CHAPTER 1Business, Trade and Commerce

Classification of Activities

Economic Activities: Economic activities are activities carried out to generate

money and sustain a living. A manufacturing worker or a school teacher, for
example. There are three main types of economic activities:

Non-economic activities: Non-economic activities are those which we do out of

love, affection, pity or any other emotion other than profit. Social service and
religious activities are examples of non-economic activities.

Role of Business in The Development of Economy:

People have been conducting business since the dawn of time. There was a flow of
goods both within and beyond the country, and the earnings from such economic
activities were used to support more investments.

One such example is given below

Hundi: It is an old type of commerce that involves a contract that guarantees money
payment, an unconditional promise or order, and the capacity to be swapped through
appropriate conversation.

Patliputra, Peshawar, Taxila, Indraprastha, Mithila, Madhuram, Surat and other historic
commercial hubs sprung up to handle goods imports and exports.

Business

Business is an economic activity conducted on a regular and continuous basis to fulfil

societal demands while also making a profit via the sale and purchase of goods and
services.

Characteristics of Business Activities

 A source of revenue: A business’s principal purpose is to generate money by

selling or trading goods and services. As a result, it is a for-profit endeavour.
 Consistent dealings: Dealings in commodities and services at regular periods
are required to form a business. A single transaction is not a business
transaction. Selling old books or furniture and buying new ones, for example, is
not considered a business.
 Goods and services produced or procurement: Production occurs in every
business operation before consumption. So, a company either creates its items or
buys them from manufacturers before selling them to end customers.

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  Making money: Every business’s principal goal is to increase profits. Without
profit, no firm can survive. As a result, the entire company’s whole efforts are
directed toward making a suitable profit.
 Return uncertainty: It is impossible to predict how much profit a company will
make because the changing environment may result in losses. Every company
must deal with both losses and profits.
 Risk: Every firm is vulnerable to various hazards, which might arise from natural,
human, financial, or personal sources. As a result, profit and loss are inextricably
linked, and every firm must take some risk to exist.
Profession

A profession is any economic activity carried out by a person with specialised

knowledge and abilities to benefit society.

Employment

Employment refers to any economic activity that involves doing labour for someone else
in exchange for money.

Classification of Business Activities

The following are the main categories of business activities:

 Industry
 Commerce
 Trade
 Auxiliaries to Commerce
1. Industry
It is primarily focused on the commercial production of products and services. It is then
separated into the following groups:

 Primary
 Secondary
 Tertiary
1. Primary Industry: It includes all those activities concerned with the extraction
and production of natural resources and the development of plants, etc.
It is further divided into two parts:

 Extractive industries: These industries provide some basic raw materials that
are mostly products of the natural environment. It includes farming, mining, etc.
 Genetic industries: These industries breed plants and animals for their use in
further reproduction. Examples- are cattle breeding and poultry farms.
2. Secondary Industries: These industries deal with the additional processing of
materials extracted in the primary sector to turn them into finished goods.
Consider iron ore mining.
It is broken into two sections:

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 1. Manufacturing industry: Manufacturing industries process raw materials and
create utilities to produce commodities. It is broken into four sections:
 Analytical industries: It separates and bifurcates distinct components from the
source material to create many by-products from the same element. Petrol,
diesel and other fuels are all derived from crude oil.
 Synthetical industries: These businesses blend materials and components
from several sources to create a new product. Consider the cement business.
 Processing industries: It is concerned with extracting and processing
resources and raw materials to generate semi-finished or completed goods. For
instance, consider the sugar, paper and textile industries.
 Assembling industries: It brings together diverse components from many
companies to create a new product. For example, diverse components from
many industries are brought together to assemble and turn into a television,
computer or automobile
[Link] industries: These businesses are involved in the construction
industry.

3. Tertiary Industry: These businesses provide support services to primary and

secondary sectors, allowing them to complete their tasks without interruption. For
instance, the banking, transportation and communication industries.

B. Commerce

All actions necessary for exchanging commodities and services are included in
commerce. It also includes any actions that aid in reducing people, location, time,
money, risk and information barriers that arise during the exchange of products and
services.

