1.

Define business. Explain its characteristics.

Ans. The term 'business' can simply be understood as the state of being busy. In economic terms, it is the act of buying, selling and distributing goods with the motive of income generation. It is an economic system in which goods and services are exchanged for money, as per their value.                                                                  According to Lewis Henry, business is defined as, "Human activity directed towards producing or acquiring wealth through buying and selling goods."

Characteristics:

a. Production and distribution of goods and services: All business activities are concerned with the production and distribution of goods and services for a certain value. It excludes production of goods and services for self-consumption.

b. Human activity: A business cannot exist without humans. They are the ones who perform all the functions of business. They include owners, customers, distributors, etc.

c. Economic activity: A business is always an economic activity. It is established by individuals or groups to serve the needs of society. It is concerned with profit generation.

d. Exchange of goods and services: A business is primarily concerned with exchange of goods and services for money or money's worth.

e. Continuity: The exchange of goods and services should be continuous in nature. One-time transactions cannot be termed as a business. The activates performed should be regular and routine in nature.

f. Satisfying customer: The objective of business is to earn profit by rendering proper services to the consumers. Without satisfied customers, a business cannot exist.

g. Risk and uncertainty: A business is comprised of risk and uncertainty. Risk directs us to the fact that loss may occur and risk always rises from the uncertainty of future. Moreover, the modern world is ever-changing due to which risk and uncertainty are always in the business.

h. Creation of utility: Business produce/ sell or distribute products, which serve a purpose to the customers. These products are transported to the places where they are demanded and are also stored for future demands. Thus, creating place and time utility.

i. Profit: A business is established to earn profit. The survival of business depends upon the profit it generates. Without profit a business cannot exist.

j. Organisation: Business is a system. It cannot exist. Without any structure and an entrepreneur. Presence of simple, easy and modern type of organizational structure is always essential.

k. System: A business is a system of interrelated activities:- Inputs process and outputs. Inputs are raw material, which pass through processes like machinery and tools to produce outputs in the form of products and thereby profit.

 

2.

Explain social and economic activities of business.

Ans. A business is always expected to undertake the activities that facilitate the betterment of the society. A business conducts its business within the boundary of the society. It uses the resources of the society for its existence, survival and growth. Any activities that are against the interests of the society are not to be done. We can say that a business ascertains the demand of the society and supply the commodities accordingly. Artificial shortage and unreasonable prices are not created. The business is always providing commodities as per the need of the society. A business is always involved in providing quality products at reasonable price. Supply of low quality products at high unreasonable prices to the society does not serve the business ethics. Likewise, business creates employment opportunities for the people of the society. The human resource is required at every stage of the business process from production till distribution. The society provides manpower in exchange of compensation as salaries and wages. Thus, the social need of employment is served.

A business is established to earn profit or maximize wealth. Profit is essential for the business for its development, diversification, and modernization and to provide return on investments. It cannot be denied that business is always functioning for the profit incentives. Uncertainties such as trade cycle, patterns of demand and so on are met by the profits earned by the business. Profit is not only important for the existence of the business but is equally important in its growth and diversification. Various stakeholders of the business have their own expectations from the business. Thus, we can say that profit is required to protect the interests of the stakeholders. And if the interests of the stakeholders are not met the business cannot exist. It will dissolve and disappear.

 

3.

Explain the economic and human objectives of business.

Ans. The economic objective of business is to earn profits. The business provides commodities to the consumer at relatively higher price to earn profit. The economic objective of business is related with production of products, earning profits, creation of markets and using latest technologies to increase efficiency and effectiveness. The economic objective of business is to earn profit to provide adequate reward to the shareholders in return of their investment.

Normally, a business organization existing in a society has to deal with two social aspects: employees and customers. Theemployees are the backbone of the organization and customers are the one’s who consumes the product of the business. Thus, it is necessary that the business treat them properly as human beings the employees should be provided with proper work conditions and constant motivation likewise, the customers should be provided with quality products at a reasonable price at the right time the business should actively seek to satisfy the customers by providing different services and qualitative goods. Also the business should try to satisfy its shareholders by providing adequate return on their investment.

