Business Activities Questions and Answers AP Inter 1st Year Commerce Chapter 2

Andhra Pradesh BIEAP AP Inter 1st Year Commerce Study Material 2nd Lesson Business Activities Class 11 Questions and Answers.

Business Activities Class 11 Questions and Answers AP Inter 1st Year Commerce 2nd Lesson

I. Fill in the Blanks (1 Mark)

Question 1.
The production side of business activity is referred to as …………… .
Answer:
Industry

Question 2.
The equation form of ……………. is Industry + Commerce.
Answer:
Business

Question 3.
The equation form of …………… is Trade + Aids to Trade.
Answer:
Commerce

Question 4.
……………. refers to the quality of life enjoyed by the members of a society.
Answer:
Standard of living

Question 5.
………… is also known as ‘domestic trade’ or ‘internal trade’.
Answer:
Home Trade

Question 6.
……………… is also known as ‘external trade’ or ‘international trade’.
Answer:
Foreign Trade

Question 7.
Entrepot trade is also known as ………….. trade.
Answer:
re-export

Question 8.
Personal hindrances can be removed by …………….. .
Answer:
Trade

Question 9.
………… removes the hindrance of place.
Answer:
Transportation

Question 10.
…………… services remove the hindrance of financial problems.
Answer:
Banking

Question 11.
………….. removes the hindrance of time.
Answer:
Warehouse

Question 12.
…………………. removes the hindrance of risk.
Answer:
Insurance

Question 13.
……………. removes the hindrance of knowledge.
Answer:
Advertisement

Question 14.
…………….. removes the hindrance of information.
Answer:
Communication

Question 15.
The …………….. connects links between the producers and the retailers.
Answer:
Wholesalers

Question 16.
The ……………….. connects links between wholesalers and consumers.
Answer:
Retailers

II. Very Short Answer Type Questions (2 Marks)

Question 1.
Industry
Answer:
The production side of business activity is referred to as industry. It is a business activity, which is related to the extracting, producing, processing or manufacturing of goods. The goods may be consumer goods or producer goods. Consumer goods are the goods, which are used finally by consumers, e.g.: food grains, textiles, cosmetics, VCR etc. Producer’s goods are the goods used by manufacturers for producing some other goods, e.g.: raw materials, machinery, tools, equipment, etc.

Question 2.
Commerce
Answer:
Commerce is that part of business which is concerned with the exchange of goods and services and includes all those activities which directly or indirectly facilitate that exchange. Commerce deals with the distribution aspect of the business. Commerce is a very wide term. It involves the process of bringing goods from the place of production to the place of consumption. In other words, it supplies goods to ultimate consumer.

According to James Stephenson, “Commerce is an organised system for ex-change of goods between members of the industrial world.”

Question 3.
Trade
Answer:

All those activities engaged in buying and selling of goods and services are called trade.
Trade is a branch of Commerce and involves transfers the goods from the producer to the consumer with an intention to earn profit.
The objective of trade is to make goods available to those who need them and willing to pay for them.
Trade may be classified into
1. home trade and
2. foreign trade.

Question 4.
Home Trade
Answer:

The trade carried on within the boundaries of a nation is called Home Trade. Both the buyer and seller.
Home trade is also known as ‘domestic trade’ or ‘internal trade’.
Home trade refers to a trade where buying and selling of goods take place between the persons who belong to the same country.
Home trade is divided into wholesale trade and retail trade.

Question 5.
Foreign Trade
Answer:

Foreign Trade refers to buying and selling of goods and services between two or more countries through international airports and sea ports.
Foreign trade is also known as ‘external trade’ or ‘international trade’.
Foreign trade is again classified into import, export and entrepot trade.

Question 6.
Entrepot Trade
Answer:

When goods are imported from one country and the same are exported to another country, such trade is called entrepot trade.
This type of trade is also known as re-export trade.
e.g.: India importing wheat from U.S. and exporting the same to srilanka.

Question 7.
Genetic Industries
Answer:
Genetic industries are engaged, in reproduction and multiplication of certain species of plants and animals with the object of sale. The main aim is to earn profit from such sales, e.g.: Plant nurseries, Poultry, Fishing, Cattle breeding, etc.

