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Chapter 1: Business, Trade, and Commerce
All human beings, wherever they may be, require different types of goods and services to satisfy their needs. If we look around, we observe people require different types of products and services to satisfy their needs.
How do they buy them? They go to the market, either physical or electronic over the internet, where they find a variety of shops and sellers offering the required commodities and choose the best which they require.
Have you ever wondered how these products and services are made available in the market? The necessity of supplying goods and services is done by a different set of people engaged in various economic activities such as production, manufacturing and distribution, and exchange so that the needs and wants of customers are satisfied.
Business is a major economic activity that is concerned with the production and sale of goods and services required by people.
Business is central to our lives. Although our lives are also influenced by many other institutions in modern society, such as schools, colleges, hospitals, political parties, and religious bodies; the business has a major influence on our daily lives. It, therefore, becomes important that we understand the concept, nature and purpose of business.
Business starts with production and ends with consumption. Making the finished products reach the consumer involves a series of steps.
The work of production of goods is covered under Industry and the remaining activities belong to commerce. In a nutshell, we call them ‘Business’ which is a wider term and includes Industry, trade and commerce.
A business that includes trade and commerce has played a vital role since times memorial.
You have studied in your earlier classes that our country, India, had a golden past and the trading activities had a significant contribution to its prosperity and gains.
The archaeological evidence have shown that trading activities were the mainstay of the economy in ancient times which were carried out by both water and land routes.
Silk route and maritime trade were quite prominent in transporting goods and commodities for trading purposes.
The goods were traded both internally and to foreign lands, which generated surplus income. As a result, the people were engaged in various economic activities such as agriculture and domestication of animals, weaving cotton, dyeing fabrics, making clay pots, utensils and handicrafts, sculpting, cottage industries, masonry, etc.
Family-based workshops [karkhanas], for manufacturing, were important components of economic life.
This money was channelized into further investment and led to the dominant growth of the indigenous banking system to finance the trading activities. An example of it is the use of age old Hundi and Chitties (used in the southern region).
These were used as documents to facilitate transfer of money from one hand to another for trading activities. As an instrument of exchange it involved a contract which — (i) warrant the payment of money, the promise or order which is unconditional (ii) capable of change through transfer by valid negotiation.
Why there was a need to create an intangible form of exchange of money. It was so because travelling long distances either by land or sea involved risk of theft and robbery. Hundi which literally means ‘to collect’ was written in vernacular language and facilitated the safe transfer of money between parties and helped promotion of trading activities.
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NCERT Solutions Class 11 Business Studies Chapter 1 Business, Trade and Commerce
1. Discuss the development of the indigenous banking system in the Indian subcontinent.
Indigenous banking system played a prominent role in lending money and also in financing domestic and international trade with the help of currency and later with the letter of credit.
As the banking system developed, people began depositing precious metals with individuals who were known as Seths. Money became the means that manufacturers can use to produce more goods.
Later, documents in the form of Hundi and Chitti were used for carrying out a monetary transactions. In ancient India, for trade promotion, the intermediaries played a prominent role.
The financial security offered by them helped in taking risks in foreign trade. The institutions such as of Jagat Seth also exercised great influence during the period of Mughals and later in the time of East India Company.
The availability of loans and rise in credit transactions helped in growth of commercial establishments.
India enjoyed a great balance of trade with exports holding the upper hand in comparison to imports. This system helped manufacturers, traders and merchants in getting funds for expansion and development.
Industrial and Commercial banks evolved to become finance trade and commerce, agriculture banks which provided short and long term loans to finance those involved in agriculture activities.
2. Define business. Describe its important characteristics.
Business is the occupation where people engage themselves in activities that are related to purchase or production and sale of goods and services with the sole purpose of earning profit, and therefore produce or sell goods and services that are in demand.
Characteristics of business are:
1. Business is considered to be an economic activity as the sole purpose of starting a business is for earning profit.
2. Business deals with procuring of raw materials and converting them into finished products and selling to consumers
3. Sustainability and the future growth of business is determined by the profit it is earning.
4. Business involves exchange of goods and service using a common medium i.e money.
5. Any business whether small or big will face business risks
6. There will be uncertainty of returns as the business may incur loss or gain profits
NCERT Class 11 Business Studies Textbook Chapter 1 Business Trade and Commerce With Answer PDF Free Download