Gujarat Board GSEB Class 11 Organization of Commerce and Management Important Questions Chapter 1 Nature, Purpose and Scope of Business Important Questions and Answers.

GSEB Class 11 Organization of Commerce and Management Important Questions Chapter 1 Nature, Purpose and Scope of Business

Short Answer Type Questions

Question 1.
Into how many types can you divide an activity?
Answer:
Two; Economic activity and Non-economic Name them. activity.

Question 2.
Why does a person engage into economic activity?
Answer:
For economic benefit or monetary consideration.

Question 3.
Define Non-economic activity?
Answer:
When a person does an activity without the aim of earning mony or gaining any economic benefit, the activity is called non-economic activity.

Question 4.
What are the objectives behind non- economic activities?
Answer:
Serving the country in needs serving the society, compassion, love towards nature, etc.

Question 5.
Give two examples of non-economic activity.
Answer:
A mother nursing her child, volunteers working for betterment of community,citizens helping victims of earth-quake, etc.

Question 6.
How many types of economic activities are there of Name them.
Answer:
Three; Business, profession and employment.

Question 7.
From where is the word ‘business’ derived? What does that word mean?
Answer:
It is derived from the word ‘busy’; Busy means to continuously remain active.

Question 8.
Define business.
An economic activity which is legal and done with the motive of earning profit and creating and maximizing wealth is known as business.

Question 9.
State any two objectives of business.
Objective of profit, exchange of goods and services, risk and uncertainty, etc.

Question 10.
With what can one measure the efficiency of a business? OR What is called the barometer of business
Answer:
Profit

Question 11.
What do you mean by man-made risks? Give two examples of man-made risks.
Answer:
Business risks that may take place due to man-made activities are called man-made risks; Example: Strike, theft, robbery, etc.

Question 12.
What are natural risks? Give two examples.
Answer:
Events that take place naturally and which poses risks to business are called natural risks; Example: Flood, earth-quake, tsunami, etc.

Question 13.
Define utility and state its types.
Answer:
The capacity of goods and services to satisfy human wants is called utility. Types – Form utility, place utility and time utility.

Question 14.
What do you mean by creation of utility?
Answer:
One of the major characteristics of a business is to create utility (i.e. usefulness) for a product or a service. This is called creation of utility’.

Question 15.
What do you mean by form utility? Give example.
Answer:
If a person changes the form (i.e. shape, size, etc.) of a commodity to make it sellable we say he has created ‘Form utility’. For example, making ice-cream from milk.

Question 16.
What is the time utility? Give example.
Answer:
When a manufacturer produces goods and stores them when it is not the right time to use such goods and sells them at the right time it is said he has created Time utility’. For example, selling umbrellas in monsoon is creation of time utility.

Question 17.
What do you mean by continuance of activity? Give one example.
Answer:
The various activities, processes and transactions of a business should keep on going continuously. This is called continuance of activity. This means business is not a one-shot process. For example, selling old furniture, newspapers, etc. lying is business premises is not a business activity because there is no continuity in it.

Question 18.
State the two types of business objectives.
Answer:
Economic objectives and social objectives.

Question 19.
List out two economic and two social objectives of business.
Answer:
Economic objectives:

1. Objective of profit,
2. Maximizaion of wealth;

Social objectives:

1. Objective of social responsibility,
2. Objective to adopt fare trade policies.

Question 20.
With respect to economic benefit what is the short term and long term economic objective of a business?
Answer:
The short term objective is to earn profit whereas the long term objective is creation and maximization of wealth.

Question 21.
Which factors makes it almost impossible for a business to ignore social responsibilities?
Answer:
Rise in consumer awareness, rules and regulations imposed by government, consumer associations, etc.

Question 22.
State full form of KVIC? What is its aim?
Answer:
Khadi and Village Industries Commission (KVIC); Its aim and preference is to provide employment especially in backward, areas by setting up business units in those area.

Question 23.
Define business risk.
Answer:
The risk of uncertain profit or loss in the business is termed as business risk.

Question 24.
State few causes of business risks.
Answer:
Change in technology, threat of substitute products, competition, uncertainty of demand, physical risk, etc.

Question 25.
How does change in technology becomes a business risk?
Answer:
When a new technology is invented, existing products may become obsolete. In such situation the businessman may lose the business if he does not adopt new technology.

Question 26.
How do substitute products threaten a business?
Answer:
When new products are developed that are better than existing or are cheaper and attractive for the customers than such substitutes threatens the existing products. For example when desi ghee seemed costlier, many people switched over to its substitute dalda ghee which is much cheaper.

Question 27.
How does uncertain demand poses risk for business?
Answer:
Due to uncertain demand a businessman may not be able to decide how much raw material he should buy, how much should he produce, how much stock he should maintain, etc. Under such situations he may incur loss due to unsold products.

