Maeer’s

M. I.T. Junior College

Paud Road, Kothrud, Pune - 38.
Chapter.1 Introduction of Commerce and Business
Exercise

Q.1 A) Select the correct option and rewrite the sentence.

1) A Lawyer is........
a) a Professional person b) a Businessman c) an employee
Ans: a) a Professional person
2) Raw material is converted into finished product by .......... industry.
a) genetic b) extractive c) manufacturing
Ans:c) manufacturing
3) Actual buying and selling of goods is known as..........
a) profession b) trade c) industry
Ans: b) trade
4) National level code of conduct is prepared for...............
a) professionals b) businessmen c) employees
Ans: a) professionals
5) Construction of dams is an activity done under ............ industry.
a) primary b) secondary c) tertiary
Ans:b) secondary
6) The problem of distance is solved by..........
7) a) bank b) transport c) warehousing
Ans: b) transport
8) Commerce is a branch of............
a) business b) industry c) trade
Ans: a) business
9) Monetary Returns in business is called.........
a) fees b) salary c) profit
Ans: c) profit
10) A business unit depends upon ............for selling its output.
11) a) industry b) society c) employees
Ans: b) society
12) Warehousing creates.......... utility in goods.
a) place b) time c) form
Ans: b) time
B) Match the pairs.
Group ‘A’ Group ‘B’
A) Helping disabled person 1) Social objective
B) Genetic Industry 2) Foreign Trade
C) Local currency 3) Sericulture
D) Solve social problems 4) Non-economic activity
5) Internal Trade
6) Mining
7) Profit
8) Economic activity
Ans:
A) Non-economic activity
B) Sericulture
C) Internal trade
D) Social objective

E) Give one word / phrase / term for the following sentences.

1) A regular activity concerned with production and distribution of
goods and services for profits.
Ans:Business activity
2) Human activities that are conducted for earning money.
Ans:Economic activities
3) Buying and selling of goods against money or money’s worth.
Ans:Trade
4) Activities that remove all the difficulties in trade.
Ans: Auxiliaries to trade
5) The type of industries that creates immovable wealth.
Ans: Construction Industry
6) Name the business activity which is concerned with production of
goods and services.
Ans: Industry
7) Name the business activity which is concerned with distribution of
goods and services.
Ans: Commerce
8) The activity which provides mobility to men and material.
Ans: Transport
9) An aid to trade which creates time utility.
Ans:Warehousing
10) An occupation by which a person agrees to provide expert services
for a fees.
Ans: Profession

F) State True or False.

1) Business is an economic activity.
Ans: True
2) Every profession is practiced for earning money.
Ans: True
3) Primary industries are concerned with nature.
Ans: True
4) Trade includes commerce.
Ans: False
5) Warehousing removes difficulty of time.
Ans: True
6) Trade includes buying and selling of goods and services.
Ans: True
7) Profit leads to increase in overall efficiency of the organization.
Ans: True
8) Plant nursery is an example of extractive industry.
Ans: False
9) Industry creates form utility.
Ans: True
10) Retailer is the link between manufacturer and wholesalers.
Ans: False

G) Find the odd one

1) Agricultural Industry, Extractive Industry, Genetic Industry,
Manufacturing Industry.
Ans: Manufacturing Industry
2) Import Trade, Export Trade, Wholesale Trade, Entrepot Trade.
Ans: Wholesale Trade
3) Banking, Insurance, Transport, Manufacturing.
Ans: Manufacturing
4) Tea, Milk, Coffee, Machinery.
Ans: Machinery

H) Complete the sentences.

1) Economic activities are those activities which are conducted
to............ .
Ans: Economic activities are those activities which are conducted to
earn money .
2) ............ includes marketing of goods and services.
Ans: Commerce includes marketing of goods and services.
3) Business is an ............ activity.
Ans:Business is an economic activity.
The basic purpose of ............ is to earn profit.
Ans: The basic purpose of business is to earn profit.
4) Professionals, charge ............ in exchange of expert services.
Ans: Professionals, charge fees in exchange of expert services.
5) ............ is the person who offers the work.
Ans: Employer is the person who offers the work.
6) ............ is considered as a reward for assuming several business risks.
Ans: Profit is considered as a reward for assuming several business
risks.
6) Industry creates ............ utility.
Ans:Industry creates form utility.
7) In ............ trade, goods are purchased and sold in bulk.
Ans:In wholesale trade, goods are purchased and sold in bulk.
8) ............ is the link between wholesaler and customer.
Ans: Retailer is the link between wholesaler and customer.

