NIOS Class 12 Business Studies Chapter 1 Nature and Scope of Business

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NIOS Class 12 Business Studies Chapter 1 Nature and Scope of Business

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Nature and Scope of Business

Chapter: 1

Module – 1 Introduction to Business

INTEXT QUESTIONS 1.1

Q. 1. Define ‘Economic Activities’.

Ans. All such activities that are performed with an object of earning money or livelihood are called economic activities. 

Q. 2. Below are given certain non-economic activities. Convert them into economic activities.

Example: A nurse attending her ailing son. (Non-economic activity) 

A nurse attending patients in her hospital. (Economic activity) 

(a) A person working in his own garden. 

Ans: A person working in a school garden. 

(b) A lady preparing food for her husband. 

Ans: A lady preparing food in a restaurant. 

(c) A man white-washing his own house.

Ans: A man white-washing the building of a trade center. 

(d) A teacher teaching his son at home. 

Ans: A teacher teaching students in a school.

(e) A Chartered Accountant preparing his own accounts.

Ans: A chartered Accountant preparing accounts of a firm.

INTEXT QUESTIONS 1.2

Q. 1. Define the term ‘Profession’ in your own words.

Ans: All those economic activities which involves the rendering of personal service of specialised and expert nature based on professional training and skill and require the observance of certain rules and regulations (code of conduct) are termed as Professions.

Q. 2. Following is a list of activities. Classify these activities as Business, Profession or Employment by putting their number in the circles provided at the end of the question.

(a) Policeman on duty at your local police station. 

(b) Teacher working in an educational institution. 

(c) A driver driving a bus of a State Road Transport Corporation.

(d) A taxi-driver who runs his own taxi. 

(e) A fisherman selling fish in a village.

(f) Gopal stitching cloth of the customers regularly at home.

(g) A daily-wager working in a factory.

(h) A gardener maintaining the lawns in a college. 

(i) A lawyer practising in a court.

(j) An engineer running his consultancy firm.

Ans: 

INTEXT QUESTIONS 1.3

Q. 1. Mohan has recently completed his MBBS course. He finds difficulty in choosing his occupation. Guide him by filling up the following table:

If he chooses	What should he do?	What will he get as return?
(a) Business
(b) Profession
(c) Employment

Ans:

If he chooses	What should he do?	What will he get as return?
(a) Business	May open a chemist shop  or Start a company to manufacture medicines	Profit
(b) Profession	Start his own clinic	Fee
(c) Employment	Get the job in a hospital	Salary

Q. 2. Correct the following sentences, if necessary:

(a) Business minimizes opportunities to work and, thus, generates employment in the country.

Ans: Business maximises opportunities to work and thus, generates employment in the country.

(b) By producing and exporting quality goods and services, the national image of a country goes down.

Ans: By producing and exporting quality goods and services, the national image of a country improves.

(c) Business objectives should concentrate on profit earning only.

Ans: Business objectives should not concentrate only on profit earning.

(d) Creation of employment opportunities and paying taxes and other dues honestly to the government are the national objectives of a business.

Ans: No correction required.

(e) A businessman should prepare a false statement of accounts in order to save taxes.

Ans: The businessmen should prepare the true statement of accounts and the pay the taxes honestly.

(f) Profit plays no role in business.

Ans: Profit plays an important role in business.

Q. 3. Identify the causes of business risk in the following causes:

(i) X Ltd. suffered a loss due to bursting of boiler:

(a) Natural Cause.

(b) Political Cause.

(c) Physical Cause.

(d) Economic Cause.

Ans:(c) Physical Cause.

(ii) Auditor identified misappropriation of cash by a group of workers in Y Ltd:

(a) Natural Cause.

(b) Human Cause.

(c) Physical Cause.

(d) Political Cause.

Ans: (b) Human Cause.

(iii) Suzuki Ltd. suffered a loss due to tsunami:

(a) Natural Cause.

(b) Human Cause.

(c) Economic Cause. 

(d) Political Cause.

Ans: (a) Natural Cause.

INTEXT QUESTIONS 1.4

Q. 1. Below are given certain groups of industries. In each group, one industry does not match with the group. Find out that industry and underline it. The first one has been done for you. In this all industries except textile belong to extractive industries.

(a) Agriculture, forestry, textile, fishery.

Ans: textile.

(b) Dams, roads, canals, cement.

Ans: Cement.