 

4.

Explain the different types of industries.

Ans. Primary Industry:

The industries involved in extracting natural resources and reproducing plants and organisms are known as primary industry. The products of primary industry are essential to the secondary industry. Primary industries are of 2 types:

Extractive Industries: They are involved in extracting natural resources from the nature with the help of human skills. For example, coal mining is an extractive industry where coal is mined from earth.

Genetic Industries: They are involved in reproducing certain types of plants and animals for generating profit. A perfect example of genetic industry is poultry farming where chickens are raised for meat and then wealth.

Secondary Industry:

The industries involved in converting raw materials or semi-finished goods into finished goods are known as Secondary Industries. They are dependent upon the products of primary industries. Secondary industries are broadly categorised as: Manufacturing and Construction Industries.

Manufacturing Industries: These industries convert raw materials or semi-finished goods into finished products. They give a complete new look to raw materials or semi-finished goods by guiding them through certain procedures. Manufacturing Industries can be Analytical Industries, Synthetic Industries, Processing Industries, Assembling Industries and Continuous Industries.

Construction Industries: As the name applies, these industries are primarily involved in construction works. They construct roads, bridges, buildings and etc.

 

5.

“Business is an economic activity?” discuss.

Ans. A business can be defined as the activity pursued with the objective of earning profit. They are the human activities directed towards providing or generating wealth through buying and selling of goods and services. All the activities included in the production and sale of goods or services are termed as business activities. So, we can assume that a business primarily, is involved in the production and distribution of goods and services to generate profit.

. Profit is essential for the business for its development, diversification, and modernization and to provide return on investments. It cannot be denied that business is always functioning for the profit incentives. Uncertainties such as trade cycle; patterns of demand and so on are met by the profits earned by the business.  Profit is not only important for the existence of the business but is equally important in its growth and diversification.  Various stakeholders of the business have their own expectations from the business. For instance, investors want adequate return on their investments, workers want more wages and entrepreneurs want profit for re-investment. Thus, we can say that profit is required to protect the interests of the stakeholders. And if the interests of the stakeholders are not met the business cannot exist. It will dissolve and disappear. Thus, “A Business is an economic activity.”

 

6.

What do you mean by home trade? Discuss its types.

Ans. Home trade can be known as Internal or Domestic Trade. It is a trade, which consists of buying, and selling of goods within the boundaries of a country and the payment for the same is made in national currency either directly or through the banking system. Internal trade may be further sub-classified into wholesale trade and retail trade.

The buying, selling and exchanging of products within the boundaries of a country is known as home or Internal or Domestic trade. Domestic trade takes place between the traders of a country. Internal trade types are:

Wholesale Trade: In this trade, products are sold, bought and exchanged in bulk. The wholesaler buys products directly from the producer in large amounts and sells them to the retailers in smaller amounts.

Detail Trade: A retail trade is such type of trade where a retailer buys in bulk from wholesalers and sells them to the consumers in small quantities.

 

7.

Introduce foreign trade. Discuss the import and export trade.

Ans. Foreign trade refers to the exchange of goods and services between two or more countries.

International Trade is also known as Foreign Trade. It is the buying and selling of products between traders of two or more countries. Wholesale trade is conducted in International Trade through foreign exchange and international means of transport.

Import Trade: Import trade is involved in purchasing goods from foreign countries for consumption in domestic market.  Import trade refers to purchase of goods by one country from another country or inflow of goods and services from foreign country to home country.

Export Trade: Export Trade is involved in selling domestic products to foreign countries. Export trade refers to the sale of goods by one country to another country or outflow of goods from home country to foreign country.

 

8.

What is commerce? Write the point of difference between home and foreign trade.