It consists of two kinds of activities:

1. Trade: The term “trade” refers to buying and selling goods and services for a
profit. Traders are those who work in the trade industry. Two types of trade can
be distinguished:
1 . Domestic trade refers to buying and selling within one’s nation. It might be:

 Local trade refers to buying and selling inside some geographic area.
 State trade is defined as buying and selling inside a single state. It is called intra-
state trade.
 National trade is the buying and selling of goods and services between states. It
is an interstate business.
2. Foreign Trade refers to the purchase and sale of goods and services outside a
country’s borders. It includes the following aspects:

 Imports: Imports are the buying of goods and services from other countries.
 Exports: Exports are products and services that are sold to other nations.
 Entrepot: Entrepot is the process of importing goods and services from one
country and exporting them to another.

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 2. Auxiliaries to Trade: Auxiliaries to trade facilitate the purchase and sale of
products and services by reducing barriers such as location, people, time,
money, risk and information. Auxiliaries to trade include:
 Communication and Transportation: Transportation of raw materials and
finished goods from production to the point of consumption. Communication
allows for simple engagement between parties that are geographically
separated. It aids in the elimination of the impediment caused by the location.
 Finance and banking: It assists businesses in overcoming financial difficulties
by providing loans and credit facilities. Businesses cannot operate if money is not
available to purchase materials. It aids in the reduction of financial barriers.
 Insurance: It protects businesses from many threats including fire, theft and
other natural disasters. It aids in the reduction of risk obstacles.
 Warehousing: It assists businesses in overcoming storage issues and improving
product availability. It aids in the reduction of time constraints.
 Public Relations and Advertising: It assists them in increasing sales and
expanding their consumer base by advertising a wide range of company products
or services. It’s a tool for persuading customers. It aids in the reduction of
informational barriers.
 Middlemen: These people serve as intermediaries between the producer and
the customer. It helps people overcome their obstacles. Wholesalers, merchants
and others are examples of a middleman.

Objectives of Business

 Market position: Goodwill is the most critical component for any firm to
distinguish itself from its competition. Every firm must provide high-quality items
at reasonable costs to gain more goodwill.
 Innovation: It entails the creation of new items or the modification of current
ones. To thrive in a competitive market, any firm must reinvent its goods or
develop new concepts to combat competition.
 Productivity: Every company should strive to increase production by
maximising resource use.
 Making money: Every company’s goal is to make increasing amounts of money
to stay afloat and develop.
 Resources, both physical and financial: Every firm must acquire physical
resources, such as land and plants and financial resources, such as finances,
according to their needs and use them effectively.
 Social accountability: Every company must operate in a socially desirable
manner and contribute resources to solving social issues.

Business Risk

The danger of insufficient profits or losses because of uncertainty or unexpected

occurrences is a business risk.

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Nature of Business Risks

 Every business entails some element of risk. It can only be decreased, not
completely abolished.
 It arises due to unavoidable uncertainties, such as natural calamities like
earthquakes and floods.
 The kind and size of the firm affect the degree of risk.
 Every company should adhere to the “no risk, no reward” approach. As a result,
profit provides an incentive to take risks.
Causes of Business Risks

 Natural causes: Natural disasters such as floods and earthquakes are to blame.
These factors are beyond the control of any individual.
 Human causes: Unexpected occurrences produced by man, such as employee
carelessness, power outages, employee or customer dishonesty, and so on are
among these reasons.
 Economic factors: Economic reasons include changes and variations in the
economy, such as uncertainty caused by changes in technology and
manufacturing methods, political upheavals, pricing fluctuations and tax rates.
 Other factors: Other reasons include anything that isn’t covered by the other
categories such as exchange rate swings.
Factors for Starting a Business:

 Type of business to choose: The first stage is determining what type of

business and how big it will be. It depends on the market’s client requirements
and the person’s expertise in the goods. A person can choose between Primary,
secondary and tertiary industries depending on profit potential, demand and
client preferences, among other factors.
 Size of Company: Every individual must select if they wish to operate on a
large or medium size. It relies on the product’s demand and the person’s
financial resources. If a person is positive about all of the elements, they may
scale up their business and vice versa.
 Business enterprise location: It is a crucial consideration when beginning a
firm. The accessibility of raw materials and labour and banking and
transportation facilities all influence the location of a firm. Any blunder here
might result in significant corporate losses.
 The proposal’s funding: When it comes to launching a business, the
availability of cash or funds is critical. Because money is required for every
activity and component of a business, such as investing in fixed assets and
stocks and paying day-to-day costs.
 Physical resources: When launching a firm, the availability of machines,
equipment and structure is also taken into account. The size and scope of
physical facilities are determined by the kind and size of the business and
financial resources.