I) Complete the following table.

Group ’A’ Group ’A’

1. Trade between different ….…………………………
countries
2. Purchases of goods and ….…………………………….
services from another
country.
3. ….………………………. Selling of goods and services to
foreign customer
4. ….………………………. Link between producer and
retailer

(Export trade, External trade, Wholesaler, Import Trade)

Ans:
Group ’A’ Group ’A’
1. Trade between different External trade
countries
2. Purchases of goods and Import Trade
services from another
country.
3. Export trade Selling of goods and
Services to foreign customer
4. Wholesaler Link between producer
And retailer

J) Answer in one sentence.

1) What is an Economic Activity?
Ans: Activity done for earning money is an economic activity.The
activities which are done in order to earn reward in terms of
money are termed as Economic Activities. These are the result of
the wide gap between the unlimited human wants. For e.g. a
working worker, a doctor, a shopkeeper selling goods.

2) What is Non-economic Activity?

Ans: The activities which are carries out for love, affection, and
sympathy are termed as Non-Economic Activities. They are not
done in order to gain reward. For e.g. A mother nursing her sick
child, helping a poor to cross a road.

3) What do you mean by Wholesale Trade?

Ans:Trade conducted on large scale is wholesale trade.

4) What is the meaning of Retail Trade?

Ans: Trade conducted on small scale is wholesale trade.

5) What do you mean by Import Trade?

Ans: When goods and services are bought from other countries,to home
country it is called import trade.

6) What is the meaning of Export Trade?

Ans: When goods and services are sold to other countries, from home
country it is called export trade.

7) What is an Entrepot Trade?

Ans: When goods and services are bought from one country and sold to
other countries, it is called entrepot trade.

8) What is meant by Auxiliaries to Trade?

Ans:Auxiliaries to Trade are the services which help the smooth
conduct of trade.
9) What is Trade?
Ans: Trade is buying and selling of goods and services.

10) What do you mean by Commerce?

Ans: Commerce is a part of business activity which is concerned with
the distribution of goods ans services.

11) What is Primary Industry?

Ans: Industry which depends upon nature for production is called
primary industry.

12) What is Secondary Industry?

Ans: Industry which depends upon primary industry for production is
called secondary industry.

13) What do you mean by Genetic Industry?

Ans: Genetic industry means the industry engaged in reproduction and
multiplication of plants, animals etc.

K) Correct the underlined word and rewrite the sentence.

1) Business is non-economic activity.
Ans:Business is economic activity.
2) Barter exchange is an exchange with money.
Ans:Barter exchange is an exchange with goods.
3) Profession can be transferred to other person.
Ans:Profession cannot be transferred to other person.
4) Capital is required for employment.
Ans: Capital is required for business.
5) Industry creates place utility.
 Ans:Transport creates place utility
6) Commerce represents supply side of market.
Ans:Industry represents supply side of market.
7) The basic purpose of business is to provide services.
Ans:The basic purpose of business is to make profit.
Q.2 Explain the following terms/concepts.
1) Business
Ans:
 It is one of the economic activities.
 Business is regular production and distribution of goods and services
with the objective of earning profit and acquiring wealth and satisfying
human wants.
 Therefore, business is regular production and distribution of goods and
services.

2) Profession
Ans:
 A person practicing a profession is called as professionals.
Professionals has to acquire certain knowledge, formal education
and training.
 It is an economic activity which involve giving a specialized
service of an expert.
 They take fees for their service.
 The persons giving such services are called professional for e.g.
Lawyer, Doctor, Chartered Accountant, Actor, Actress, Producer,
Dancer, Singer, Photographer, Editor etc.

3) Employment
Ans:
 When a person agrees to work for someone, he is said to be an
employed person or in employment.
 The person employed is called employee and the one who
employees is called the employer.
 The payment to an employee for his service is called his salary or
wages.