Ans. The term commerce refers to the process of buying and selling-wholesale; retail, import, export, enter port trade and all those activities which facilitate or assist in such buying and selling such as storing, grading, packaging, financing, transporting, insuring, communicating, warehousing, etc.

The different points between home and foreign trade are:

For home trades, payments could be made in home currency only. Foreign trades are to be paid invariably in convertible currencies.

Home trades generally have no restrictions of movement within the country. In international trade, there are restrictions as to movement of specific goods to specified countries.

Home trades have taxes levied by the Government and local bodies. International trades have levies called customs duties. These invariably go to the Federal Government.

Documents for domestic trades are comparatively simple and easy to understand and follow. Foreign trades have a different set of documents, which must be filed in every case.

Insurance of consignments sent on foreign trade are compulsory; in home trade it is optional.

Usually, foreign trades are preceded by payment or promises of payment made by international foreign exchange traders (also called Letters of Credit.) In domestic trades, payments are realised usually after the trade is executed. Depending on the credit rating of the parties concerned, even a simple promise is not taken. Letters of Credit in domestic trades is not common but not ruled out.

Credibility of parties can be got verified in foreign trades through the trade representatives of the countries involved in the transaction.

 

9.

 

Explain banking and insurance as auxiliary of trade.

Ans. There are certain functions such as banking, transportation, insurance, ware-housing, advertising, etc. which constitute the main auxiliary functions helping trade-internal and international. The banking and insurance functions are:

Banking: Banks provide a device through which payments for goods bought and sold are made thereby facilitating the purchase and sale of goods on credit. Banks serve the useful economic function of collecting the savings of the people and business houses and making them available to those who may profitably use them. Thus, banks may be regarded as traders in money and credit.

Insurance: Insurance provides a cover against the loss of goods in the process of transit and storage. An insurance company performs a useful service of compensating for the loss arising from the damage caused to goods through fire, pilferage, thief and the hazards of sea, transportation and thus protects the traders form the fear of loss of goods. It charges insurance premium for the risk covered.

1.

Define business. Explain its characteristics.

Ans. The term 'business' can simply be understood as the state of being busy. In economic terms, it is the act of buying, selling and distributing goods with the motive of income generation. It is an economic system in which goods and services are exchanged for money, as per their value.                                                                  According to Lewis Henry, business is defined as, "Human activity directed towards producing or acquiring wealth through buying and selling goods."

Characteristics:

a. Production and distribution of goods and services: All business activities are concerned with the production and distribution of goods and services for a certain value. It excludes production of goods and services for self-consumption.

b. Human activity: A business cannot exist without humans. They are the ones who perform all the functions of business. They include owners, customers, distributors, etc.

c. Economic activity: A business is always an economic activity. It is established by individuals or groups to serve the needs of society. It is concerned with profit generation.

d. Exchange of goods and services: A business is primarily concerned with exchange of goods and services for money or money's worth.

e. Continuity: The exchange of goods and services should be continuous in nature. One-time transactions cannot be termed as a business. The activates performed should be regular and routine in nature.

f. Satisfying customer: The objective of business is to earn profit by rendering proper services to the consumers. Without satisfied customers, a business cannot exist.

g. Risk and uncertainty: A business is comprised of risk and uncertainty. Risk directs us to the fact that loss may occur and risk always rises from the uncertainty of future. Moreover, the modern world is ever-changing due to which risk and uncertainty are always in the business.

h. Creation of utility: Business produce/ sell or distribute products, which serve a purpose to the customers. These products are transported to the places where they are demanded and are also stored for future demands. Thus, creating place and time utility.

i. Profit: A business is established to earn profit. The survival of business depends upon the profit it generates. Without profit a business cannot exist.

j. Organisation: Business is a system. It cannot exist. Without any structure and an entrepreneur. Presence of simple, easy and modern type of organizational structure is always essential.

k. System: A business is a system of interrelated activities:- Inputs process and outputs. Inputs are raw material, which pass through processes like machinery and tools to produce outputs in the form of products and thereby profit.