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  A workforce that is capable and dedicated: To execute its business
operations properly, any company needs qualified employees. Hiring the
appropriate workers at the right time and at the best cost requires careful
preparation and training.
 Tax preparation: Because of the country’s growing tax rules, every firm must
perform comprehensive tax planning ahead of time to avoid future problems.
 Starting the business: After completing all of these procedures, a person is
ready to establish a business. It might be a partnership, a sole proprietorship or a
corporation.

An Overview of the Chapter

Division of Business Activities

Economic and non-economic activities are the two main categories of business activity.
Chapter 1 Business Studies Class 11 notes are solely concerned with economic
activity.

Economic Activities are Further Divided Into

 Business – A profession that involves selling services or items for a profit.

 Profession – A paid job that requires formal education and extensive training.
 Employment – Discharging paid work.

Different Features of Business

 Purchasing or producing services or commodities.

 Services or products are exchanged or sold.
 Dealings in services or commodities on a regular basis.
 Making money.
 The type of return generated is unclear.
 Existence of danger.

Classification of Business Activities

Business operations are classified into three categories: primary, secondary, and
tertiary.

 Primary activities are those that involve the production or exploitation of natural
resources.
 Secondary activities, such as manufacturing are concerned with processing or
raw resources.
 Tertiary activities provide service opportunities.

Main Objectives in a Business

A company’s key aims include market positioning, innovation, output generation,

product and service production or supply and profit. Chapter 1 Class 11 Business

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Studies may appear to be rather vast at first, and you may struggle to pick which
sections of the chapter to focus on. Using Extramarks study materials in this situation
would be extremely advantageous in preparation for this chapter.

MULTIPLE CHOICE QUESTIONS

1. The possibilities of inadequate profits or even losses due to uncertainties
are known as ____________.

(a) Business contingencies

(b) Business risks

(c) Business ventures

(d) None of these

Answer: (b) Business risks

2. Business risk is not likely to arise due to _____.

(a) Changes in government policy

(b) Good management

(c) Employee dishonesty

(d) Power failure

Answer: (b) Good management

3. Name the two broad categories of business activities.

(a) Trade and Commerce

(b) Trade and Industry

(c) Industry and Commerce

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(d) None of these

Answer: (c) Industry and Commerce

4. The industries which provide support services to other industries are

known as _____.

(a) Primary industries

(b) Secondary industries

(c) Commercial industries

(d) Tertiary industries

Answer: (d) Tertiary industries

5. ‘Earning of profit is considered to be the subsidiary objective of the

business.’ The given statement is _____.

(a) True

(b) False

(c) Cannot say

(d) None

Answer: (b) False

6. The occupation in which people work for others and get remunerated in
return is known as _____.

(a) Business

(b) Profession

(c) Employment

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(d) None of these

Answer: (c) Employment

7. Transfer of interest exists in the case of _____.

(a) Profession

(b) Employment

(c) Business

(d) None of these

Answer: (c) Business

8. Which of the following does not characterise business activity?

(a) Production of goods and services

(b) Presence of risk

(c) Sale or exchange of goods and services

(d) Salary and wages

Answer: (d) Salary and wages

9. Which of the following is not an example of non-economic activity?

(a) Patriotism

(b) Teaching

(c) Sentiment

(d) Sympathy

Answer: (b) Teaching

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10. Economic activities may be classified into business, ___________ and
employment.

(a) Profession

(b) Occupation

(c) Vocation

(d) Work

Answer: (a) Profession

11. Which of the broad categories of industries covers oil refineries and
sugar mills?

(a) Primary

(b) Secondary

(c) Tertiary

(d) None of these

Answer: (b) Secondary

12. Following are the characteristics of business risks. One of them is not
correct. Please identify it.

(a) Loss is the reward for risk-bearing

(b) Business risks are due to uncertainties

(c) Risk is an essential component of every business

(d) Degree of risk depends mainly upon the nature and size of business

Answer: (a) Loss is the reward for risk-bearing

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13. Which one of the following may not be a factor behind starting a
business?