4) Home Trade
Ans:
 It is related to buying and selling of goods within the country.
 In this the goods donor cross the national boundaries of a country.
For e.g. trade between pune and madras etc.
 Internal trade is divided into two types--
A. Wholesale trade
B. Retail trade

5) Foreign Trade
Ans:
 Foreign trade is carried between different countries of the world.
For e.g. trade between India and U.S.A. under this trade the goods
cross national boundaries.
 Foreign trade is divided into three types--
A.Import trade:
B.Export trade
C.Entrepot trade

6) Economic Activity
Ans:
 The activities which are done in order to earn reward in terms of
money are termed as Economic Activities.
 These are the result of the wide gap between the unlimited human
wants.
 For e.g. a working worker, a doctor, a shopkeeper selling goods.
 The Economic Activities are classified into three types which are
as follows-
A. Business
B. Profession
C. Employment

7) Non-economic Activity
Ans:
 The activities which are carries out for love, affection, and
sympathy are termed as Non-Economic Activities.
 They are not done in order to gain reward.
 For e.g. A mother nursing her sick child, helping a poor to cross a
road.

Q.3 Study the following case/situation and express your opinion.

1) Jaysukh oil mills produce refined oil. The entire production is
purchased by Rupesh oil Depot, who in turn sells it to various
retailers. Mrs. Prachi purchased 2 kg oil from Balaji Groceries.
Identify:
i) Wholesaler
Ans:Rupesh Oil Depot
ii) Retailer
Ans: Balaji Groceries
iii) Consumer
Ans: Prachi

2) Mr. Pranav is a tin manufacturer in India. Mr. Jack of England

sells goods to M/s. Frank Corporation in North America and Mr.
Williams of USA buys various goods from Brazil.
i) Who is importer?
Ans: M/s Frank Corporation in North America, Mr. Williams in USA
ii) Who is manufacturer?
Ans:Mr. Pranav
iii) Who is exporter?
Ans: Mr. Jack

Q.4 Distinguish between.

1) Industry and Commerce
Give comparative analysis of business, profession and employment.
Refer textbook

Q.5 Answer in brief.

1) State any four features of profession
Ans: Following are the features of profession---------
1.Qualification:
Every profession has its own defined body of knowledge.
This knowledge has to be acquired by systematic and formal
training. For e.g. MBBS is required to be a doctor.
2.Motive:
Every profession is practiced for earning money. However,
service motive is also equally important.
3.Monetary returns:
Professionals get fees as monetary returns or income.
4.Capital:
 A self-employed or practicing professional requires capital for
setting up his practice for e.g. fees is required to be a C.A.
5.Requirement of Registration:
Every professional with specified education and training
has to register himself with his respective council and get certificate
of practice for e.g. Institute of Chartered Accountants of India.
6.Non transfer ability:
Profession cannot be transferred to other person at the will
of professional because, it requires certain educational training and
skill.
7.Nature of work:
It involves rendering of expert services on the basis of
formal education and training in exchange of fees for e.g. a
professional interior designers design a house/bungalow and accepts
money.
2) State any two types of industries or
State any two types of primary industry.
Ans: Following are the types of Industry -------------
(A)Primary Industry:
The industry which takes the help of nature or natural
resources for the further production of goods are called primary
industry. Following are the types of primary industries--
1.Agriculture industry:
It refers to farming and cultivation of land. Majority
agricultural products are further processed before consumption.
2.Extractive Industry:
This industry is concerned with extraction or drawing out
goods from soil, air or water or from beneath the surface of the earth
for e.g. mining, coal, mineral, oil industry, iron ore, fishing etc.
3.Genetic Industry:
This industry is concerned with reproduction of plants, birds,
animals etc. For e.g. nursery, poultry farm, animal husbandry,
horticulture etc.
(B)Secondary Industries:
Secondary industries depend on primary industry for raw
material. Those industries which are converted raw material into
finished goods are known as secondary industries. Following are the
secondary industries--
1. Manufacturing industry:
 These industries are concerned with raw material
which are the finished or final goods of the primary industry. It is
converted raw material in finished goods for e.g. cotton into cloths,
sugarcane into sugar etc.
2. Construction Industry:
These industries are concerned with activities such as
buildings, roads, bridge, dams etc. It is the only industry which
creates immovable wealth. For e.g. adarsh complex etc.
(C) Tertiary industries:
Tertiary industries depend on primary and secondary
industries. These can flourish only if primary and secondary
industries are doing well in the economy. These type of industries
provide services for e.g. transport, banking, insurance etc.