Question 28.
When can a profession be converted into an employment?
Answer:
When a professional takes up a job under someone rather than practicing independently. For example, when a doctor works in a hospital for someone.

Question 29.
State two characteristics of profession.
Answer:
(a) A professional charges fee,
(b) The primary objective is to render service,
(c) It is compulsory to follow the code of conduct.

Question 30.
Who is an employee?
Answer:
A person who works under someone or in an organization as per the contract and gets a fix salary or wage at a decided time say every month he is called an employee.

Question 31.
Into how many categories can we classify business activities? Name them.
Answer:
Three;
(a) Trade,
(b) Commerce and
(c) Industry

Question 32.
State two characteristics of trade.
Answer:
(a) Trade is an economic activity,
(b) Exchange is the base of trade.

Question 33.
Define internal trade. State one example.
Answer:
The trade that takes place among different regions but within the boundaries of a country is called internal trade.
Example: A trader of Gujarat buying woolen sweaters from Punjab.

Question 34.
Into how many types can we divide internal trade? Name them.
Answer:
Two;

1. Retail trade and
2. wholesale trade.

Question 35.
Define international trade.
Answer:
Trade carried out for exchanging goods or services between two countries is called international trade. Thus, international trade crosses the boundaries of the country.

Question 36.
Define commerce.
Answer:
The combination of trade and auxiliary services is called commerce.

Question 37.
State few auxiliary services that are a part of commerce.
Answer:
Banking, warehousing, transport, communication, agents, etc. are auxiliary services.

Question 38.
State two characteristics of commerce.
Answer:
(a) Commerce is an economic activity,
(b) It includes auxiliary services such as transport, warehousing, communication, etc.

Question 39.
Define industry
Answer:
An economic activity in which raw materials are processed to add utility to the material and convert them into useful products which can satisfy human needs is called an industry.

Question 40.
State characteristics of industry.
Answer:
Production, economic activity, changing the form of raw material, producing various articles, adding utility, etc. are all characteristics of an industry.

Question 41.
Into how many types are industries classified? Name them.
Answer:
Three;
(a) Primary,
(b) Secondary and
(c) Tertiary.

Question 42.
Give two examples of primary industry. OR Define primary industry. Give two examples.
Answer:
Industries that mainly works on natural elements such as land, sea, air, etc. are called primary industries; Example – farming, fisheries, etc.

Question 43.
Define secondary industry. Give two examples.
Answer:
The industry that takes raw materials supplied by the primary industry and processes them into consumer goods is called secondary industry.; Example: Fertilizer industry, food processing ‘ industry, etc.]

Question 44.
Define tertiary industry. Give two examples.
Answer:
The industry that supports primary and secondary industries i.e. assists and provides services is called tertiary industry.; Example: Bakery, dairy, etc.

Question 45.
Define business administration.
Answer:
The process of managing a business or non-profit organization so that it remains stable and continues to grow is known as business administration.

Question 46.
Define organization.
Answer:
When an organized group of people worktogether with a specific common purpose than such a structure is called an organization.

Question 47.
Give two examples of employment.
Answer:

1. A school employing a teacher and
2. A factory owner employing engineers.

Long Answer Type Questions

Question 1.
Bring out key differences between economic activity and non-economic some benefit.
Answer:

• Economic gain has been the most important driving force for humans since ancient time.
• Money has been a prime motive for most of the development that takes place in the world.
• Under such conditions it requires a big heart and a feeling of compassion to forget economic gain and serve the society, humanity and country.
• Such feelings cannot be found in everyone.
• Hence, it is rightly said non-economic activity is not every one’s up of tea.

Question 2.
Define business and explain its meaning.
Answer:
Business:
An economic activity which is legal and is done with the motive of earning profit and creating and maximizing wealth is known as business.

Explanation:

• The term business is derived from the English word ‘busy’ which means to continuously remain occupied and active.
• The concept of business is associated with motive of earning profit and creating and maximizing wealth.
• This does not mean a businessman will always earn good profit. At times, he may earn very less profit or he may even incur loss.

Question 3.
List out the characteristics of business.
Answer:
Following are the important characteristics of business:

• Objective of profit,
• Exchange of goods and services,
• Risk and uncertainty,
• Creation of utility,
• Continuance of activity,
• Need of money,
• Economic activity.

Question 4.
Define creation of utility and classify its three forms.
Answer:
Creation of utility (OR creating utilities):
One of the major characteristics of a business is to create utility (i.e. usefulness) for a product or a service. This is called ‘creation of utility’.

A business can create utility in three ways:
1. Form utility:

• If a person changes the form (i.e. shape, size, etc.) of a commodity to make it sellable we say he has created ‘Form utility’.
• For example, making ice-cream from milk.

