Short Answer Questions
1. List any five major commercial cities of ancient India?
Answer: Harappa and Mohenjodaro, Indraprastha, Mathura, Mithila, and Pataliputra were the five major commercial cities of ancient India.
2. What is Hundi?
Answer: A Hundi is an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order.
3. List the major exports and imports in ancient India.
Answer: Major exports consisted of spices, wheat, sugar, indigo, opium, sesame oil, cotton etc. whereas major imports were horses, animal products, Chinese silk, flax and linen etc.
4. What were the different types of Hundi in use by traders in ancient times?
Answer: Dhani-jog, Sah-jog, Firman-jog, Dekhan-har, Jokhmi were the different types of Hundi in use by traders in ancient times.
5. What do you understand by maritime trade?
Answer: Maritime trade refers to trading or shipment of goods via sea or other waterways.
6. State the different types of economic activities.
Answer: Primary activities, secondary activities and tertiary activities are the different types of business activities.
7. Why is business considered as economic activity?
Answer: Business is considered to be an economic activity because it is undertaken with the objective of earning money or livelihood and not out of love, affection, sympathy or any other emotion.
8. State the meaning of business.
Answer: Business refers to an occupation in which people regularly engage in activities related to purchase, production and/or sale of goods and services with a view to earning profits.
9. How would you classify business activities?
Answer: Business activities can be classified into three types - Business, profession and emoloyment.
10. What are the various types of industries?
Answer: Industries are of three types. They are: i) Primary industry, ii) Secondary industry and iii) Tertiary industry.
11. Explain any two business activities which are auxiliaries to trade.
Answer: Banking and Finance, Insurance are such two activities which are auxiliaries to trade.
12. What is the role of profit in business?
Answer: Every business must earn a reasonable profit which is so important for its survival and growth.
13. What is business risk? What is its nature?
Answer: The term ‘business risks’ refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events.
Nature of business risks are: (i) Business risks arise due to uncertainties, (ii) Risk is an essential part of every business, (iii) Degree of risk depends mainly upon the nature and size of business, (iv) Profit is the reward for risk-taking.
Long Answer Questions
1. Discuss the development of indigenous banking system in Indian subcontinent.
Answer: As economic life progressed, metals began to supplement other commodities as money because of its durability and divisibility. As money served as a medium of exchange, the introduction of metallic money and its use accelerated economic activities.
Documents such as Hundi and Chitti were in use for carrying out transactions in which money passed from hand to hand. Hundi as an instrument of exchange, which was prominent in the subcontinent. It involved a contract which — (i) warrant the payment of money, the promise or order which is unconditional (ii) capable of change through transfer by valid negotiation.
Indigenous banking system played a prominent role in lending money and financing domestic and foreign trade with currency and letter of credit. With the development of banking, people began to deposit precious metals with lending individuals functioning as bankers or Seths, and money became an instrument for supplying the manufacturers with a means of producing more goods.
2. Define business. Describe its important characteristics.
Answer: Business refers to an occupation in which people regularly engage in activities related to purchase, production and/or sale of goods and services with a view to earning profits. The activity may consist of production or purchase of goods for sale, or exchange of goods or supply of services to satisfy the needs of other people.
● The distinguishing characteristics of business are as follows:
i) An economic activity: Business is considered to be an economic activity because it is undertaken with the objective of earning money or livelihood and not out of love, affection, sympathy or any other emotion. It may be mentioned here that this activity can be undertaken either on small and individual level.
ii) Production or procurement of goods and services: Before goods are offered to people for consumption, these must be either produced or procured by business enterprises. Thus, every business enterprise either manufactures the goods it deals in or acquires them from producers, to be further sold to consumers or users.
iii) Sale or exchange of goods and services: Directly or indirectly, business involves transfer or exchange of goods and services for value. If goods are produced not for the purpose of sale but for personal consumption, it cannot be called a business activity. Cooking food at home for the family is not business, but cooking food and selling it to others in a restaurant is business.
iv) Dealings in goods and services on a regular basis: Business involves dealings in goods or services on a regular basis. One single transaction of sale or purchase, therefore, does not constitute business. Thus, for example, if a person sells his/her domestic radio set even at a profit, it will not be considered a business activity. But if he/she sells radio sets regularly either through a shop or from his/her residence, it will be regarded as a business activity.