3) Give two types of Foreign Trade

OR
What is the meaning of export trade?
Ans: Foreign trade is carried between different countries of the world.
For e.g. trade between India and U.S.A. under this trade the goods cross
national boundaries.
Foreign trade is divided into three types--
A.Import trade:
Import trade means purchasing goods from another country
and bringing them inside our country. For e.g. India buying goods
from U.S.A.
B. Export trade:
Export trader means selling of goods of home country to other
country for e.g. India selling goods to U.S.A.
C.Entrepot trade:
It is the type of trade in which the goods are imported from
one country and are exported after some value addition or
reprocessing of the goods to some other country. For e.g. India
imported goods from Japan and after reprocessing it selling to
Shrilanka.

4) State any four Auxiliaries to Trade.

OR
What are the different types of secondary industries?
Ans: Aids to trade means the services provided for the smooth
functioning of trade. it is an important function of commerce. It is a
specialized agency which helps in removing difficulties of trade.
Following are the different auxiliaries to trade ----------
1.Transport:
The producer and consumer are at two different places where
“Difficulty of place” arises. The difficulty of place is removes with
the help of transport.
Goods are produced at one place and they are required at
different places for e.g. wheat is grown in Punjab but its
consumption is more or less throughout the country. Therefore,
wheat has to be transported from Punjab to various places of
consumption which is done with the help of transport.
The geographical distance between producer and consumers is
removes with the help of transport. The main aim of transport is the
movement of goods from the place of production to the place of
consumption. Transportation creates place and time utility.
2.Warehousing:
Warehouses solve the problem of time goods are produced on
large scale in anticipation of demand so goods are required to be
stored in warehouse, till they are required in the market.
Also the production of some goods are seasonable, while the
demand for them is regular and some commodities are produced
throughout the year but are consumed seasonally. These goods are
required to be stores so that their regular and smooth supply is
maintained in the market.
Therefore, warehouses facilities are provided for the safety of
goods. It also regulates the market supply of goods from time to
time, according to the change in the market demand and to bring
price stability. In short warehousing creates time utility.
3.Insurance:
Risk always exist in the business. All business trading
operations cover risks and uncertainty. Businessman are not willing
to bear the risk.
Therefore, they take out insurance policies to complete against
the possible risks functioning of trade and commerce.
Insurance solves the difficulty of risk by assuring the trader to
compensate the loss suffered by him. The trader has to insure his
goods and should pay the premium.
4.Banking:
Successful business operations require continuous flow of
money. A trader may not be able to invest huge capital from his
savings and thus to face the “Difficulty of Finance. Banking solves
the difficulties arising business mainly financial difficulties.
Bank provides like cheque, demand draft, loan, ATM Card,
Credit Card etc. So that money can be sent from one place to
another place very safely through banks. It also allows traders to
open different types of accounts as per their requirement.
5.Advertising:
Modern markets are highly competitive, so nothing can be
sold without advertising. The “Difficulty of communication,
knowledge” is solved by advertising.
It encourages customer to buy goods. Advertising is a through
various media like television, films, newspapers, magazines etc.
6.Mercantile Agents:
There is middleman in the process of distribution. In the
modern world, the direct control between the buyer and seller is
very difficult.
So market requires efficient organizations and expert traders.
This mercantile agent is appointed by traders for buying and selling
of goods. They are specialized workers in their works. There are
different types of agents such as brokers, factors, commission
agents, auctioneer, consigners etc.
7.Communication:
Communication means an exchange of message or giving
information orally or in written. Modern means of communication
are like phone, fax, internet etc. So people can communicate quickly
and easily over long distance.
The “Difficulty of distance” is solved by various means of
communication. Communication saves their time and money.