2. Place utility:

• When goods are carried from place of production to place of consumption i.e. to the customers, we say ‘Place utility’ is created.
• For example, when we transport food grains from farms to market yards/ consumers we say we have created ‘Place utility’.

3. Time utility:

• When a manufacturer produces goods and stores them when it is not the right time to use such goods and sells them at the right time we say he has created Time utility’.
• For example, selling umbrellas in monsoon is creation of time utility.

Question 5.
Give reason. OR Explain objective of profit as a characteristics of business.
Answer:
Objective of profit:

• Profit is the primary motive of business.
• Profit is necessary for the survival and continuity of the business.
• In absence of profit the business is quite likely to shut down.
• Moreover, how well is the business performing can be known by measuring the profits it earns.
  Profit is the barometer of business.

Question 6.
“Business cannot be done without exchange of goods or service.” Explain the statement with reference to characteristics of business.
Answer:
Exchange of goods and services:
Business is done by exchanging goods and services.

• This exchange then leads to profit.
• A manufacturer produces goods and sells them to buyers. In addition to selling the goods he also provides several after sales services such as installation, repair, return, etc. to his buyers.
• Apart from manufacturers there also exists seller of services i.e. service providers who sells the services and earn profit.
• For example, Samsung Company manufactures mobile phones and sells them to earn profit whereas Vodafone sells mobile services to customers and earns profit.
• Thus, business involves exchange of tangible (physical) goods and intangible services.

Question 7.
What is business risk? Explain risk and uncertainly related to business.
Answer:
Business risk:
The risk of uncertain profit or even loss that lies while doing business is called business risk.

Risk and uncertainty:

• There always lies risk of uncertainty in business.
• Risk can be either man-made or natural.
• Man-made risks include fire, accident in factory, strike of employees, riots, robbery, thefts, change in preferences of customers, decreased demand, changes in life-style, taste or habits, competition, changes in technology, etc.
• On the other hand natural risks could be earthquake, flood, tsunami, etc.
• A business may get badly affected, may make huge losses and may even get shut down due to such risks.

Question 8.
What is a continuance of activity? Explain with the help of an example.
Answer:
Continuance of activity:
The various activities, processes and financial transactions of a business should keep on going continuously. This is called continuance of activity. This means business is not a one-shot process.

For example, if a trader/producer constructs a building for his residence and later sells it and earns profit, if is not business. The reason is this is not a business activity because there is no continuity in it.

Question 9.
List out the various objectives of business.
Answer:
The objective of business can be classified in two parts. They are:
(A) Economic objectives:

• Objective of profit
• Maximization of wealth
• Other economic objectives

(B) Social objectives:

• Objective of social responsibility
• Objective to provide opportunity of employment
• Objective to provide quality goods and services
• Objective to adopt fair trade practices
• Other objectives

Question 10.
List out the objectives of business and explain any two social objectives in detail.
Answer:
An economic activity done with the motive of earning profit and creating and maximizing wealth is known as business.
Objectives of business can be classified in two parts. They are:
(A) Economic objectives
(B) Social objectives

(A) Economic objectives:
1. Objective of profit:

• Earning profit, is one of the key objectives of business.
• Earning profit is necessary for both survival and growth of business.
• Profit can be called the motivating force, barometer of efficiency and life blood of business.
• However in today’s time rather than just maximizing the profits the concept of fair (reasonable) profit is more accepted.
• It is highly essential for a business to focus on earning ‘fair profit’ i.e. a reasonable profit in order to survive and get acknowledged in the society.

2. Maximization of wealth:

• In shorter runs say at the end of year the objective of business can be annual income, i.e. net profit. However in longer run say about at the end of five years or so a businessman aims at creating wealth and maximize.
• In order to achieve the long term goals of wealth creation and maximization, the business should adopt a broader view and give up the sole focus of profit, especially in times of depression like situations in the market.

3. Other economic objectives:
Business also has other economic objectives like economic growth and development of business, market expansion, optimum utilization of resources, adopting modern technology and practices, etc. to boost the business.

(B) Social objectives of business:
Business exists due to existence of society. With this respect, a business needs to acknowledge the existence of society and try to fulfill certain social objectives other than pure objective of profit. These social objectives could be following fair trade practices, providing employment oportunities, providing quality goods and services, etc.

Some of the social objectives are:
1. Objective of social responsibility:

• Business is not an independent activity. It interacts with various groups/ classes of people of society associated with business directly or indirectly but with different interests. Business interacts with owners, employees, creditors, government, etc.
• It is quite important to take care of the interests of these different groups of society.
• To do so, business has abide by the laws to maintain the business environment, follow the Employee Welfare Act, Factory Act, Consumer Protection Act, etc.
• Factors like rise in consumer awareness, rules and restrictions imposed by state, consumer associations and increased education compel a business to fulfill these social responsibilities.