 

2.

Explain social and economic activities of business.

Ans. A business is always expected to undertake the activities that facilitate the betterment of the society. A business conducts its business within the boundary of the society. It uses the resources of the society for its existence, survival and growth. Any activities that are against the interests of the society are not to be done. We can say that a business ascertains the demand of the society and supply the commodities accordingly. Artificial shortage and unreasonable prices are not created. The business is always providing commodities as per the need of the society. A business is always involved in providing quality products at reasonable price. Supply of low quality products at high unreasonable prices to the society does not serve the business ethics. Likewise, business creates employment opportunities for the people of the society. The human resource is required at every stage of the business process from production till distribution. The society provides manpower in exchange of compensation as salaries and wages. Thus, the social need of employment is served.

A business is established to earn profit or maximize wealth. Profit is essential for the business for its development, diversification, and modernization and to provide return on investments. It cannot be denied that business is always functioning for the profit incentives. Uncertainties such as trade cycle, patterns of demand and so on are met by the profits earned by the business. Profit is not only important for the existence of the business but is equally important in its growth and diversification. Various stakeholders of the business have their own expectations from the business. Thus, we can say that profit is required to protect the interests of the stakeholders. And if the interests of the stakeholders are not met the business cannot exist. It will dissolve and disappear.

 

3.

Explain the economic and human objectives of business.

Ans. The economic objective of business is to earn profits. The business provides commodities to the consumer at relatively higher price to earn profit. The economic objective of business is related with production of products, earning profits, creation of markets and using latest technologies to increase efficiency and effectiveness. The economic objective of business is to earn profit to provide adequate reward to the shareholders in return of their investment.

Normally, a business organization existing in a society has to deal with two social aspects: employees and customers. Theemployees are the backbone of the organization and customers are the one’s who consumes the product of the business. Thus, it is necessary that the business treat them properly as human beings the employees should be provided with proper work conditions and constant motivation likewise, the customers should be provided with quality products at a reasonable price at the right time the business should actively seek to satisfy the customers by providing different services and qualitative goods. Also the business should try to satisfy its shareholders by providing adequate return on their investment.

 

4.

Explain the different types of industries.

Ans. Primary Industry:

The industries involved in extracting natural resources and reproducing plants and organisms are known as primary industry. The products of primary industry are essential to the secondary industry. Primary industries are of 2 types:

Extractive Industries: They are involved in extracting natural resources from the nature with the help of human skills. For example, coal mining is an extractive industry where coal is mined from earth.

Genetic Industries: They are involved in reproducing certain types of plants and animals for generating profit. A perfect example of genetic industry is poultry farming where chickens are raised for meat and then wealth.

Secondary Industry:

The industries involved in converting raw materials or semi-finished goods into finished goods are known as Secondary Industries. They are dependent upon the products of primary industries. Secondary industries are broadly categorised as: Manufacturing and Construction Industries.

Manufacturing Industries: These industries convert raw materials or semi-finished goods into finished products. They give a complete new look to raw materials or semi-finished goods by guiding them through certain procedures. Manufacturing Industries can be Analytical Industries, Synthetic Industries, Processing Industries, Assembling Industries and Continuous Industries.

Construction Industries: As the name applies, these industries are primarily involved in construction works. They construct roads, bridges, buildings and etc.

 

5.

“Business is an economic activity?” discuss.

Ans. A business can be defined as the activity pursued with the objective of earning profit. They are the human activities directed towards providing or generating wealth through buying and selling of goods and services. All the activities included in the production and sale of goods or services are termed as business activities. So, we can assume that a business primarily, is involved in the production and distribution of goods and services to generate profit.

. Profit is essential for the business for its development, diversification, and modernization and to provide return on investments. It cannot be denied that business is always functioning for the profit incentives. Uncertainties such as trade cycle; patterns of demand and so on are met by the profits earned by the business.  Profit is not only important for the existence of the business but is equally important in its growth and diversification.  Various stakeholders of the business have their own expectations from the business. For instance, investors want adequate return on their investments, workers want more wages and entrepreneurs want profit for re-investment. Thus, we can say that profit is required to protect the interests of the stakeholders. And if the interests of the stakeholders are not met the business cannot exist. It will dissolve and disappear. Thus, “A Business is an economic activity.”

 

6.

What do you mean by home trade? Discuss its types.

Ans. Home trade can be known as Internal or Domestic Trade. It is a trade, which consists of buying, and selling of goods within the boundaries of a country and the payment for the same is made in national currency either directly or through the banking system. Internal trade may be further sub-classified into wholesale trade and retail trade.

The buying, selling and exchanging of products within the boundaries of a country is known as home or Internal or Domestic trade. Domestic trade takes place between the traders of a country. Internal trade types are:

Wholesale Trade: In this trade, products are sold, bought and exchanged in bulk. The wholesaler buys products directly from the producer in large amounts and sells them to the retailers in smaller amounts.

Detail Trade: A retail trade is such type of trade where a retailer buys in bulk from wholesalers and sells them to the consumers in small quantities.

 

7.

Introduce foreign trade. Discuss the import and export trade.

Ans. Foreign trade refers to the exchange of goods and services between two or more countries.

International Trade is also known as Foreign Trade. It is the buying and selling of products between traders of two or more countries. Wholesale trade is conducted in International Trade through foreign exchange and international means of transport.

Import Trade: Import trade is involved in purchasing goods from foreign countries for consumption in domestic market.  Import trade refers to purchase of goods by one country from another country or inflow of goods and services from foreign country to home country.

Export Trade: Export Trade is involved in selling domestic products to foreign countries. Export trade refers to the sale of goods by one country to another country or outflow of goods from home country to foreign country.

 

8.

What is commerce? Write the point of difference between home and foreign trade.

Ans. The term commerce refers to the process of buying and selling-wholesale; retail, import, export, enter port trade and all those activities which facilitate or assist in such buying and selling such as storing, grading, packaging, financing, transporting, insuring, communicating, warehousing, etc.

The different points between home and foreign trade are:

For home trades, payments could be made in home currency only. Foreign trades are to be paid invariably in convertible currencies.

Home trades generally have no restrictions of movement within the country. In international trade, there are restrictions as to movement of specific goods to specified countries.

Home trades have taxes levied by the Government and local bodies. International trades have levies called customs duties. These invariably go to the Federal Government.

Documents for domestic trades are comparatively simple and easy to understand and follow. Foreign trades have a different set of documents, which must be filed in every case.

Insurance of consignments sent on foreign trade are compulsory; in home trade it is optional.

Usually, foreign trades are preceded by payment or promises of payment made by international foreign exchange traders (also called Letters of Credit.) In domestic trades, payments are realised usually after the trade is executed. Depending on the credit rating of the parties concerned, even a simple promise is not taken. Letters of Credit in domestic trades is not common but not ruled out.

Credibility of parties can be got verified in foreign trades through the trade representatives of the countries involved in the transaction.

 

9.

 

Explain banking and insurance as auxiliary of trade.

Ans. There are certain functions such as banking, transportation, insurance, ware-housing, advertising, etc. which constitute the main auxiliary functions helping trade-internal and international. The banking and insurance functions are:

Banking: Banks provide a device through which payments for goods bought and sold are made thereby facilitating the purchase and sale of goods on credit. Banks serve the useful economic function of collecting the savings of the people and business houses and making them available to those who may profitably use them. Thus, banks may be regarded as traders in money and credit.

Insurance: Insurance provides a cover against the loss of goods in the process of transit and storage. An insurance company performs a useful service of compensating for the loss arising from the damage caused to goods through fire, pilferage, thief and the hazards of sea, transportation and thus protects the traders form the fear of loss of goods. It charges insurance premium for the risk covered.