5) State any four features of employment

Ans: Following are the features of Employment ------
1.Qualification:
 Generally, for every job, some qualification is necessary. For
some jobs specific qualification are required for e.g. technical jobs
etc.
2.Motive:
The simple motive of any employment is to earn money to meet
primary and secondary needs of their employment.
3.Monetary returns:
An employee gets wages or salary or monetary returns of the
work completed by him. These returns are certain as the employees
are paid as per the predetermined terms. Wages are paid daily or
weekly and salary is monthly, apart from the incentives, free
medical checkup etc.
4.Capital:
Capital is not required for the employment because the
employer is supposed to provide material, equipment’s,
appliances, infrastructure etc. Required for the completion of the
job.
5.Code of conduct:
Every employee has to follow the rules and regulations
mentioned by his employer and agreed by him at the time of
accepting the employment.
6.Non-transfer ability:
Every employment is an independent contract which is not
transferable. Employment cannot be transferred from one person to
another for e.g. if a clerk retires then he cannot transfer his job to his
son, provided certain provisions and guidelines are given on
government level.
7.Nature of work:
The nature of work for every employees depends upon the
nature of job of the employer. an employer is expected to complete
the work assigned to him.

6) Write any four objectives of business.

OR
Describe various objectives of a business.
Ans: Objectives means the final result of the business activity where a
business unit wants to reach. Hence all the activities are guided but its
objectives.
According to Henry Ford, “business is not mere money chasing but
it also should aim at serving the community.”
The main aim of the business is to earn profit but today’s business
depends on other factors also like society, government environment
(man, money, machine) and finished goods.
So it is necessary to achieve other objectives to survive in
today’s competitive world.
Following are the objectives of Business--
(A)Economic Objectives:
1. Earning Profit:
Profit earning is an important and basic of every business.
Generally, a business unit produces those goods and services which
public requires and which allow it to earn profit.
2. Search of New Customers:
Every business unit tries to create new customers and also
to maintain the existing lot of customers. When customers are fully
satisfied a business unit can operate in the market for a long time
and face the competition successfully.
3. Innovations:
business organization wants to hold the old customers and to
create new customers then it has to spend money on Research and
development, market survey etc. So that it can provide novelties to
the customers and can approach the customers is an innovative way.
4. Best possible use of resources:
Resources are limited. Many of them have alternative
use. So business organization should use the resources to its
maximum and should avoid wastage. When wastage is restricted
then the profit increases hence optimum use of resources to
increasing profits.
(B)Social objectives:
Business unit depends upon the society therefore it is
necessary that it should follow social objectives. Following are the
social objectives-
1.Supplying quality products:
Every business unit has to provide superior quality of
goods and services to its customers. Superior quality means a
combination of purity, safety, durability, utility etc. of a product at
right price, at right time.
 Superior quality of product creates a good image in the minds
of the customers for e.g. bakerwadi of chitale bandhu, joshi
wadewale etc.
2.Avoiding unfair trade practices:
A businessman should not get involved into unfair trade
practices like misleading advertising, black marketing, wrong
measurement, wrong price, inferior quality of goods and services
etc. Avoiding unfair trade practices is very important for survival
and growth of a business unit.
3.Employment Generation:
It is the responsibility of every businessman that to
provide employment to skilled and unskilled people and try to
decrease the unemployment. He should also consider poor and
handicapped persons while giving jobs.
4.Welfare of employees:
It is the main objective of a businessman to take care of his
employees because employee welfare can be achieved by providing
fair and regular remuneration, healthy working conditions, unbiased
personnel policies, offering perks, providing medical facilities etc.
5.Help to solve social problems:
Business organizations should be aware of social problems
such as traffic jams, growth of slums, air, water pollution etc. And
try to reduce them for e.g. provide residential quarters, create
minimum pollution etc.
6.Contributing to the welfare of the society:
Businessman should accept their role
in welfare of the society like giving donations, encouraging research
and development, offering scholarships for higher education etc.

7) State any four features of business.