2. Objective to provide opportunity of employment.

• With increasing unemployment, some business units are established to create new opportunities of employment.
• For example, Khadi and Village Industries Commission (KVIC), a Government of India body encourage those industries that provide ‘ employment opportunities. KVIC gives preference to those business units that are established in backward/rural areas for providing employment to the unemployed.

3. Objective to provide quality goods and services:
Business aims at providing quality goods and services to people in order to satisfy their needs. For example, units that manufacture spices used for cooking food, food products, cold drinks, etc. need to maintain very high quality standards. Moreover, business units also need to provide quality services. For example, after sales service, installation assistance, setting up service centers, etc.

4. Objective to adopt fair trade practices:

• A business unit should see that it does not fall into practices that are against the well-being of society. For example, black marketing, hoarding, misleading advertisements, creating artificial scarcity, etc. are unfair practices and hence should be avoided.
• A businessman should adopt only fair trade practices in the welfare of customers and society.

5. Other objectives:

• To establish a specific identity in the society.
• Conduct research in production activities.
• Help in the economic development of nation and co-operate with the government.
• Provide various incentives to the employees and execute welfare schemes for them.

Question 11.
Write a short note on creation and maximization of wealth as an economic objective of business.
Answer:
Maximization of wealth:

• In shorter runs say at the end of year the objective of business can be annual income, i.e. net profit. However in longer run say about at the end of five years or so a businessman aims at creating wealth and maximize.
• In order to achieve the long term goals of wealth creation and maximization, the business should adopt a broader view and give up the sole focus of profit, especially in times of depression like situations in the market.

Question 12.
Explain the social objective of providing quality goods and services to customers.
Answer:
Objective to provide quality goods and services:
Business aims at providing quality goods and services to people in order to satisfy their needs.
For example, units that manufacture spices used for cooking food, food products, cold drinks, etc. need to maintain very high quality standards. Moreover, business units also need to provide quality services. For example, after sales service, installation assistance, setting up service centers, etc.

Question 13.
What do you mean by fair trade practice? Explain.
Answer:
A business unit that provides said quality and services, does not involve in black marketing or hoarding, does not mislead its customers with false advertisements, etc. is said to follow fair trade practice.

Objective to adopt fair trade practices:

• A business unit should see that it does not fall into practices that are against the well-being of society. For example, black marketing, hoarding, misleading advertisements, creating artificial scarcity, etc. are unfair practices and hence should be avoided.
• A businessman should adopt only fair trade practices in the welfare of customers and society.

Question 14.
The concept of ‘fair profit’ is what a business should focus on. Give reason.
Answer:
Profit is the lifeline and prime motive behind a business.

• Every businessman has the right to earn a profit. However, with an aim to earn high profits in this greedy world the businessman may tend to compromise on his product quality or service, take undue advantage of customer’s ignorance, or even charge unreasonably high from his customers. In other words, he runs towards profit maximization at any cost.
• Today, the customer is well-in formed, aware, literate, has other options for a product and protected by several laws.
• Under such circumstances aiming for very high profits can be very harmful in longer run.
• A businessman that aims at a fair or say reasonable profit can satisfy his customers and employees better, survive and slowly grow too.
• Hence, the concept of ‘fair profit’ is widely accepted.

Question 15.
A socially responsible business is the need of the hour. Give reason.
Answer:

• Business is not an independent activity. It interacts with various groups/ classes of people of society associated with business directly or indirectly but with different interests. Business interacts with owners, employees, creditors, government, etc.
• It is quite important to take care of the interests of these different groups of society.
• To do so business has to abide by the laws to maintain the business environment, follow the Employee Welfare Act, Factory Act, Consumer Protection Act, etc.
• Factors like rise in consumer awareness, rules and restrictions imposed by state, consumer associations and education compel a business to fulfill these social responsibilities.
• A business man that ignores these responsibilities may end up facing legal and financial problems and even lose his credibility.
• Hence, a socially responsible business is the need of the hour.

Question 16.
What do you mean by business risk? Explain briefly types of business risks.
Answer:
Business risk:
The risk of uncertain profit or even loss that lies while doing business is called business risk.
There always remains uncertainty of profit or even risk of incurring loss in the business. Thus, the uncertainties associated with business that may result into loss of profit and even loss of business is termed as business risk.

Types:
(A) Natural risks:

• Risk of loss that may occur due to fury of nature is called natural risk.
• Natural risks that may harm the business could be earthquake, flood, fire, etc.
• These factors may damage or destroy business assets like machinery, / furniture, stock, etc.
• These risks are natural and man or business has no control over them.

(B) Man-made risks:

• Risks that are generated due to man-made factors are called man-made business risks.
• These risks could be strike of employees, change in technology, change in preference and demand of customers, political factors in the state, competition in market, etc.