Question 8.
Extractive Industries
Answer:
Extractive industry is concerned with extraction or drawing out goods from the soil, air or water. Generally, products of extractive industries come in raw form and they are used by manufacturing and construction industries for producing finished products.
e.g.: Mining, Coal, Mineral, Oil, Iron ore, extraction of timber and rubber from forests, etc.

Question 9.
Warehousing
Answer:

There is a time gap between production and consumption. In other words, goods, which are produced at one time, are not consumed at the same time. Hence, it becomes necessary to make arrangements for storage or warehousing.
Agricultural commodities like wheat and rice are seasonal in nature but are consumed throughout the year.
On the other hand, goods such as umbrellas and woollen clothes are produced throughout the year but are demanded only during particular seasons.
Therefore, these goods need to be stored in warehouses till they are demanded.
So, it creates time utility by supplying the goods at right time to consumers.

Question 10.
Transportation
Answer:

There is a vast distance between centres of production and centres of con-sumption. Goods are to be moved from place of production to the place where they are demanded.
The activity which is concerned with movement of goods is called transpor-tation. Transport creates place utility.
There are several kinds of transport such as air, water and land transport.
The geographical distance between producers and consumers is removed with the help of transport.

Question 11.
Banking
Answer:

Banking solves the problem of finance. Businessmen receive money and also pay money in large amounts. It is risky to carry large amount of cash from one place to another.
Here comes Banking as a solution. Banking and financial institutions solve the problem of payment and facilitate exchange between buyer and seller.
The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also advance loans in the form of overdrafts, cash credit and discounting of bills of exchange.

Question 12.
Wholesaler
Answer:

Wholesale Trade involves buying and selling of goods in large quantities. Traders who engage themselves in wholesale trade are called ‘Wholesalers’.
Wholesale serves as a connecting link between the producers and the retailers.
Wholesaler sells goods to other businesses, rather than directly to customers.

Question 13.
Retailer
Answer:

Retail Trade involves buying and selling of goods in small quantities. Traders engaged in retail trade are called ‘retailers.
They serve as a connecting link between wholesalers and consumers.
Retail trade is the final stage of distribution.

III. Short Answer Type Questions (4 Marks)

Question 1.
List out types of Industries
Answer:
Classification/ Types of Industry: There are various types of industries.
They are described below:
1. Primary Industry : Primary industry is concerned with production of goods with the help of nature. It is a nature-oriented industry, which requires very little human effort, e.g.: Agriculture, Farming, Forestry, Horticulture etc.

2. Genetic Industry: Genetic industries are engaged, in reproduction and mul-tiplication of certain species of plants and animals with the object of sale. The main aim is to earn profit from such sales, e.g.: Plant nurseries, Poultry, Fishing, Cattle breeding, etc.

3. Extractive Industry : Extractive industry is concerned with extraction or drawing out goods from the soil, air or water. Generally, products of extractive industries come in raw form and they are used by manufacturing and construction industries for producing finished products, e.g. : Mining, Coal, Mineral, Oil, Iron ore, extraction of timber and rubber from forests, etc.

4. Manufacturing Industry : Manufacturing industries are engaged in trans-forming raw materials into finished product with the help of machines and manpower. The finished goods can be either consumer goods or producer goods, e.g.: Textiles, Chemicals, Sugar, Paper, etc. The manufacturing may be analytical, synthetic, processing, and assembling industries.

Analytical: In an analytical industry the basic raw material is broken into several useful materials. For example, in an oil refinery, crude oil is refined and several petroleum products are obtained.
Synthetic : In this type of manufacturing industry two or more materials are mixed to form a new product. For example, Cosmetics, Soap, Fertilizers, Paint industry, etc.
Processing : in the processing industry, material is processed through various stages. For example, in the textile industry, cotton passes through the spinning, weaving, dyeing, bleaching and printing processes.
Assembling: In this type of industry, manufactured components or parts are combined together mechanically or chemically to produce a new product. Manufacture of T.V sets, watches and automobiles are the examples of assembling industries.

5. Construction Industry: Construction industries take up the work of construction of buildings, bridges, roads, dams, canals, etc. This industry is different from all other types of industries. The other industries can produce goods in one place and sell them in another place. But goods produced and sold by constructive industry are erected in one place.