OR
Define business. Explain its features.
Ans: Business is regular production and distribution of goods and
services with the objective of earning profit and acquiring wealth
and satisfying human wants. Therefore, business is regular
production and distribution of goods and services.
Definitions of Business:
1.According to Stephenson, “the regular production or purchase and
sale of goods undertaken with the object of earning profit and
acquiring wealth through the satisfaction of human wants.”
2.Prof. Haney, “Business activities are all those human activities
which are directed towards the production and processing of
wealth.”
Following are the features of Business:
1.Involves Production and Distribution:
Business is concerned with production and
distribution of goods and services.
2.Dealings in goods and services:
Business deals with goods and services which can
be divided into consumer goods and producer goods.
A.Consumer goods:
Those goods which are used by ultimate consumers. For
e.g. food, cloths, TV, bucket etc.
B.Producer goods:
Those goods which are used for making consumer goods
for e.g. machinery, building, raw material. These goods help in
manufacture of another goods for e.g. wood is converted into table
etc.
3.Involves exchange:
Business activities always involves sale, transfer or exchange
of goods and services against the money it is called monetary
exchange. For e.g. buying a mobile by giving money etc. If goods
are giving as a gift it cannot be called an exchange.
4.Aims at profit:
The main aim or goal of any business is to earn maximum
profit. Without profit there cannot be a business.
5.Continuity:
Business does not include a single transaction the business
activity should in nature. Business involves a service of transactions.
6.Risk:
A business involves many risk which maybe insurable or
uninsurable. For e.g. loss due to change in price, fashion etc. Are
uninsurable risk. Loss due to fire, theft etc. are insurable risk.
7.Two Parties:
 There are at least two parties involve in a business transaction
i.e. buyer and the seller, the business is the agreement between two
parties.

Q.6 Justify the following statements.

1) Retailer is in direct contact with ultimate consumers.
Ans:Following are the justification of the above statement---
(i) Retailer in a trader operating in the chain of distribution.
(ii) He deals with the ultimate consumer.
(iii) Retailer is the last link in the chain of distribution.
(iv) Goods flow from the producer to consumer in the following
way :-
Producer- Wholesaler - Retailer→ Consumer
(v) Thus, retailer comes into direct contact with the ultimate
consumer.

2) Commerce is a wider term than Trade.

Ans:Following are the justification of the above statement---
(i) Commerce is a part of business. Business is divided into two
parts; industry and commerce.
(ii) Commerce is concerned with the distribution of goods.
(iii) Commerce is divided into two parts. One is trade and the
other is auxiliaries to trade.
(iv) Trade is concerned with buying and selling of goods and
services.
(v) Trade is a part of commerce.
(vi) Along with trade, commerce also includes auxiliaries or
services to trade.

3) Risk is inevitable in business activities.

Ans:Following are the justification of the above statement---
(i) Every business is exposed to various risks. A businessman
cannot avoid risks in the business.
(ii) These risks include goods remaining unsold due to changes
in fashions, risks of losses due to fire or the damage to goods
during transportation or warehousing, risks of bad debts, etc.
(iii) A businessman has to be prepared to handle these risks.
(iv) These risks cannot be totally eliminated. But they can be
minimized or transferred to insurance company. A businessman
must be ready for the risks as they are inevitable.
(v) Thus, risk is inevitable in business activities.

4) Combination of Import-export trade is entrepot trade.

Ans: Following are the justification of the above statement---
(i) Import, export and entrepot trade are the parts of foreign
trade.
(ii) When the goods are purchased from other countries it is
called import trade.
(iii) When the goods are sold to other countries it is called export
trade.
(iv) A combination of import and export trade is called entrepot
trade.
(v) In case of entrepot trade goods are first purchased from one
country i.e. imported and then sold
exported to other country.
(vi) E.g. Indian trader purchased some computers from Japan
and sold them to Sri Lanka will be included in entrepot trade.
(vii) Thus, entrepot trade is a combination of import and export
trade.
5) Transport creates place utility
Ans:Following are the justification of the above statement---
. (i) Transport is one of the important auxiliaries to trade.
(ii) Transport brings raw materials and people to the place of
production and carries finished products to market.
(iii) There are different modes of transport through it carries
goods and people from one place to another. They are rail, road,
water and air.
(iv) If goods are produced at one place, it may not have demand
at that place only.
(v) Transport carries them to other place where they are
demanded and create place utility.
(vi) Thus, we can say that transport creates place utility.