(v) Profit earning: One of the main purpose of business is to earn income by way of profit. No business can survive for long without profit. That is why, businessmen make all possible efforts to maximise profits, by increasing the volume of sales or reducing costs.
(vi) Uncertainty of return: Uncertainty of return refers to the lack of knowledge relating to the amount of money that the business is going to earn in a given period. Every business invests money (capital) to run its activities with the objective of earning profit. But it is not certain as to what amount of profit will be earned. Also, there is always a possibility of losses being incurred, dispite the best efforts put into the business.
(vii) Element of risk: Risk is the uncertainty associated with an exposure to loss. It is caused by some unfavourable or undesirable event. Risks are related with factors, like changes in consumer taste and fashion, changes in method of production, strike or lockout at workplace, increased competition in market, fire, theft, accidents, natural calamities, etc. No business can altogether do away with risk.
3. Compare business with profession and employment.
Answer: Comparison of business with profession and employment:
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| Source: NCERT |
4. Define Industry. Explain various types of industries giving examples.
Answer: Industry refers to economic activities, which are connected with conversion of resources into useful goods. Generally, the term industry is used for activities in which mechanical appliances and technical skills are involved.
● Types of industries:
1) Primary industry: These include all those activities which are concerned with the extraction and production of natural resources and reproduction and development of living organisms, plants, etc. They can be further classified into
i) Extractive industries: These industries extract or draw products from natural sources. Examples: farming, mining, fishing operations etc.
ii) Genetic industries: These industries are engaged in breeding plants and animals for their use in further reproduction. Examples: poultry firms, fish hatcheries etc.
2) Secondary industry: These are concerned with using materials, which have already been extracted at the primary state. Secondary industries may be further divided as follows:
i) Manufacturing industries: These industries are engaged in producing goods through processing of raw materials and, thus, creating form utilities. Examples: oil refinery, sugar, paper and television industry etc.
ii) Construction industries: These industries are involved in the construction of buildings, dams, bridges, roads as well as tunnels and canals. Engineering and architectural skills are an important part in construction industries.
3) Tertiary industries: These are concerned with providing support services to primary and secondary industries as well as activities relating to trade. These industries provide service facilities. Examples: transpirt, banking, insurance, warehousing, communication etc.
5. Describe the activities relating to commerce.
Answer: Commerce includes the following types of activities
i) Trade: Trade is an essential part of commerce. It refers to sale, transfer or exchange of goods. It helps in making the goods produced available to the consumers or users. Trade may be classified into two broad categories – internal and external. Internal, domestic or home trade is concerned with the buying and selling of goods and services within the geographical boundaries of a country. This may further be divided into wholesale and retail trade. When goods are purchased and sold in comparatively smaller quantities, for final consumption it is called retail trade. the exchange of goods and services between persons or organisations operating in two or more countries. If goods are purchased from another country, it is called import trade. If they are sold to other countries, it is known as export trade.
ii) Auxiliaries to trade: There are a lot of activities that are required to facilitate the purchase and sale of goods. These are called services or auxiliaries to trade and include transport, banking, insurance, communication, advertisement, packaging and warehousing.
6. Explain any five objectives of business.
Answer: Since a business has to balance a number of needs and goals, it requires multiple objectives. Such as:
(i) Market standing: Market standing refers to the position of an enterprise in relation to its competitors. A business enterprise must aim at standing on stronger footing in terms of offering competitive products to its customers and serving them to their satisfaction.
(ii) Innovation: Innovation is the introduction of new ideas or methods in the way something is done or made. There are two kinds of innovation in every business i.e., (a) innovation in product or services; and (b) innovation in various skills and activities needed to supply products and services. No business enterprise can flourish in a competitive world without innovation. Therefore, innovation becomes an important objective.