(a) Routine workload

(b) Size of the firm

(c) Finance

(d) Location of the business

Answer: (a) Routine workload

14. Commerce includes activities relating to trade and ___________ to trade.

(a) Supporting

(b) Subsidiaries

(c) Auxiliaries

(d) None of these

Answer: (c) Auxiliaries

15. Which of the following cannot be classified as an objective of a business?

(a) Investment

(b) Productivity

(c) Innovation

(d) Profit earning

Answer: (a) Investment

IMPORTANT QUESTIONS
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Question 1

What are the different types of economic activities?

Answer: There are various types of economic activities. Namely,

 Profession
 Business
 Employment
Question 2

Name one economic pursuit, in which expertise is required.

Answer: Profession is an economic pursuit, in which expertise is required.

Question 3

Name the industries that furnish support to other fellow industries.

Answer: Tertiary industries are involved in furnishing support to all the

primary and secondary industries.

Question 4

Can fishing be contemplated as a primary industry?

Answer: Yes.

Important Topics in Business Studies:

 Types of Entrepreneurship
 What is Marketing Mix
 Marketing vs Branding
 Importance of Consumer Protection
 What is Stock Exchange?

Question 5

Categorise the occupation in which the employees work for others and get
paid in return.

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  Profession
 Business
 Employment
 None of the above
Answer: Employment

Question 6

Sort the following into a business concern, employment and profession.

 Farmer
 Clerk
 Lawyer
 Doctor
Answer:

 Farmer – Business
 Clerk – Employment
 Lawyer – Profession
 Doctor – Profession
Question 7

What is the reward that a businessman earns for bearing risk?

Answer: When a businessman bears the risk, the reward that he’ll get is –
earning the profit.

Question 8

What is the difference between Business and Profession?

Answer:

Business Profession

In the business, capital investment is In the profession, limited capital is required

necessary according to the size and nature of for the establishment of the business
the business. enterprise.

Here, profits are uncertain. Here, the risk factor is not to that extent.

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Question 9

Mention the risks that are involved in the business.

Answer: Every aspect has its own risk factors. So does business has too.
Namely,

 Business risks arise due to a few uncertain and unexpected situations

 It is a quintessential part of any business
 However, profit is the reward for bearing the risks
Question 10

What are the objectives of the business?

Answer: Objectives of business are mentioned below:

 Innovation: Every business concern must come up with novice ideas, inventions
and implement them; which are helpful for survival and growth.
 Productivity: Productivity is certainly determined by contrasting the value of
the output with the value of the input.
 Earning Profits: Any business entity that is operating must earn a reasonable
amount of profits in order to sustain survival and growth.
Question 11

What is Commerce and its significance in modern life?

Answer: Commerce is the control of business among economic agents.

Usually, it refers to the exchange of commodities, services or items of value,
among companies or entities.

The significance of Commerce are:

 Commerce acts as a catalyst between the manufacturers and customers.

 It establishes employment opportunities.
 It encourages trade in the global level.
 Assists in the growth of developing the industries.
 Helps during exigencies like the natural calamities – earthquake, flood, drought
etc.
Question 12

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Under which type of industry do oil refinery and sugar mills are classified?

Answer: Secondary industry

Question 13

What are the differences between primary and secondary industry?

Answer:

Primary Secondary

Pursuits that are concerned with the These industries manufacture raw materials
extraction and manufacturing of natural to produce the commodities for final
resources. utilisation.

Classified as follows: Classified as follows:

 Extractive industries  Manufacturing industries
 Genetic industries  Construction industries

Example: Mining, fishing Example: Oil refinery, Sugar mill

Question 14

How does a trader get rid of the hindrance of a person?

Answer:

 Getting rid of hindrance of a person by making the commodities obtainable to the

customers from the manufacturers via trade.
 Transportation removes hindrance of a location by transporting the commodities
from the place of manufacturing to the market place for selling purpose.
 However, insurance removes the hindrance of perils of loss or damage of
commodities due to dire, theft and accidents etc.,
 Advertising removes the hindrance of the data by keeping the customers
informed regarding the commodities and services that are obtainable in the
market place.
Question 15

Insurance is known as the tertiary industry. Explain.

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Answer: Insurance is the support service to both the primary and secondary
industries.

The tertiary industry is the section of the economy that contributes services
to its customers, including a broad array of businesses such as schools,
financial institutions and restaurants. It is also called as the tertiary sector or
service industry/sector.

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