6) Industrial activities take place before commerce starts its role

Ans:Following are the justification of the above statement---
(i) Industry and commerce are the two parts of business.
(ii) Both the parts are complimentary to each other.
(iii) One cannot function without other.
(iv) Industries look after the production of goods and services
and commerce takes care of the distribution of the goods
produced.
(v) Obviously production of goods comes first and it is followed
by distribution or selling of goods.
(vi) Thus, industrial activities take place before commerce starts
its role,
7) Available resources should be used to its maximum.
Ans: Following are the justification of the above statement---
. (i) Resources are always scarce. The demand for resources is
more and the availability of resources.
(ii) Similarly, resources belong to the society but the businesses
use them for production and provide the finished products to the
society.
(iii) So it is necessary to use the resources carefully.
(iv) Wastage of resources should be avoided.
(v) Wherever possible, recycling and reusing the resources
should be considered by the businesses.
(vi) Thus, whatever resources available should be used to its
maximum.
8) Wholesaler is a link between retailer and manufacturer.
Ans:Following are the justification of the above statement---
(i) Wholesaler and retailer are the important intermediaries in
trade,
(ii) They help to bring the goods from the manufacturer to
ultimate consumer.
(iii) Wholesaler is a trader who deals in large quantities i.e. the
wholesaler purchases the goods in bulk from the manufacturer
and sells it to retailer in small quantities,
(iv) Both the wholesalers and retailers are the part of chain of
distribution, which is shown below. Producer-Wholesaler -
Retailer - Consumer
(v) Thus , it is true that wholesaler is the link between the
manufacturer and retailer.
9) Business is a part of economic activities.
Ans:Following are the justification of the above statement---
(i) Economic activities are those activities which are done with
the intention of making money. Businessmen has to earn money
for his livelihood.
(ii) However all economic activities are not same. They can be
conducted mainly in three different ways.
(iii) (a) Employment (b) Profession and (c) Business.
(iv) Business is conducted to earn profit.
(v) A businessman invests his own capital, takes decisions and
carries out business activities.
(vi) He also takes risk for carrying business activities.
(vii) Thus, a businessman is responsible for the business
activities. The profit earned is enjoyed by the businessman. So
business is a part of economic activity.

10) Changing fashions is one of the important cause of business risk.

Ans: Following are the justification of the above statement---
(i) Business is exposed to various kinds of risk.
(i) The risks can be due to the loss of goods by fire or theft, bad
debts, changes in government policies, goods remaining unsold
etc.
(iii) Goods remaining unsold due to changes in fashion, is also
an important type of risk in the business.
(iv) Due to this risk businessman can suffer loss.
(v) However this risk is there in case of some goods only e.g.
clothes, footwear, jewellery, accessories, sun glasses etc.
(vi) This risk is not there in case of food grains or vegetables as
they are essentials and their demand remains somewhat
constant.
(vii) Thus, changes in fashion is an important risk in the
business.

Q.7 Attempt the following.

1) What do you mean by commerce?
Ans: Commerce involves distribution of goods and services.
Commerce is a part of business. Business is divided into two
parts. They are (i) industry and (ii) commerce. Industries are
concerned with the distribution of goods and commerce does
the distribution of those goods in the market. Commerce
helps in bringing the goods from the manufacturer to
consumer by making uninterrupted flow of goods.
Commerce includes main two activities - (i) Trade and (ii)
Auxiliaries to trade.
(i) Trade means buying and selling of goods and services.
Any buying and selling is included in trade. It can be
industrial goods, consumer goods or buying and selling of
services, etc.
(ii) Auxiliaries of trade are all those supportive services which
help in the smooth conduct of trade. They include transport,
banking, insurance, advertising, etc.

2) State the role of auxiliaries to trade in trading activities.

Ans: Role of auxiliaries to trade :
(i) Auxiliaries to trade are all the services which help trade.
(ii) Trade means buying and selling of goods. However buying
and selling is not possible unless it is supported
by different services which will make the trade easy,
(iii) There are different auxiliaries or services which support
buying and selling. They are : transport, warehousing, banking,
insurance, advertising, etc.
(iv) These services help the trader as well as the buyers. They
remove the hindrances in the process of distribution and ensure
smooth flow of goods.
(v) In modern world, the manufacturers and consumers stay
away from each other. It becomes very difficult for the
manufacturer to contact the buyers and sell goods directly to
them.
(vi) In this regard auxiliaries to trade help in establishing a link
between the manufacturer or seller to consumer

3) State the types of human activities.