(iii) Productivity: Productivity is ascertained by comparing the value of output with the value of inputs. It is used as a measure of efficiency. In order to ensure continuous survival and progress, every enterprise must aim at greater productivity through the best use of available resources.
(iv) Physical and financial resources: Any business requires physical resources, like plants, machines, offices, etc., and financial resources, i.e., funds to be able to produce and supply goods and services to its customers. The business enterprise must aim at acquiring
(v) Earning profits: One of the objectives of business is to earn profits on the capital employed. Profitability refers to profit in relation to capital investment. Every business must earn a reasonable profit which is so important for its survival and growth.
7. Explain the concept of business risk and its causes.
Answer: The term ‘business risks’ refers to the possibility of inadequate profits or even losses due to uncertainties or unexpected events. Business enterprises constantly face two types of risk : speculative and pure. Speculative risks involve both the possibility of gain, as well as, the possibility of loss. Speculative risks arise due to changes in market conditions. Pure risks involve only the possibility of loss or no loss. The chance of fire, theft or strike are examples of pure risks. Their occurrence may result in loss, whereas, non-occurrence may explain absence of loss, instead of gain.
● Causes of business risks:
(i) Natural causes: Human beings have little control over natural calamities, like flood, earthquake, lightning, heavy rains, famine, etc. property and income in business.
(ii) Human causes: Human causes include such unexpected events, like dishonesty, carelessness or negligence of employees, stoppage of work due to power failure, strikes, riots, management inefficiency, etc.
(iii) Economic causes: These include uncertainties relating to demand for goods, competition, price, collection of dues from customers, change of technology or method of production, etc. Financial problems, like rise in interest rate for borrowing, levy of higher taxes, etc., also come under these type of causes as they result in higher unexpected cost of operation or business.
(iv) Other causes: These are unforeseen events, like political disturbances, mechanical failures, such as the bursting of boiler, fluctuations in exchange rates, etc., which lead to the possibility of business risks.
8. What factors are to be considered while starting a business? Explain.
Answer: Starting a business enterprise is similar to any other human effort in which resources are employed to achieve certain objectives. Some of the basic factors, which must be considered by anybody who is to start the business are as follows:
(i) Selection of line business: The first thing to be decided by an entrepreneur is the nature and type of business to be undertaken. He/she will obviously like to enter that branch of industry and commerce, which has the possibility of greater amount of profits. The decision will be influenced by the customer requirements in the market and also the kind of technical knowledge and interest the entrepreneur has for producing a particular product.
(ii) Size of the firm: Size of the firm or scale of its operation is another important decision to be taken at the start of the business. Some factors favour a large size, whereas, others tend to restrict the scale of operation. If the entrepreneur is confident that the demand for the proposed product is likely to be good over time and he/she can arrange the necessary capital for business, he/she will start the operation at a large scale. If the market conditions are uncertain and risks are high, a small size business would be better choice.
(iii) Choice of form of ownership: With respect to ownership, the business organisation may take the form of a sale proprietorship, partnership, or a joint stock company. Each form has its own merits and demerits. The choice of the suitable form of ownership will depend on such factors as the line of business, capital requirements, liability of owners, division of profit, legal formalities, continuity of business, transferability of interest and so on.
(iv) Location of business enterprise: An important factor to be considered at the start of the business is the place where the enterprise will be located. Any mistake in this regard can result in high cost of production, inconvenience in getting, right kind of production inputs or serving the customers in the best possible way. Availability of raw materials and labour; power supply and services, like banking, transportation, communication, warehousing, etc., are important factors while making a choice of location.
(v) Financing the proposition: Financing is concerned with providing the necessary capital for starting, as well as, for continuing the proposed business. Capital is required for investment in fixed assets, like land, building, machinery and equipment and in current assets, like raw materials, books, debts, stock of finished goods, etc. Capital is also required for meeting day-to-day expenses. Proper financial planning must be done to determine (a) the requirement of capital, (b) source from where the capital will be raised and (c) the best ways of utilising the capital in the firm.
Download NCERT Solutions for Class 11 Business Studies chapter 1: PDF link .
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