1. Role of Business in Development of an Economy
- Business plays a vital role in economic development by producing goods and services, creating employment, generating income, and increasing national wealth.
- Major Trade Centres in Ancient India:
- Harappa, Mohenjo-Daro, Pataliputra, Taxila, Ujjain
- Known for trade in textiles, spices, metals, and handicrafts.
- Position of Indian Subcontinent in World Economy (1 AD to 1991):
- Ancient India was a leading economy with high trade, skilled artisans, and advanced agriculture.
- During colonial period, India’s economy became de-industrialized and trade was controlled by Britain.
- Post-independence, India started planning for reindustrialisation to restore economic growth.
- India Begins to Reindustrialise:
- Focus on public sector industries, heavy industries, and infrastructure.
- Gradual privatization and promotion of entrepreneurship after 1991.
- Make in India:
- Government initiative to promote manufacturing and investment.
- Encourages domestic production, foreign investment, and job creation.
2. Types of Human Activities
A. Economic Activities:
- Activities aimed at earning income or profit.
- Examples: Business, profession, employment, farming, trading.
B. Non-Economic Activities:
- Activities done without profit motive, for personal satisfaction or social welfare.
- Examples: Volunteering, charity, painting, hobbies.
3. Difference Between Business, Profession, and Employment
| Basis | Business | Profession | Employment |
|---|---|---|---|
| Commencement | Can be started anytime | Requires qualification/license | Requires appointment by employer |
| Qualification | No specific qualification needed | Professional degree/skills needed | Education/skills as required |
| Investment | Requires capital investment | Low investment | No investment |
| Risk | Involves risk of loss | Low risk | No risk |
| Transfer of Interest | Can be transferred/sold | Cannot be transferred | Cannot be transferred |
| Main Objective | Profit | Service and earning | Salary/Wages |
| Code of Conduct | As per business ethics | Professional ethics | As per employer rules |
| Nature of Work | Production and sale of goods/services | Expert advice/services | Work assigned by employer |
| Reward | Profit | Fees | Salary/Wages |
Difference Between Economic and Non-Economic Activities
| Basis | Economic | Non-Economic |
|---|---|---|
| Motive | Earning income/profit | Personal satisfaction or social welfare |
| Expectation | Material gain | Emotional or social satisfaction |
| Purpose | Production/trade of goods/services | Leisure, charity, hobbies |
| Outcome | Monetary benefit | Non-monetary benefit |
| Examples | Business, farming, job | Volunteering, hobby, painting |
4. Concept and Characteristics of Business
Concept: Business involves production, purchase, and sale of goods and services to earn profit and satisfy human needs.
Characteristics:
- Economic activity: Done to earn profit.
- Production or procurement: Involves creating or buying goods/services.
- Sale and exchange: Goods/services are sold for money.
- Profit motive: Main aim is earning profit.
- Continuous activity: Business is ongoing, not occasional.
5. Objectives of Business
Objectives:
- Economic objectives: Earning profit, creating employment, and generating wealth.
- Social objectives: Serving society, providing essential goods/services.
- Innovation objectives: Introducing new products, techniques, and technology.
- Customer satisfaction: Meeting customer needs efficiently.
- Growth objectives: Expanding business, increasing market share.
6. Role of Profit in Business
- Reward for risk-taking: Compensates entrepreneurs for business risk.
- Source of capital: Profit can be reinvested for expansion.
- Motivation: Encourages innovation and efficiency.
- Economic development: Helps in creating employment and wealth.
- Business survival: Ensures continuity and growth of business.
7. Classification of Business Activities
Business activities are classified into Industry and Commerce:
- Industry: Production of goods or services.
- Commerce: Activities that help in the exchange and distribution of goods.
8. Industry
Meaning: Industry involves production or extraction of goods and services.
Types and Subtypes:
- Primary Industry: Uses natural resources directly.
- Agriculture, Mining, Forestry, Fishing
- Secondary Industry: Converts raw materials into finished goods.
- Manufacturing, Construction
- Tertiary Industry: Provides services rather than goods.
- Transport, Banking, Insurance
Examples:
- Primary: Farming, Coal mining
- Secondary: Sugar factory, Car manufacturing
- Tertiary: Courier service, Bank
9. Commerce
Meaning: Commerce involves all activities that facilitate the buying and selling of goods.
Functions of Commerce:
- Trade: Buying and selling goods.
- Aids to trade: Services that make trade easier.
- Transport: Moving goods from producer to consumer.
- Banking: Providing finance and credit.
- Insurance: Protecting goods against risk.
Classification of Commerce:
A. Trade:
- Involves buying and selling of goods.
- Types:
- Wholesale trade – Buying in bulk for resale.
- Retail trade – Selling directly to consumers.
B. Aids to Trade:
- Services that support trade.
- Examples: Banking, transport, insurance, warehousing.
10. Business Risk
Definition:
- Business risk is the possibility of loss or failure in business due to uncertainty.
Nature of Business Risk:
- Uncertainty: Future outcomes are not certain.
- Possibility of loss: Risk may lead to financial loss.
- Essential in business: Every business faces some risk.
- Opportunity and risk: Risk-taking may also lead to profit.
Causes of Business Risk:
- Natural causes: Floods, earthquakes, droughts.
- Economic causes: Changes in demand, inflation, recession.
- Human causes: Errors by workers, fraud, negligence.
- Political causes: Policy changes, strikes, wars.