(c) Poultry farming, hunting, mining, forestry. 

Ans: Poultry farming.

(d) Iron & steel, textile, chemical works, pisciculture.

Ans: Pisciculture.

(e) Oil exploration, agriculture, dairy farming, hunting.

Ans: Dairy farming.

(f) Floriculture, films, transport, banking.

Ans: Floriculture.

Q. 2.Complete the following Chart:

Ans: (a) Business. 

(b) Commerce.

(c) Primary.

(d) Tertiary.

(e) Genetic.

INTEXT QUESTIONS 1.5

Q. 1. Give one word substitute for the following sentences:

(a) The process of exchange and distribution of goods and services.

Ans: Commerce. 

(b) Buying and selling of goods and services.

Ans: Trade.

(c) Buying and selling of goods in large quantities.

Ans: Wholesale trade.

(d) Import of goods for exporting. 

Ans: Entrepot.

(e) Buying and selling of goods between different countries.

Ans: External trade.

Q. 2. Complete the following incomplete words by taking clues from the statements given for each. Every blank represents one letter only. First one has been done for you.

(a) ___ ___ MM ___ ___ C ___. (COMMERCE)

(b) ___ ___ A ___ E.

(c) W ___ ___ ___ H ___ ___ ___ IN ___.

(d) ___ X ___ ___ ___T.

(e) E ___ ___ ___ E___ ___ T.

(f) ___ H ___ ___ E ___ ___ ___ E.

(g) ___ ___ T ___ ___ L.

Clues:

(a) All activities that facilitate availability of goods and services for consumption. 

Ans: Commerce.

(b) Buying and selling of goods.

Ans: Trade. 

(c) Storage of goods whether raw material or finished goods. 

Ans: Warehousing. 

(d) Selling of goods to foreign countries.

Ans: Export.

(e) A company of one country buys goods from a company of another country to be sold to a company of some third country.

Ans: Entrepot. 

(f) Goods are bought and sold in bulk quantities. 

Ans: Wholesale.

(g) Goods are sold in small quantities to consumer.

Ans: Retail.

TERMINAL EXERCISE

Short Answer Type Questions: 

Q. 1. What is meant by ‘human activity’?

Ans: Human beings undertake various activities to satisfy their needs and wants. These activities are known as Human Activities.

Q. 2. Define the term ‘occupation’.

Ans: The activities in which individuals engage themselves on a regular basis and earn their livelihood are known as their ‘occupations’.In fact everyone is engaged in one occupation or the other, and these can be broadly categorized as-

(a) Profession. 

(b) Employment. and 

(c) Business. 

Q. 3. State the meaning of ‘Genetic industry’.

Ans: Have you seen poultry farms, or apple orchards or nurseries? All these are industries engaged in rearing and breeding animals and birds and growing plants or flowers for sale and are known as genetic industries. Now-a-days genetic industries are growing in number which include Horticulture (growing fruits and vegetables), Floriculture (growing flowers), Dairy Farming, Poultry Farming, Pisiculture (breeding fish) etc.

Q. 4. Explain Commerce.

Ans: Commerce is defined as the exchange of goods and services between two or more entities. It typically involves buying and selling things of value. Commerce can take place between businesses, between consumers, or between businesses and consumers.

Thus, Commerce includes two types of activities, viz: 

(i) Trade. and 

(ii) Auxiliaries to trade. 

Trade: Buying and selling of goods is termed as trade. 

Auxiliaries to Trade: On the other hand, activities that are required to facilitate the purchase and sale of goods are called services or auxiliaries to trade.

Q. 5. What is ‘Trade’?

Ans: Trade refers to the process of buying and selling of goods and services. When trade takes place within the boundaries of a country, it is called Internal trade. It is called Wholesale trade when goods are bought in bulk from manufacturers/produces and sold in bulk to retailers. It is termed as retail trade when goods are bought from manufacturers or wholesalers and sold in small quantities to consumers. Trade that takes place between two countries is known as External trade. When goods are purchased from a foreign country, it is known as Import trade. Export trade is the process of selling goods to a foreign country. When goods are bought from one foreign country to be sold in some other foreign country it is known as Entrepot trade.

Q. 6. What do you meant by ‘Auxiliary to trade’?

Ans: Auxiliaries to trade refers to the factors that are essential for bringing the goods from the place of their production to the place of their consumption. In simple words, these are essential services and functions that assist the business.