Question 17.
How changes in technology possess a threat to business?
Answer:

• In order to increase quality and productivity of product/services man continuously invents new methods of production.
• New methods of production may require changing existing machinery or addition of new equipments or machinery.
• For example, with invention of smart phones manufacturers were forced to stop producing old fashioned phones and set-up new machineries and technology to produce smart phones.
• Thus, business remains under threat of constantly moving with the new technologies that come up in market. Failing to do so is a serious threat to business.

Question 18.
Explain ‘threat of substitute products’ as a business risk.
Answer:
The threat of substitute products:

• Change in technology, reduced price, price rise customer preference, etc. may divert a customer to use other substitutes of a product available in market.
• For example, when ball pen was invented people started using it more compared to traditional ink pens.
• Other examples are steel vessels instead of copper, dalda ghee instead of desi ghee, etc.

Question 19.
How does competition poses business risk?
Answer:
Competition:

• When new competitors enter the market, they create threat for the existing businessman.
• To fight this competition and to maintain its position in the market the businessman may have to increase it expenses on marketing like advertisements, reduce sales price of its products, etc. As a result, the profit diminishes

Question 20.
Explain uncertainty of demand as a business risk.
Answer:
In market the demand of a product or service various continuously.

Uncertainty of demands:
The demand for a product may change due to several factors. Factors like changes in customer’s income, taste, product price, inflation, fashion, etc. can lead to changes in demand as well. Uncertain demand poses risks of diminished profit or even loss in the business.

Question 21.
Explain the meaning of employment and state its characteristics.
Answer:
Meaning:

• An economic activity done under an individual or an organization in return for a fixed salary or wage is called an employment. In employment, the work is assigned as per the contract signed.
• For example a teacher working in a school, a mechanic working in someone’s garage, an engineer working in a factory, etc.
• The person or organization that gives job or say employment is called employer and the person who does the job is called employer. Thus, teacher is an employee and school is employer. The school has given employment (job) to the teacher to teach in the school.

Characteristics:

• The employer gets a fix salary at fixed intervals in return of physical or mental labour he provides. For example, a brick layer gets a salary at the end of month to lay the bricks. This is an example physical labour. A teacher teaching the students in a school is providing mental labour and is paid salary every month.
• In employment, the employee may get certain additional benefits such as medical allowances, conveyance, bonus, pension, etc.
• In employment, the employer performs the work assigned by his/her employer as per the contract signed between the two.
• The employer pre-determines the qualification needed for the job, skills, working hour, retirement benefits, etc. for the employee.
• Employment is a dependent activity i.e. employee is dependent on employer for his earnings.
• Both employer and employee are bound to follow rules as per the contract.
• Unlike business, the employee need not make any capital investment.

Question 22.
Explain the meaning of trade and state its characteristics.
Trade:
Trade refers to the exchange of commodities or services from one person to another in exchange of other commodities or services or money. The objective of trade is either to gain some benefits or earn a profit.

Example:

• When you buy a book from a shopkeeper i.e. a commodity and pay money it means trade has occurred between you and the shopkeeper.
• Similarly when you buy a bus ticket and travel by bus it means you exchanged money for travelling service and hence you have traded.

Characteristics:

• Trade is an economic activity.
• There are two parties in a trade, the buyer and the seller.
• Exchange is the base of trade. Thus, if nothing is exchanged it cannot be called trade.
• The ownership of a good/service is transferred from one party to another.
• To complete the exchange process, either money is paid or some goods/ services are to be provided.
• Trade is a continuous activity.
• The value of goods/services is determined in terms of money.
• Trade is a legal activity.

Question 23.
Which are the different types of trade? Name them and explain.
Answer:
There are two types of trade. They are:
(A) Internal trade,
(B) International trade

(A) Internal trade:
The trade that takes place among different regions but within the boundaries of a country is called internal trade.
Example:

• A trader of Gujarat buying woollen sweaters from Punjab.
• A kite maker of Surat selling his kites to a trader in Baroda.

From the perspective of distribution, internal trade can be divided into.

1. Wholesale trade and
2. Retail trade.

1. Wholesale trade:

• In wholesale trade a wholesaler purchases the goods in wholesale i.e. a very large quantity from the producer and sells it to various retailers as per their requirement.
• For example, a wholesaler may buy 500 electric fans from a manufacturing company and sell it to various retailers in quantities like 5, 7, 10, 50, etc. as per retailer’s need.
• Wholesaler serves as a link between producer and retailer.

2. Retail trade:
In retail trade, retailer purchases goods from wholeseller and sells the goods to the customers as per their need.