6. Service Industry: In modern times, service sector plays an important role in the development of the nation and therefore it is named as service industry. The main industries, which fall under this category include Banking industry, Hotel industry, Tourism industry, Entertainment industry, etc.

Question 2.
How Trade is classified ?
Answer:
Trade is a branch of Commerce. It connects buying and selling activities. An in-dividual who does trade is called a trader. Trader transfers the goods from the producer to the consumer. He earns profit from this activity.
Trade may be classified into
1. Home trade and
2. Foreign trade.
1. Home Trade: Home trade is also known as ‘domestic trade’ or ‘internal trade’. Home trade is carried on within the boundaries of a nation. Both the buyer and seller belong to the same country. Home trade again is of two types :
a. Wholesale Trade: It involves buying and selling of goods in large quantities. Traders who engage themselves in wholesale trade are called ‘Wholesalers’. Wholesale serves as a connecting link between the producers and the retailers.
b. Retail Trade : It involves buying and selling of goods in small quantities. Traders engaged in retail trade are called ‘retailers. They serve as a con-necting link between wholesalers and consumers. Retail trade is the final stage of distribution.

2. Foreign Trade: It refers to buying and selling of goods and services between two or more countries through international airports and sea ports Foreign trade is also known as ‘external trade’ or ‘international trade. Foreign trade is again classified into three categories as mentioned below:

Export Trade: It means the sale of goods to foreign countries. For example, India exports tea to the United Kingdom.
Import Trade: It refers to the purchase of goods from foreign countries. For example, India buys petrol from Iran.
Entrepot Trade : It means importing (buying) goods from one country to export (selling) them to another country. This type of trade is also known as re-export trade.

Question 3.
What are the hindrances involved in Commerce ?
Answer:
Commerce is an organised system which facilitates the free flow of goods and services. The produced goods and services face various types of hindrances to reach the customers. Commerce removes these hindrances and helps to distribute products and achieving the business’s desired goals.
Following are some of the hindrances in commerce :
1. Hindrance of Person : Trade is done by buyers and sellers, in exchange for money. The sellers sell the goods and services to the buyers. Therefore, by handing over products or services, personal hindrances can be removed.

2. Hindrance of Place : Goods are produced in a limited number of production centres, whereas consumers are located everywhere. Transportation removes the hindrance of place. It implies conveyance of goods and passengers from one place to another. It creates place utility.

3. Hindrance of Finance : Banking services remove the hindrance of financial problems. It facilitates trade by providing credit in various forms.

4. Hindrance of Time and Duration: There is a time gap between production and consumption. The goods produced are not immediately required for consump-tion. Warehousing removes the hindrance of time and duration. It preserves the goods from the time of production to the time of consumption. It creates time utility.

5. Hindrance of Risk: Business involves risk. Risk and uncertainty are inherent in any business. Insurance stands for protection significant against risk. So it removes the hindrance of risk. The risk of businessman is reduced by several types of insurance such as fire insurance, transit insurance, marine insurance, factory insurance, insurance on stocks and assets etc.

6. Hindrance of Knowledge and Information: Advertisement helps to eliminate the hindrance of knowledge. It informs the customers about the availability of various products. Communication helps in the efficient operation of commercial activities. Thus, it removes the hindrance of information.

Question 4.
Trace out the various types of Aids to Trade.
Answer:
Trade or exchange of goods involves several difficulties, which can be removed by auxiliaries to trade or aids to trade. It refers to all those activities, which directly or indirectly facilitate smooth exchange of goods and Services.
The various aids to trade in commerce are explained in the following points :
1. Transport : There is a vast distance between centres of production and centres of consumption. This difficulty is removed by transport. Transport creates place utility. There are several kinds of transport such as air, water and land transport. The geographical distance between producers and consumers is removed with the help of transport.

2. Communication: Communication means transmitting or exchanging infor-mation from one person to another. It can be oral or in writing. It is necessary to communicate information from one person to another to finalise and settle the terms of sales such as prices of goods, discount allowed, facility of credit, etc. Modern means of communication like telephone, telex, telegraph, email, teleconference, etc., play an important role in establishing contact between businessmen, producers and consumers.

3. Warehousing: There is a time gap between production and consumption. In other words, goods, which are produced at one time, are not consumed at the same time. Hence, it becomes necessary to make arrangements for storage or warehousing. Agricultural commodities like wheat and rice are seasonal in nature but are consumed throughout the year. On the other hand, goods such as umbrellas and woollen clothes are produced throughout the year but are demanded only during particular seasons. Therefore, these goods need to be stored in warehouses till they are demanded. So it creates time utility, (by supplying the goods at right time to consumers)

4. Insurance: Insurance reduces the problem of risks. Business is subject to risks and uncertainties. These are inevitable in the field of business. Risks may be due to fire, theft, accident or any other natural calamity. Insurance companies who act as risk bearer cover risks. Insurance tries to reduce risks by spreading them out over a larger number of people.

5. Banking: Banking solves the problem of finance. Businessmen receive money and also pay money in large amounts. It is risky to carry large amount of cash from one place to another. Here comes Banking as a solution. Banking and financial institutions solve the problem of payment and facilitate exchange between buyer and seller. The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also ad-vance loans in the form of overdrafts, cash credit and discounting of bills of exchange.

6. Advertising: Advertising fills the knowledge gap. Exchange of goods and services is possible only if producers can bring the products to the consumers. Advertising and publicity are important medias of mass communication. Ad-vertising helps consumers to know about the various brands manufactured by several manufacturers. The media used to advertise products are Radio, Newspapers, Magazines, TV, Internet, etc.

Question 5.
What do you understand by commerce.
Answer:
1. Commerce is that part of business which is concerned with the exchange of goods and services and includes all those activities which directly or indirectly facilitate that exchange.
2. Commerce deals with the distribution aspect of the business. Whatever is produced it must be consumed. To facilitate this consumption there must be a proper distribution channel. Here comes the need for commerce which is concerned with the smooth buying and selling of goods and services.
3. Commerce is a very wide term. It involves the process of bringing goods from
the place of production to the place of consumption. In other words, it supplies goods to ultimate consumer.

COMMERCE = TRADE + AIDS TO TRADE

Importance of Commerce:

Commerce tries to satisfy increasing human wants.
Commerce helps to increase our standard of living.
Commerce links producers and consumers.
Commerce generates employment opportunities.
Commerce increases national income and wealth.
Commerce helps in expansion of aids-to-trade.
Commerce encourages international trade.
Commerce benefits underdeveloped countries.
Commerce helps during emergencies.

Question 6.
How foreign Trade is classified.
Answer:
Foreign Trade: It refers to buying and selling of goods and services between two or more countries through international airports and sea ports Foreign trade is also known as ‘external trade’ or ‘international trade’.
Foreign trade is again classified into three categories as mentioned below:

Export Trade: It means the sale of goods to foreign countries.
For example: India exports tea to the United Kingdom.
Import Trade: It refers to the purchase of goods from foreign countries.
For example : India buys petrol from Iran.
Entrepot Trade: It means importing (buying) goods from one country to export (selling) them to another country. This type of trade is also known as re-export trade.

IV. Essay Type Questions (8 Marks)

Question 1.
What is meant by Industry ? Explain various types of Industries with suitable example.
Answer:
The production side of business activity is referred to as industry. It is a business activity, which is related to the extracting, producing, processing or manufacturing of goods.
The goods may be consumer goods or producer goods. Consumer goods are the goods, which are used finally by consumers. e-g-: food grains, textiles, cosmetics. VCR etc. Producer’s goods are the goods used by manufacturers.for producing some other goods. e.g.: raw materials, machinery, tools, equipment, etc. Classification/ Types of Industry:
There are various types of industries. They are described below:

Primary industry
Genetic industry
Extractive industry
Manufacturing industry
Construction industry
Service industry

1. Primary Industry : primary industry is concerned with production of goods with the help of nature. It is a nature-oriented industry, which requires very little human effort. E.g. Agriculture, Farming, Forestry, Horticulture etc.

2. Genetic Industry: Genetic industries are engaged, in reproduction and mul-tiplication of certain species of plants and animals with the object of sale. The main aim is to earn profit from such sales. E-g-: plant nurseries, Poultry. Fishing, Cattle breeding, etc.

3. Extractive Industry : Extractive industry is concerned with extraction oi drawing out goods from the soil, air or water. Generally, products of extractive industries come in raw form and they are used by manufacturing and construc-tion industries for producing finished products. E.g.: Mining, Coal, Mineral. Oil, Iron ore, extraction of timber and rubber from forests, etc.

4. Manufacturing Industry : Manufacturing industries are engaged in trails forming raw materials into finished product with the help of machines and manpower. The finished goods can be either consumer goods or producer goods. E.g.: Textiles, Chemicals, Sugar, Paper, etc. The manufacturing may be analytical, synthetic, processing, and assembling industries.

Analytical: In an analytical industry the basic raw material is broken into several useful materials. For example, in an oil refinery, crude oil is refined and several petroleum products are obtained.
Synthetic : In this type of manufacturing industry two or more materials are mixed to form a new product. For example, Cosmetics, Soap, Fertilizers, Paint industry, etc.
Processing: In the processing industry, material is processed through various stages. For example, in the textile industry, cotton passes through the spinning, weaving, dyeing, bleaching and printing processes.
Assembling: In this type of industry, manufactured components or parts are combined together mechanically or chemically to produce a new product. Manufacture of T.V sets, Watches and Automobiles are the examples of assembling industries.

5. Construction Industry: Construction industries take up the work of construc-tion of buildings, bridges, roads, dams, canals, etc. This industry is different from all other types of industries. The other industries can produce goods in one place and sell them in another place. But goods produced and sold by constructive industry are erected in one place.

Question 2.
What is Commerce ? Describe the various branches of Commerce.
Answer:
Meaning of Commerce:
Commerce is that part of business which is concerned with the exchange of goods and services and includes all those activities which directly or indirectly facilitate that exchange.

Commerce deals with the distribution aspect of the business. Whatever is produced it must be consumed. To facilitate this consumption there must be a proper distribution channel. Here comes the need for commerce which is concerned with the smooth buying and selling of goods and services.

Commerce is a very wide term. It involves the process of bringing goods from the place of production to the place of consumption. In other words, it supplies goods to ultimate consumer.

Definition of Commerce:
According to James Stephenson, “Commerce is an organised system for exchange of goods between members of the industrial world.”
Commerce can also be defined as “the sum total of those processes which are engaged in the removal of hindrances of person, place and time in the exchange of commodities”.
Commerce = Trade + Aids to Trade

Branches of Commerce:
Commerce is divided into two branches. They are :
1. Trade
2. Aids to trade

1. Trade: Trade is a branch of Commerce. It connects buying and selling activi-ties. An individual who does trade is called a trader. Trader transfers the goods from the producer to the consumer. He earns profit from this activity. Other activities of Commerce such as transport, insurance, warehousing, banking and advertising revolve around the trade. In brief, trade is the nucleus of commerce.
Trade may be classified into two types:
i) Home trade
ii) Foreign trade

i) Home Trade : Home trade is also known as ‘domestic trade’ or ‘internal trade’. Home trade is carried on within the boundaries of a nation. Both the buyer and seller belong to the same country. Home trade again is of two types : (a) wholesale trade and (b) retail trade.

Wholesale Trade: It involves buying and selling of goods in large quan-tities. Traders who engage themselves in wholesale trade are called ‘Wholesalers’. Wholesale serves as a connecting link between the pro-ducers and the retailers.
Retail Trade: It involves buying and selling of goods in small quantities. Traders engaged in retail trade are called ‘retailers’. They serve as a connecting link between wholesalers and consumers. Retail trade is the final stage of distribution.

ii) Foreign Trade: It refers to buying and selling of goods and services between two or more countries through international airports and sea ports Foreign trade is also known as ‘external trade’ or ‘international trade. Foreign trade is again classified into three categories as mentioned below:

Export Trade: It means the sale of goods to foreign countries. For example, India exports tea to the United Kingdom.
Import Trade: It refers to the purchase of goods from foreign countries. For example, India buys petrol from Iran.
Entrepot Trade: It means importing (buying) goods from one country to export (selling) them to another country. This type of trade is also known as re-export trade.

2. Aids to Trade: Trade or exchange of goods involves several difficulties, which can be removed by auxiliaries to trade or aids to trade. It refers to all those activities, which directly or indirectly facilitate smo oth exchange of goods and services.

Aids to trade include Transport, Communication, Warehousing, Banking, Insur-ance, and Advertising. Auxiliaries ensure a smooth flow of goods from producers to the consumers. The various aids to trade in commerce are explained in the following points:
i) Transport :There is a vast distance between centres of production and centres of consumption. This difficulty is removed by transport. Transport creates place utility. There are several kinds of transport such as air, water and land transport. The geographical distance between producers and consumers is removed with the help of transport.

ii) Communication: Communication means transmitting or exchanging information from one person to another. It can be oral or in writing. It is necessary to communicate information from one person to another to finalise and settle the terms of sales such as prices of goods, discount allowed, facility of credit, etc. Modern means of communication like telephone, telex, telegraph, email, teleconference, etc., play an important role in establishing contact between businessmen, producers and consumers.

iii) Warehousing: There is a time gap between production and consumption. In other words, goods, which are produced at one time, are not consumed at the same time. Hence, it becomes necessary to make arrangements for storage or warehousing. Agricultural commodities like wheat and rice are seasonal in nature but are consumed throughout the year. On the other hand, goods such as umbrellas and woollen clothes are produced throughout the year but are demanded only during particular seasons. Therefore, these goods need to be stored in warehouses till they are demanded. So it creates time utility, (by supplying the goods at right time to consumers)

iv) Insurance : Insurance reduces the problem of risks. Business is subject to risks and uncertainties. These are inevitable in the field of business. Risks may be due to fire, theft, accident or any other natural calamity. Insurance companies who act as risk bearer cover risks. Insurance tries to reduce risks by spreading them out over a larger number of people.

v) Banking : Banking solves the problem of finance. Businessmen receive money and also pay money in large amounts. It is risky to carry large amount of cash from one place to another. Here comes Banking as a solution. Banking and financial institutions solve the problem of payment and facilitate exchange between buyer and seller. The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also advance loans in the form of overdrafts, cash credit and discounting of bills of exchange.

vi) Advertising: Advertising fills the knowledge gap. Exchange of goods and ser-vices is possible only if producers can bring the products to the consumers. Advertising and publicity are important Medias of mass communication. Ad-vertising helps consumers to know about the various brands manufactured by several manufacturers. The media used to advertise products are Radio, Newspapers, Magazines, TV, Internet, etc.

Question 3.
Define Trade and explain the various types of aids to Trade.
Answer:
Trade: Trade is a branch of Commerce. It connects buying and selling activities. An individual who does trade is called a trader. Trader transfers the goods from the producer to-the consumer. He earns profit from this activity. Other activities of Commerce such as transport, insurance, warehousing, banking and advertising revolve around the trade. In brief, trade is the nucleus of commerce.

Aids to Trade: Trade or exchange of goods involves several difficulties, which can be removed by auxiliaries to trade or aids to trade. It refers to all those activities, which directly or indirectly facilitate smooth exchange of goods and services.

Aids to trade include Transport, Communication, Warehousing, Banking, Insurance, and Advertising. Auxiliaries ensure a smooth flow of goods from producers to the consumers.
The various aids to trade in commerce are explained in the following points :
i) Transport: There is avast distance between centres of production and centres of consumption. This difficulty is removed by transport. Transport creates place utility. There are several kinds of transport such as air, water and land transport. The geographical distance between producers and consumers is removed with the help of transport.

ii) Communication: Communication means transmitting or exchanging infor mation from one person to another. It can be oral or in writing. It is necessary to communicate information from one person to another to finalise and settle the terms of sales such as prices of goods, discount allowed, facility of credit, etc. Modern means of communication like telephone, telex, telegraph, email, teleconference, etc., play an important role in establishing contact between businessmen, producers and consumers.

v) Banking: Banking solves the problem of finance. Businessmen receive money and also pay money in large amounts. It is risky to carry large amount of cash from one place to another. Here comes Banking as a solution. Banking and financial institutions solve the problem of payment and facilitate exchange between buyer and seller. The businessmen may also require short-term and long-term funds. Banks provide such finance to businessmen. Banks also advance loans in the form of overdrafts, cash credit and discounting of bills of exchange.

Question 4.
Narrate the importance of Commerce.
Answer:
Commerce is that part of business which is concerned with the exchange of goods and services and includes all those activities which directly or indirectly facilitate that exchange.

