Chapter 1- Characteristics of Business

April 18, 2020

Good morning boys! I hope you all have understood till now the history of commerce in India and types of economic activities. If you have any doubt, please ask questions through the comments section of this blog alongwith your attendance.

Today's topic is features or characteristics of business.

Learning outcomes for today is at the end of the topic, students will be able to explain and identify the features of business.

Q.6 Explain the characteristics or features of Business. (6)
Ans-1) Business is an economic activity-
 a) Business is an economic activity because it is undertaken to earn money for livelihood and not for any sentimental reasons
b) It satisfies human needs by supplying goods and services for mutual profit. For example - Selling of goods by a  shopkeeper for a value.
2) Production or Procurement of Goods and Services-
a) Business supplies goods to meet the human needs by either manufacturing goods or procuring the consumer goods.
b) For example-  Buying toys from a manufacturer and selling toys in the market, Manufacturing televisions with a purpose to sell, etc.
3) Sale or exchange of Goods and Services- a) Business involves transfer or exchange of goods and services between a seller and a buyer for a value.
b)Goods purchased for personal consumption cannot be called as a business activity .
b) For example- Gift when selected by a person from a shop to be  presented to his daughter is not a business activity since there is no exchange for monetary value.
4) Dealing in goods and services on a regular basis-
a) Business should be undertaken on a regular basis. One single transaction does not constitute business.
b) For example- A car dealer buys and sells on a regular basis. An old car sold for cash or exchanged for purchase of new car is not a business activity
5) Profit Motive-  a) It is one of the main objectives of a business activity. It is the  yardstick to measure the success of a business .
b)Therefore , businessmen makes all possible profits to maximise profits, by increasing sales or  reducing costs.
6) Uncertainty of Return-
a) Earning of profit is uncertain as it depends upon demand of the product and other market conditions.
b)There is a possibility of losses in the event of adverse business conditions.
7) Element of Risk-
a) Business is always associated with risk due to uncertainty of profits.
b) It depends upon consumers taste and preferences ,changes in fashion, competition ,risk of fire , theft, strikes,etc..Risks can be reduced through insurance but can never be eliminated.

Kindly watch the video given below for better understanding of the topic.

Answer the following questions:

Q.1 Name two trading communities of ancient India. (1)
Q.2 State the main characteristics of indigenous banking.(1)
Q.3 State the main factor which distinguishes an economic from non economic activity.(1)
Q.4 Why is business considered as an economic activity?(1)
Q.5 A housewife exchanges old clothes for utensils on regular basis. Is it a business activity? Why? (1)