Non-economic activities.

Question 3.
Profession.
Answer:

• A profession is an occupation or vocation intended to render personal service of a specialized and expert nature. It is part of economic activities undertaken by the human being.
• Always profession is based on educational qualification, knowledge and competencies. A fee is charged for providing professional service.

Question 4.
Employment.
Answer:

• Employment is the relationship between two parties. One party render this service on contractual basis for the remuneration wage or salary.
• Hence the relationship between these two parties will be employer – employee.

Question 5.
Risk and uncertainity.
Answer:

• Risk means fear or loss. It implies the uncertainity of profit or the possibility of loss. Business enterprises function is uncertain and uncontrollable environment.
• Changes in customers tastes and fashions, demand, competition, Government policies etc., create risk. Flood, fire, earthquake, strike by employees, theft etc., also cause loss. A businessman can reduce risks through correct forecasting and insurance.