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Chapter 10: Internal Trade
Trade refers to buying and selling of goods and services with the objective of earning profit. Mankind has been engaged in trading, in some form or the other, since early days of civilisation.
The importance of trade in modern times has increased as new products are being developed every day and are being made available for consumption throughout the world.
No individual or country can claim to be self-sufficient in producing all the goods and services required by it. Thus, each one is engaged in producing what it is best suited to produce and exchanging the excess produce with others.
On the basis of geographical location of buyers and sellers, trade can broadly be classified into two categories (i) Internal trade; and (ii) External trade.
Trade which takes place within a country is called internal trade. Trade between two or more countries, on the other hand, is called external trade.
The present chapter discusses in detail the meaning and nature of internal trade and explains its different types and the role of chambers of commerce in promoting internal trade.
Internal Trade Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade.
Whether the products are purchased from a neighbourhood shop in a locality or a central market or a departmental store or a mall or even from any door-to-door salesperson or from an exhibition, all these are examples of internal trade as the goods are purchased from an individual or establishment within a country.
No custom duty or import duty is levied on such trade as goods are part of domestic production and are meant for domestic consumption.
Generally, payment has to be made in the legal tender of the country or any other acceptable currency.
Internal trade can be classified into two broad categories viz., (i) wholesale trade and (ii) retail trade.
Generally, for products, which are to be distributed to a large number of buyers who are located over a wide geographical area, it becomes very difficult for the producers to reach all the consumers or users directly.
For example, if vegetable oil or bathing soap or salt produced in a factory in any part of the country are to reach millions of consumers throughout the country, the help of wholesalers and retailers becomes very important.
Purchase and sale of goods and services in large quantities for the purpose of resale or intermediate use is referred to as wholesale trade.
On the other hand, purchase and sale of goods in relatively small quantities, generally to the ultimate consumers, is referred to as retail trade. Traders dealing in wholesale trade are called wholesale traders and those dealing in retail trade are called retailers.
Both retailers and wholesalers are important marketing intermediaries who perform very useful functions in the process of exchange of goods and services between producers and users or ultimate consumers.
Internal trade aims at equitable distribution of goods within a nation speedily and at reasonable cost.
Wholesale Trade As discussed in the previous section, wholesale trade refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.
Wholesaling is concerned with the activities of those persons or establishments which sell to retailers and other merchants, and/ or to industrial, institutional and commercial users but who do not sell in significant amount to ultimate consumers.
Wholesalers serve as an important link between manufacturers and retailers. They enable the producers not only to reach large number of buyers spread over a wide geographical area (through retailers), but also to perform a variety of functions in the process of distribution of goods and services.
They generally take the title of the goods and bear the business risks by purchasing and selling the goods in their own name. They purchase in bulk and sell in small lots to retailers or industrial users.
They undertake various activities such as grading of products, packing into smaller lots, storage, transportation, promotion of goods, collection of market information, collection of small and scattered orders of retailers and distribution of supplies to them.
They also relieve the retailers of maintaining large stock of articles and extend credit facilities to them. Most of the functions performed by wholesalers are such which cannot be eliminated.
If there are no wholesalers, these functions shall have to be performed either by the manufacturers or the retailers.
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NCERT Solutions Class 11 Business Studies Chapter 10 Internal Trade
1. What is meant by internal trade?
The buying and selling of goods and services within the nation boundaries is termed as internal trade. No custom duty or import duty is levied upon them as they are domestically produced and are meant for consuming domestically. There are two kinds of internal trades: wholesale trade and retail trade
2. Specify the characteristics of fixed shop retailers.
Fixed shop retailers are those who maintain a permanent establishment and conduct their business from there. They do not need to move from one place to another in order to sell their service and goods.
Here are some of the characteristics:
1. They have a greater resource base and operate on a larger scale as compared to other traders.
2. They deal in more than one category of products, and it includes consumer durable and non-durables.
3. They can provide additional services such as home delivery, goods supplied on credit.
4. Being fixed in one place, they have more credibility in eyes of the consumer.
3. What purpose is served by wholesalers providing warehousing facilities?
Wholesalers providing warehousing facilities serve the following purpose:
1. They purchase goods in bulk from manufacturers. Store and distribute the purchased goods to retailers in small quantities.
2. Being situated near the centre of distribution they are known as place of utility.
3. The bulk purchasing done by distributors help manufacturers undertake large scale production without worrying about storage issues.
4. How does market information provided by wholesalers benefit the manufacturers?
Market information provided by wholesaler benefits manufacturer in the following ways:
1. Information on preferences of customers and their tastes.
2. Prevailing market conditions
3. Goods that are in demand among consumers
4. Level of competition in the market
Using such information manufacturers can produce products that suits the customers need.
5. How does the wholesalers help the manufacturer in availing the economies of scale?
Wholesaler help manufacturer in availing economics of scale in following ways:
1. Purchase goods in bulk quantities from manufacturer and distributing to retailers in small quantities.
1. By providing manufacturers with warehousing facilities they reduce burden of storage.
2. Create time and place utility and enable manufacturers to produce goods on large scale.
NCERT Class 11 Business Studies Textbook Chapter 10 Internal Trade With Answer PDF Free Download