Q. 7. Name the obstacles in the way of Trade.

Ans: A trade barrier refers to any regulation or policy that restricts international trade, especially tariffs, quotas, licences etc. 

Q. 8. List two examples of human causes of loss in business. 

Ans: If the management fail in estimating demand for products, loss may arise. Uncertainties caused by human actions e.g. forgery, misappropriation of cash, theft of goods, riots, wars, etc. can also result in loss.

Short Answer Type Questions:

Q. 1. Explain the different type of primary industries.

Ans: Primary industries refer to the activities of extraction of natural resources like coal, oil, minerals etc. and reproduction and development of living organisms like plants and animals etc. Primary industries can be categorised as extractive and genetic industries.

Extractive Industries: ONGC it is a company that extracts oil and natural gas from earth. Similarly we have farmers growing crops, business houses engaged in extracting raw materials/minerals from earth (coal-mines, iron-ore mines etc.), extracting materials from forest for further processing (like collecting natural honey, timber etc.), extracting items from sea/river (like fish, crab, prawn, sea foods etc.). All these are examples of extractive industries.

Genetic Industries: Have you seen poultry farms, or apple orchards or nurseries? All these are industries engaged in rearing and breeding animals and birds and growing plants or flowers for sale and are known as genetic industries. Now-a-days genetic industries are growing in number which include Horticulture (growing fruits and vegetables), Floriculture (growing flowers), Dairy Farming, Poultry Farming, Pisiculture (breeding fish) etc.

Q. 2. How would you classify business activities?

Ans: Let’s look around and find out the various types of business activities that usually take place in an economy. 

Some of these are:

1. Extraction of oil, natural gas or minerals. 

2. Manufacturing of commodities.

3. Buying of goods from one place/country and selling it at different place/country.

4. Construction of buildings, roads, and bridges etc. 

5. Providing services like ticketing, warehousing, transportation, banking, insurance etc.

When we analyse the above business activities we find that most business activities are concerned with production and/or processing of goods and services or distribution of goods and services. The former is known as ‘Industry’ and the latter as ‘Commerce’. So we can classify business as Industry and Commerce.

Q. 3. Distinguish between economic and non-economic activities.

Ans: The human activities that are undertaken with an objective to earn money or livelihood are called economic activities. Whereas the other types of activities that are undertaken to derive self-satisfaction, are called non-economic activities. A farmer growing crops, a worker working in a factory for wage/salary, a businessman engaged in buying and selling of goods are examples of economic activities. While activities like meditation, engaging in sports for physical fitness, listening to music, providing relief to flood victims etc., are examples of non-economic activities.

Q. 4. State any two characteristics of business.

Ans: The two characteristics of business are: 

(a) It is an occupation where a person is engaged in manufacturing or buying and selling of goods and services. The goods may be consumer goods or capital goods.Similarly the services may be in the form of transportation, banking, insurance etc.

(b) The activities must be carried on regularly. A single transaction is usually not treated as a business. For example, if a person sells his old car at a profit, it is not treated as a business activity. However, if he is engaged in the activity of buying old cars and selling them on a regular basis, he shall be treated as engaged in business activity.

Q. 5. Mention any three economic objectives of business.

Ans. Some of the main economic objectives of business are: 

(i) earning of adequate profits.

(ii) exploring new markets and creation of more customers.

(iii) growth and expansion of business operation.

(iv) making innovations and improvements in goods and services. and

(v) making use of available resources in the best possible manner.

Q. 6. Mention any three characteristics of business risks.

Ans: 1. Uncertainty: Business risks is due to uncertainty of the future course of action. Natural clamaties such as flood, earthquake etc. result is loss. Loss may also arise due to human causes like strike, lockouts, accidents, theft, bad-debts etc. There are other uncertainties such as competition, technological changes, price fall etc.

2. Profit is the Reward for Risk: A business concern which is willing to take risk earns handsome profits. Heavy risk results in higher profits.

3. Difficult to Measure: A businessman may anticipate some risks. He cannot predict all the risks which will occur in future. Therefore, risk cannot be measured accurately.

Q. 7. Briefly describe physical causes of business risks.

Ans: Physical and Technical Causes: Change in technology may make the machines obsolete before their expected life. Mechanical failures arise due to leakage of gas, bursting of a boiler etc. Value of assets may be reduced due to loss in weight, vaporisation etc. Another kind of physical cause is the loss of goods in transit.

Long Answer Type Questions: