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Features of business

Everything that surrounds us is a chain of business, from a laptop to the chair we sit. With every change in technology, human being demand also changes. Giving business persons to grow their business or start a new venture. Let’s study in details about the business and its characteristics.

Business Definition

Business is an economic activity that involves the exchange, purchase, sale or production of goods and services with a motive to earn profits and satisfy the needs of customers. Businesses can be both profit or non-profit organizations that function to gain profits or achieve a social cause respectively.

Quick link: Types of Entrepreneurship

Characteristics of Business

Following are the characteristics or features of business

(1) An Economic Activity

A business is an economic activity which includes the purchase & sale of goods or rendering of services to earn money.
It is not concerned with the achievement of social and emotional objectives.

Example: Wholesaler sell goods to the retailers and retailers sell goods to the customers.

(2)Manufacturing or Procurement of Services and Goods

Before offering goods to the consumer for consumption it should be manufactured or procured by businesses.
Business enterprise converts the raw material into finished goods.
Organisations also procure finished goods& services from the producers to meet the needs of the customers in the market.
Goods can be a Consumer good like sugar, pen, ghee, etc. capital goods include machinery, furniture, services like transportation, banking, etc.

Example: Individual retailer buys the toffees from wholesalers in a specific quantity and sells it to the ultimate consumer.

(3)Exchange or Sale of Goods and Services for the Satisfaction of Human Needs

Every business activity includes an exchange or transfer of services and goods to earn value.
Producing goods for the goal of personal consumption is not included in business activity.
So, there should be the process of sale or exchange of goods or services exits among the seller and the buyer.

Example: A lady who bakes pastries and cakes at home and sells it to the pastry shop is a business activity.

(4) Dealings With Goods and Services on a Daily Basis

Every business, rendering either services or goods should deal on a daily basis.
A one-time sale is not considered a business activity.

Example: If a person sells his old car through OLX even at a profit will not be considered as a business activity. But if he is engaged in regularly trading of cars at his showroom will be considered as business activity.

(5) Profit Earning

No business can last for long, without making a profit.
The purpose to conduct the business is to earn profits and minimise the cost.

Example: A business house tries to reduce the cost of production and the cost of raw material to earn high profits.

(6) Uncertainty of Return

The possibility of earning profit or loss is very uncertain and can’t be anticipated by the entrepreneur.
Hence, no business can totally do away with risks.

Solved Questions:

Q.1 How are economic activities different from non-economic activities.

ANSWER:

BASIS
ECONOMIC ACTIVITIES
NON-ECONOMIC ACTIVITIES

(1) Meaning
Activity performed to earn a livelihood.
That activity is performed out of

love, sympathy, sentiments, patriotism,

etc.

(2) Purpose
Undertaken to earn money and satisfy physiological needs.
Undertaken to satisfy psychological or emotional needs.

(3) Types
Business, profession, and employment.
Social responsibility, religious responsibility, personal satisfaction, etc.

(4) Benefits
Money and wealth.
Self-satisfaction.

(5) Examples
A worker working in a factory.
A boy helping an old man to cross the road.

Q.2 Defines human activities.

ANS: The activities which are performed by human beings for the continued survival of life.

Q.3 A person sold his old mobile phones for Rs.10, 000. Identify the type of activity performed here?

ANS: Non-economic activity.

Q.4 Mention any two types of non-economic activities?

ANS: Social obligation and Religious obligation.

Q.5 Give two examples of economic activities.

ANS:

(1)A teacher teaching student in the class

(2)A doctor treating the patient in the clinic

Q.6 Name the activity which requires special knowledge and skill.

ANS: The profession is that activity which requires specialised knowledge and skill.

Q.7 Explain the types of economic activities.

State the different types of economic activities.{NCERT}

ANS:

(A) Economic Activities

The activities which are carried out for the purpose of earning money or money’s worth.
It helps in fulfilling the basic financial, monetary and human requirements.

(B) There are three types of economic activities

(1)Employment

It refers to the work in which people work for others and get paid in the form of wages or salaries.
The persons who are employed by others are known as employees.
The person who gives remuneration to the employees is known as an employer.
In other words, it is a contract between the employer and the employee.

Example: People who work in factories and receive wages.

People who work in offices and receive a salary.

(2) Business

Business refers to any occupation, in which people engage regularly to earn profits.
In other words, it is concerned with being involved in economic activities which include:
Production and sale of goods and
Rendering services
The objective of earning profits is to satisfy the customer’s needs for long-term survival in the society.

(3) Profession

The profession is an economic activity which requires specialised knowledge and skills.
applies knowledge and skills in his work to earn money.
Such activities are generally subject to guidelines laid down by professional bodies.
The individual who is specialised in a particular profession is called a professional.

Example: A lawyer who is engaged in the law profession is governed by the Bar Council of India.

Q.8 Define the term business.

Explain the concept of business.{NCERT}

ANSWER:

Meaning and concept of business

Business refers to any occupation in which people engage regularly to earn profits.
In other words, it is concerned with engaged in economic activities which involves
Production and sale of goods and
Rendering services
The objective of earning profits is to satisfy the customer’s needs for long-term survival in the society.

Q.9 Difference between business, profession, and employment.

Compare business with profession and employment. {NCERT}

ANSWER:

PARAMETERS
BUSINESS
PROFESSION
EMPLOYMENT

(1) Formation
Easy to Form and can be started with Minimal Legal Formalities except in a few cases.
Need to obtain an ICAI, ic qualification from a recognised body(e.g. CA by ICAI, MBBS by MCI)
After signing a Service contract and getting an appointment letter.

(2)Nature of work
Production of goods,

Buying and selling of goods, rendering services to the consumer for monetary benefits.

Rendering of expert services.
Performing work according to the nature of the job.

(3) Qualification
Minimum qualification is not necessary.
Proficiency and training in a specific field are necessary.
Requirement and training as recommended by the employer.

(4) Reward or Return
Profit earned.
Professional fee.
Wages or salary.

(5) Capital Investment
Capital is needed according to the size and nature of business.
Limited capital is needed.
No capital is required.

(6) Risk
Profits are uncertain that is why risk is present.
The fee is generally regular and certain that is why minimum risk.
Fixed and regular pay that is why no risk.

(7) Transfer of Interest
Possible with some rules.
Not feasible.
Not feasible.

(8) Ethical Code of Conduct
No code of conduct is prescribed.
Professional code of conduct is to be comprehended.
There is a contract instead of a code of conduct.

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Multiple Choice Question
Q.1- Identify the characteristics of the business :

a. Profit earning

b. Uncertainty of return

c. Both (a) & (b)

d. None of the above

Q.2-____________ is excess of revenue over cost.

a. losses

b. profit

c. Both (a) & (b)

d. None of the above

Q.3- The reward a businessman receives in return of his risk-taking in the business is _____