According to James Stephenson, “Commerce is an organised system for exchange of goods between members of the industrial’world.”
Importance of Commerce: The importance of Commerce is explained below:

Commerce tries to satisfy increasing human wants.
Commerce helps to increase our standard of living.
Commerce links producers and consumers.
Commerce generates employment opportunities.
Commerce increases national income and wealth.
Commerce helps in expansion of aidsto-trade.
Commerce encourages international trade.
Commerce benefits underdeveloped countries.
Commerce helps during emergencies.

1. Commerce tries to satisfy increasing human wants: Human wants are never ending. Commerce has made distribution and movement of goods possible from one part of the world to the other. Today we can buy anything produced anywhere in the world.

2. Commerce helps to increase our standard of living : Standard of living refers to the quality of life enjoyed by the members of a society. When a man con-sumes more products his standard of living improves. Commerce helps us to get what we want at the right time, right place, and at the right price and thus helps us in improving our standard of living.

3. Commerce links producers and consumers: Production is meant for ultimate consumption. Commerce makes possible to link producers and consumers through wholesalers and retailers and also through the aids to trade. Thus, Commerce creates and facilitates the contact between the centres of production and consumption and links them.

4. Commerce generates employment opportunities: The growth of commerce, industry and trade caused the growth of agencies of trade such as banking, transport, warehousing, insurance, advertising, etc. These agencies need peo- pie to look after their functioning. Thus, development of commerce generates more and more employment opportunities.

5. Commerce increases national income and wealth: When production increases, national income also increases. It also helps to earn foreign exchange by way of exports and duties levied on imports.

6. Commerce helps in expansion of aids-to-trade: With the growth in trade and commerce there is a growing need for expansion and modernisation of aids to trade. Aids to trade such as banking, communication, advertising and publicity, transport, insurance, etc., are expanded and modernised for the smooth conduct of commerce.

7. Commerce encourages international trade : With the help of transport and communication development, countries can exchange their surplus commodities and earn foreign exchange. Thus, commerce ensures faster economic growth of the country.

8. Commerce benefits underdeveloped countries : Underdeveloped countries can import skilled labour and technical know-how from developed countries, while the advanced countries can import raw materials from underdeveloped countries. This helps in laying down the seeds of industrialization in the un-derdeveloped countries.

9. Commerce helps during emergencies: During emergencies like floods, earth-quakes, and wars, commerce helps in reaching the essential requirements like foodstuff, medicines, and relief measures to the affected areas.

Question 5.
Explain the hindrances involved in Commerce.
Answer:
Commerce is an organised system which facilitates the free flow of goods and services. In business, products and services are produced through industry. The produced goods and services face various types of hindrances to reach the cus-tomers.’Commerce removes these hindrances and helps to distribute products and achieving the business’s desired goals.

Hindrances in Commerce:
Following are some of the hindrances in commerce :

Hindrance of Person
Hindrance of Place
Hindrance of Finance
Hindrance of Time and Duration
Hindrance of Risk
Hindrance of Knowledge and Information

1. Hindrance of Person: Trade is done by buyers and sellers, in exchange for money. The sellers sell the goods and services to the buyers. Therefore, by handing over products or services, personal hindrances can be removed.

2 Hindrance of Place: Goods are produced in a limited number of production cen-tres, whereas consumers are located everywhere. Transportation removes the hindrance of place. It implies conveyance of goods and passengers from one place to another. It creates place utility.

3 Hindrance of Finance : Banking services remove the hindrance of financial problems. It facilitates trade by providing credit in various forms.

4. Hindrance of Time and Duration : There is a time §aP between production and consumption! The goods produced are not immediately required for consumption. Warehousing removes the hindrance of time and duration. It preserves the goods from the time of production to the time of consumption. It creates time utility.

5 Hindrance of Risk: Business involves risk. Risk and uncertainty are inherent in any business. Insurance stands for protection significant against risk. So it removes the hindrance of risk. The risk of businessman is reduced by several types of insurance such as fire insurance, transit insurance, marine insurance, factory insurance, insurance on stocks and assets etc.

6. Hindrance of Knowledge and Information : Advertisement helps to eliminate the hindrance of knowledge. It informs the customers about the availability of various products. Communication helps in the efficient operation of commercial activities. Thus, it removes the hindrance of information.

Business Activities Class 11 Questions and Answers AP Inter 1st Year Commerce 2nd Lesson

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