Ans: There are various activities conducted by a person in a day.
These activities can be divided into two parts,Human
Activities,Non-economic activities,Economic activities
(i) Economic activities : These activities are conducted to earn
money. A human being requires money for livelihood. Economic
activities are divided into three types.
(a) Business
(b) Profession
(c) Employment
Business is done to earn profit. Profession is done by acquiring
special knowledge to provide services to the people.
A professional gets fees for the services rendered. Whereas
when a person works for other person a organisation to earn
wage or salary, is called employment.
(ii) Non-economic activities : Non-economic activities are
conducted by the person to satisfy their needs other than
financial needs. These activities include cultural, social,
religious, sports, health related etc.

4) Describe the scope of internal trade.

Ans: Internal trade is a part of trade. It includes buying and
selling of goods within the country.
Internal trade is further divided into two parts.
(i) Wholesale Trade : Wholesale trade is a trade conducted on
large scale. A wholesaler purchases goods in bulk from the
manufacturer and sells them to the retailers. Wholesaler forms a
large network through which he helps to distribute goods at
distant places. Wholesaler is an expert trader in his field. He acts
a link between the manufacturer and the retailer.
(ii) Retail Trade: Retail trade is a trade conducted on small scale.
He purchases goods from the wholesalers and sells them to the
consumers in required quantities. Retailer comes into direct
contact with the consumers. A retailer caters to the needs of
consumers by providing them various goods in whatever
quantities they want

5) How does banking and insurance help trading?

Ans: Commerce includes trade and auxiliaries to trade. Trade
means buying and selling of goods and services But buying and
selling is not possible unless it is supported by the auxiliaries of
trade. Thus auxiliaries to trade are the services which help trade.
Banking and insurance are two important auxiliaries to trade.
(i) Banking : Banking services help traders in many ways.
Branches of banks are spread over wider areas Traders can
open an account in bank and take the advantage of various
banking services. Banks offer loans, overdrafts, transfer of
money, letter of credit, foreign exchange facilities to the traders.
(ii) Insurance : There are various kinds of risks in the business. A
businessman can transfer some risks on the insurance
company. Goods can be destroyed by fire, theft or damaged in
transportation. The businessman can transfer these risks on the
insurance company. He has to pay premium to the insurance
company
make a contract with the insurance company. In case of loss,
insurance company pays compensation to the trader.
(iii) Thus, the risks cannot be avoided completely but can be
minimized by taking insurance policy.

Q.8 Answer the following.

1. Explain the importance of profit in business.

Ans: Importance of profit cannot have ignored because without
profit, business cannot achieve any objective. Profit is the reward for
taking risk and for investing time, money, energy and effort in the
business.
1.Survival of Business:
The main aim of any business is to earn profit. To survive
in today’s competitive world profit is necessary. Hence it plays a
very important role in survivals of business.
2.Income to satisfy needs:
Business is the part of economic activity which mainly
deals with earning profit. A businessman can satisfy his needs only
if he earns profit.
3.Reward for risk bearing:
In every business there is a risk for e.g. fire, theft, change in
fashion etc. And a businessman invests capital in the business so as
to earn profit and also takes the risk of incurring losses.
4.Availability of funds:
Profit makes the funds available from internal and external
sources. A profit making concern can create a good image in the
minds of the customers and in the market. If a businessman earns
profit regularly then it can create savings and wealth which can be
made available during emergencies.
5.Growth and expansion:
Every businessman wants to expand his business at national
and international level. Growth and expansion means opening new
branches at the international level. Such expansion is possible only
if adequate profits are available.
6.Increasing efficiency:
Profit facilities regularity in payment of dues, salaries, bills
etc. In time. Similarly, employers are also motivated. This leads to
increase in overall efficiency of the business.
7.Satisfaction of internal groups:
The society, government, customers and employees are
known as interest groups. Every business has to satisfy the different
interest groups by providing good salary, facilities, superior quality
of goods and services, donations, education, research and
development etc.
8.Index of performance:
Performance of any business depends on the profits. Higher
profit talk about the efficiency of the management whereas lower
profit act as warning bell for management.
9.Research and development:
Research is helpful for innovations and novelties and
development is helpful for the better standard of living and economy
of the whole nation. Regular profits enable the businessman to
invest money in research and development and to go for innovations
and novelties.

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