(B) International trade:

• Trade carried out for exchanging the goods or services between two countries is called international trade. Thus, international trade crosses boundaries of the country.
• For example, a Japanese company selling its televisions to India. An Indian trader selling its Kesar mango to an African trader.
• International trade consists of:
  (a) Import trade,
  (b) Export trade and
  (c) Re-export trade.

Question 24.
Explain briefly internal trade.
Answer:
Internal trade:
The trade that takes place among different regions but within the boundaries of a country is called internal trade.
Example:

• A trader of Gujarat buying woollen sweaters from Punjab.
• A kite maker of Surat selling his kites to a trader in Baroda.

From the perspective of distribution, internal trade can be divided into.

1. Wholesale trade and
2. Retail trade.

1. Wholesale trade:

• In wholesale trade a wholesaler purchases the goods in wholesale i.e. a very large quantity from the producer and sells it to various retailers as per their requirement.
• For example, a wholesaler may buy 500 electric fans from a manufacturing company and sell it to various retailers in quantities like 5, 7, 10, 50, etc. as per retailer’s need.
• Wholesaler serves as a link between producer and retailer.

2. Retail trade:
In retail trade, retailer purchases goods from wholeseller and sells the goods to the customers as per their need.

Question 25.
Explain briefly international (foreign) trade.
Answer:
International trade:

• Trade carried out for exchanging the goods or services between two countries is called international trade. Thus, international trade crosses boundaries of the country.
• For example, a Japanese company selling its televisions to India. An Indian trader selling its Kesar mango to an African trader.
• International trade consists of
  (a) Import trade,
  (b) Export trade and
  (c) Re-export trade.

Question 26.
Explain the meaning of commerce and state its characteristics.
Answer:
Commerce:

• Commerce can be termed as a combination of trade and auxiliary services that help trade.
• Trading is not always an independent activity. A trader may need various services such as banking, insurance, transportation, communication, warehousing, commission agents, etc. All these services are called auxiliary services.
• When a trader starts making use of auxiliary services we can say he has risen above trading and has entered into commerce.

Characteristics of Commerce:

• Trade is a part of commerce. In other words commerce is a super set.
• Commerce is an economic activity.
• Commerce includes auxiliary services such as banking, insurance, transport, etc. that help to trade.
• Commerce increases time and place utility of goods.
• Auxiliary services are demand oriented yet continuous in nature.
• If auxiliary services are available at reasonable prices, goods can be supplied to customers at fair price.

Question 27.
State the meaning of an industry and explain its characteristics.
Answer:
Industry:

• An economic activity in which raw materials are processed to add utility to the material and convert them into useful products which can satisfy human needs is called an industry.
• For example, when a textile industry owner process cotton and converts it into a product say a shirt he is adding utility to the raw material i.e. cotton, and satisfying the need of humans to wear a shirt.
• Other examples are manufacturer manufacturing furniture from wood, a shoe company that makes shoes from leather, etc.

Characteristics of industry:

• Production, economic activity, changing the form of raw material, producing various articles, adding utility, etc. are ail characteristics of an industry.
• Moreover, use of human labour, natural wealth and machineries are also included in characteristics of an industry.

Question 28.
Classify the industries in various types.
Answer:
Industries can be classified as follows:
(A) Primary industry:

• Industries that mainly work on natural elements such as land, sea, air, etc. are called primary industries.
• These industries process various elements of nature and produce useful things.
• For example agriculture, animal husbandry, etc. are based on land, fishing industry is based on sea.
• Primary industries are also called fundamental industries.

(B) Secondary industry:

• The industry that takes raw materials supplied by the primary industry and processes them into consumer goods is called secondary industry.
• For example a textile industry uses cotton as raw material obtained from forming i.e. primary industry and so textile industry is an example of secondary industry.
• Other examples are fertilizer industry, food processing industries, automobile industry, etc.

(C) Tertiary industry:

• The industry that supports primary and secondary industries i.e. assists and provides services is called tertiary industry.
• In this sense we can say that the products obtained from the primary and secondary industries are further made more consumable for a variety of customers.
• For example, growing wheat is a primary industry, converting wheat into flour is a secondary industry. A baker that uses the flour to make bread, biscuits, etc. and sells it to customer is an example of tertiary industry.
• Tertiary industry serves directly to a very large number of consumers and so is quite near to the end-consumers or say end-users.
• Dairy industry, beverage industry, bakeries, etc. are all tertiary industries. Tertiary industry also includes services of banking, insurance, transportation warehousing, agents, communication, etc.

Question 29.
Explain briefly primary industry.
Answer:
Primary industry:

• Industries that mainly work on natural elements such as land, sea, air, etc. are called primary industries.
• These industries process various elements of nature and produce useful things.
• For example agriculture, animal husbandry, etc. are based on land, fishing industry is based on sea.
• Primary industries are also called fundamental industries.

Question 30.
Explain briefly secondaiy industry.
Answer:
Secondary industry:

• The industry that takes raw materials supplied by the primary industry and processes them into consumer goods is called secondary industry.
• For example a textile industry uses cotton as raw material obtained from forming i.e. primary industry and so textile industry is an example of secondary industry.
• Other examples are fertilizer industry, food processing industries, automobile industry, etc.

Question 31.
Explain briefly tertiary industry.
Answer:
Tertiary industry:

• The industry that supports primary and secondary industries i.e. assists and provides services is called tertiary industry.
• In this sense we can say that the products obtained from the primary and secondary industries are further made more consumable for a variety of customers.
• For example, growing wheat is a primary industry, converting wheat into flour is a secondary industry. A baker that uses the flour to make bread, biscuits, etc. and sells it to customer is an example of tertiary industry.
• Tertiary industry serves directly to a very large number of consumers and so is quite near to the end-consumers or say end-users.
• Dairy industry, beverage industry, bakeries, etc. are all tertiary industries. Tertiary industry also includes services of banking, insurance, transportation warehousing, agents, communication, etc.

Question 32.
Business is a riskier affair compared to employment (job). Give reason.
OR
A chicken-hearted person should opt for a job than business. Give reason.
Answer:

• To do business a businessman has to do several things and overcome several challenges.
• He needs to invest capital, set up a shop or an office or a factory, purchase raw material, machinery, etc. and market his product or service to sell them and finally earn a profit.
• Over and above these things, there always lie several man-made and natural risks that a business may face. Risks such fire, accident, theft, robbery, riots, flood, earth quake, etc. may diminish profits or even destroy the business completely.
• On the other hand a person who is employed need not face any such problems or risks. He does his work and earns a fix salary at the end of the month. Employment provides a much higher safety and a peace of mind as compared to business.
• Hence it is said business is a riskier affair.

Multiple Choice Questions

Question 1.
Into how many types can you classify an activity?
(A) 2
(B) 3
(C) 4
(D) 6
Answer:
(A) 2

Question 2.
Which of the following is an economic activity?
(A) A doctor treating his son
(B) A farmer producing food grains for his family
(C) A fruit vendor
(D) A temple priest serving the temple and surviving on the voluntary donations of the devotes
Answer:
(C) A fruit vendor

Question 3.
A person is said to be doing an economic activity if he
(A) Exchanges goods or services
(B) Satisfies the needs of others for some economic benefit
(C) Sells something
(D) All of these
Answer:
(D) All of these

Question 4.
_________ lies at the centre of modern world.
(A) Economic activity
(B) Trade
(C) Commerce
(D) Business and employment
Answer:
(A) Economic activity

Question 5.
Which of the following is/are the objective(s) of non-economic activity?
(A) Monetary gain
(B) Economic returns
(C) Both (A) and (B)
(D) None of these
Answer:
(D) None of these

Question 6.
Select the odd one out with respect to economic activity.
(A) Farmer
(B) Nurse
(C) Father
(D) Teacher
Answer:
(C) Father

Question 7.
You can divide an economic activity in _________ parts.
(A) 2
(B) 3
(C) 4
(D) 6
Answer:
(B) 3

Question 8.
Business is done with the motive of _________
(A) Service to people
(B) Earning profit
(C) Creating wealth
(D) Both B and C
Answer:
(D) Both B and C

Question 9.
_________is the life line of business.
(A) Capital
(B) Profit
(C) Creating wealth
(D) Creating utility
Answer:
(B) Profit

Question 10.
_________can be considered the barometer of business.
(A) Competition
(B) Continuity of business
(C) Capital
(D) Profit
Answer:
(D) Profit

Question 11.
Which of the following factors does not adversely affect the business?
(A) Strikes
(B) Riots
(C) Public holidays
(D) Accidents
Answer:
(C) Public holidays

Question 12.
Selling sunglasses in summer is an example of _________ utility.
(A) Time
(B) Form
(C) Place
(D) Material
Answer:
(A) Time

Question 13.
A wooden furniture maker makes a chair and creates _________ utility.
(A) Time
(B) Form
(C) Place
(D) Space
Answer:
(B) Form

Question 14.
Transport of food grains from farms to market yards is a creation of _________ utility.
(A) Place
(B) Space
(C) Time
(D) Form
Answer:
(A) Place

Question 15.
Which of the following is not a business objective?
(A) Social
(B) Economic
(C) Cultural
(D) Both A and C
Answer:
(C) Cultural

Question 16.
Into how many parts can we classify business objectives?
(A) 2
(B) 4
(C) 6
(D) 7
Answer:
(A) 2

Question 17.
Business can be acknowledge by society and can survive in competition only if it focuses on _________
(A) Profit maximization
(B) Fair profit
(C) Wealth creation
(D) All of these
Answer:
(B) Fair profit

Question 18.
In KVIC, the letter ‘C’ stands for _________
(A) Commission
(B) Company
(C) Corporation
(D) Co-operative
Answer:
(A) Commission

Question 19.
KVIC gives preference to establish business units _________
(A) For corporates
(B) In metro states
(C) For woman
(D) In backward areas
Answer:
(D) In backward areas

Question 20.
Which of the following industry needs to follow quality regulations very strictly?
(A) Steel
(B) Furniture
(C) Dairy
(D) Ceramic
Answer:
(C) Dairy

Question 21.
Which of the following is not an unfair business practice?
(A) Hoarding
(B) Artificial scarcity
(C) Advertising with Bollywood stars
(D) Black marketing
Answer:
(C) Advertising with Bollywood stars

Question 22.
Into how many types can you classify business risks?
(A) 2
(B) 3
(C) 4
(D) 5
Answer:
(A) 2

Question 23.
Which of the following is a man-made risk?
(A) Change in technology
(B) Political instability
(C) Change in preference
(D) All of these
Answer:
(D) All of these

Question 24.
Increased use of smart phones over traditional phones can primarily be attributed as _________cause of business risk.
(A) Threat of substitute product
(B) Uncertainty of demand
(C) Changes in technology
(D) Consumer preference
Answer:
(C) Changes in technology

Question 25.
Which of the following person compulsorily needs to be a member of the governing body?
(A) Businessman
(B) Employee
(C) Professional
(D) All of these
Answer:
(C) Professional

Question 26.
Which of the following person needs to obey the established code of conduct of the association?
(A) Businessman
(B) Professional
(C) Employee
(D) All of these
Answer:
(B) Professional

Question 27.
Who among the following will earn out of fees?
(A) Grocery store owner
(B) A school teacher
(C) A person serving in a company
(D) Charted accountant
Answer:
(D) Charted accountant

Question 28.
The primary objective of a professional is to
(A) Render service
(B) Serve the company
(C) Earn profit
(D) Both A and C
Answer:
(A) Render service

Question 29.
Who out of the following cannot work unless he has obtained specialized education?
(A) Businessman
(B) Professional
(C) Employee
(D) All of these
Answer:
(B) Professional

Question 30.
Who gets a bonus?
(A) A businessman
(B) An employee
(C) An independent professional
(D) Both B and C
Answer:
(B) An employee

Question 31.
Whose working hours are pre-determined?
(A) An employee
(B) A businessman
(C) A professional
(D) Both A and B
Answer:
(A) An employee

Question 32.
When a cafe serves you a coffee, he has
(A) Rendered service
(B) Exchanged service
(C) Traded
(D) Entered into commerce
Answer:
(C) Traded

Question 33.
_________ is essential in trade.
(A) Service
(B) Exchange
(C) Production
(D) Code of conduct
Answer:
(B) Exchange

Question 34.
How many types of trades are there?
(A) 2
(B) 3
(C) 4
(D) 5
Answer:
(A) 2

Question 35.
Internal trade can take place
(A) Between US and France
(B) Between Ahmedabad and Surat
(C) Between Madhya Pradesh and Rajasthan
(D) Both (B) and (C)
Answer:
(D) Both (B) and (C)

Question 36.
With respect to distribution, into how many parts can you classify trade?
(A) 2
(B) 3
(C) 4
(D) 6
Answer:
(A) 2

Question 37.
Who serves as a link between producer and retailer?
(A) Commission agent
(B) Marketer
(C) Retailer
(D) Wholesaler
Answer:
(D) Wholesaler

Question 38.
Which trade is not a part of international trade?
(A) Import trade
(B) Export trade
(C) Re-export trade
(D) None of these
Answer:
(D) None of these

Question 39.
Trade and auxiliary services to trade means
(A) Retail trade
(B) Commerce
(C) Wholesale trade
(D) Business
Answer:
(B) Commerce

Question 40.
Which of the following is not included in commerce?
(A) Retail trade
(B) Communication
(C) Warehousing
(D) Production
Answer:
(D) Production

Question 41.
Into how many types can you classify an industry?
(A) 2
(B) 3
(C) 4
(D) 5
Answer:
(B) 3

Question 42.
Which of the following industries is not connected directly with sea, land and air?
(A) Secondary
(B) Primary
(C) Tertiary
(D) Both A and C
Answer:
(D) Both A and C

Question 43.
Which of the following industry is closely associated with and customers?
(A) Primary
(B) Tertiary
(C) Secondary
(D) All of these
Answer:
(B) Tertiary

Question 44.
Which of the following is secondary industry?
(A) Producing honey
(B) Iron extracting
(C) Bakery
(D) Colour and chemicals
Answer:
(D) Colour and chemicals