Class 11 BST Chapter 1 Business, Trade and Commerce

Let’s be honest. Business Studies can feel a little too theoretical at times. With so many definitions, concepts, and distinctions to remember, it’s easy to feel overwhelmed. 

But here’s the truth: BST shouldn’t be about mugging up pages of jargon but instead about understanding how the real business world works, and being able to connect concepts to everyday situations around you.

No more jumping from one book to another. These notes are all you need: complete, concise, and super student-friendly.

Class 11 Business, Trade and Commerce Notes

Business is an essential part of economic activity. It includes all those activities that are related to the production, distribution, and exchange of goods and services with the primary motive of earning profit. 

Since ancient times, business has played a vital role in the development of civilizations, economies, and societies. 

The modern business world has evolved significantly from barter systems to e-commerce, but the fundamental objectives remain similar, satisfying human wants and making profits.

What is Business?

The word “business” comes from “busy”, meaning being actively engaged in something. In simple terms, business is any economic activity that deals with producing or exchanging goods and services to earn profit. It’s not just about selling; it involves regular dealings, investments, and taking risks.

Key Features of Business:

• Profit-oriented: The main goal is to earn profit.
• Deals in goods and services: Business involves both products and services.
• Continuous activity: It’s an ongoing process, not a one-time effort.
• Risk and uncertainty: Every business faces potential losses and market risks.
• Capital requirement: Money or resources are needed to start and run a business.
• Satisfies human needs: Business exists to meet the demands of people.

Objectives of Business

Although earning profit is the main objective of business, a business cannot survive on profit alone. To grow in the long run and stay competitive, businesses focus on several other important objectives as well.

• Market Standing: Businesses aim to build a good reputation, gain customer trust, and create a strong position in the market to face competition confidently.
• Innovation: Introducing new products, improved services, or better production methods helps businesses stay relevant and meet changing customer needs.
• Productivity: Businesses try to achieve maximum output with minimum input. Higher productivity means lower costs and better profits.
• Proper Use of Physical and Financial Resources: Efficient use of machines, raw materials, money, and manpower helps reduce wastage and improves overall performance.
• Manager Performance and Development: Businesses focus on developing skilled managers who can plan, organise, and take effective decisions for business growth.
• Worker Performance and Attitude: Motivating employees through fair wages, incentives, and good working conditions improves efficiency and creates a positive work environment.
• Social Responsibility: A business also has a duty towards society. It should protect the environment, provide quality products, generate employment, and contribute to social welfare.

Comparison Between Economic and Non-Economic Activities

Economic activities are those activities that are performed to earn a livelihood or generate income. These activities involve the production, distribution, or exchange of goods and services and are measurable in monetary terms. Examples include business, profession, and employment.

On the other hand, non-economic activities are undertaken not for money but for emotional, social, or moral satisfaction. These activities are driven by feelings such as love, sympathy, patriotism, or personal interest. Examples include a mother cooking for her family, helping the needy, or volunteering at an NGO.

Types of Economic Activities

Economic activities are broadly classified into three main categories:

1. Business: Business involves the production or purchase and sale of goods and services with the primary aim of earning profit. It requires regular transactions, investment of capital, and involves risk.

2. Profession: A profession involves providing specialised and expert services to clients. It requires formal education, training, and a recognised qualification. Examples include doctors, lawyers, chartered accountants, and architects.

3. Employment: Employment refers to working under an employer in return for wages or salary. The employee follows the terms and conditions of service and bears little or no business risk.

Each of these economic activities differs in terms of investment, risk, legal requirements, degree of independence, and reward, making them suitable for different individuals and situations.

Industry, Commerce and Trade

Business activities are broadly divided into two major categories: Industry and Commerce. Both are essential for the smooth functioning of economic activities and together help in satisfying human wants.

Industry

Industry refers to all economic activities that are concerned with the production, processing, or extraction of goods. It involves converting natural resources into useful products that can be used by consumers or further processed by other industries.

Industries are classified into the following types:

1. Primary Industry

Primary industries are concerned with extracting and producing natural resources directly from nature. These industries form the base of all economic activities.

• Extractive Industry: Involves extraction of natural resources from the earth, sea, or forests.
  Examples: mining, fishing, forestry, oil extraction
• Genetic Industry: Involves breeding plants and animals to increase their population or improve quality.
  Examples: animal husbandry, poultry farming, seed production

2. Secondary Industry

Secondary industries use raw materials obtained from primary industries to manufacture finished or semi-finished goods.

• Manufacturing Industry: Converts raw materials into useful products.
  Examples: textile factories, automobile industries, food processing units
• Construction Industry: Involved in construction of infrastructure and buildings.
  Examples: roads, bridges, dams, houses, schools

3. Tertiary Industry

Tertiary industries provide supporting services to primary and secondary industries. They do not produce goods but help in the smooth functioning of business activities.
Examples: transport, banking, warehousing, insurance, communication services

Commerce

Commerce refers to all those activities that help in the exchange and distribution of goods and services from producers to consumers. It removes obstacles related to place, time, finance, risk, and information.

Commerce includes two main components:

1. Trade

Trade involves the buying and selling of goods and services with the objective of earning profit.

2. Aids to Trade

These are services that support and facilitate trade activities. They include:

• Banking: Provides finance and credit facilities
• Transport: Helps in movement of goods
• Warehousing: Stores goods until they are needed
• Insurance: Protects against business risks
• Advertising: Creates awareness about products
• Communication: Enables information flow between buyers and sellers

Trade

Trade is an important part of commerce and focuses specifically on the exchange of goods and services between buyers and sellers.

Types of Trade

Trade is classified into two main types:

1. Internal (Domestic) Trade

Trade that takes place within the boundaries of a country.

• Wholesale Trade: Goods are sold in large quantities to retailers
• Retail Trade: Goods are sold in small quantities directly to consumers

2. External (Foreign) Trade

Trade that takes place between two or more countries.

• Import Trade: Buying goods from other countries
• Export Trade: Selling goods to other countries
• Entrepot Trade: Importing goods for the purpose of re-export after processing or repackaging

Aids to Trade

Trade does not function on its own. To make the buying and selling of goods smooth and efficient, several supporting services are required. These services are known as Aids to Trade. They help remove obstacles related to distance, finance, risk, storage, and information.

The main aids to trade are:

1. Transport and Communication

Transport helps in the physical movement of goods from producers to consumers across different places. Communication helps in sharing information, placing orders, and coordinating business activities.

Examples: railways, roads, shipping, postal services, internet, telephones

2. Banking and Finance

Banking services provide the necessary capital and credit facilities required to start and run a business. They help in payments, money transfer, loans, and savings, making trade convenient and secure.

3. Warehousing

Warehousing involves the storage of goods until they are sold or needed for consumption. It helps businesses maintain a continuous supply of goods and protects them from damage or spoilage.

4. Insurance

Insurance provides financial protection against business risks such as fire, theft, accidents, and natural calamities. It reduces uncertainty and gives businesses the confidence to operate smoothly.

5. Advertising

Advertising helps in promoting products, informing consumers, and creating awareness about goods and services. It plays an important role in increasing sales and building brand image.

Historical Background of Trade and Commerce in India

India has a long and interesting history of trade. From ancient times, we were already connecting with far-off lands.

Ancient Trade

• The Indus Valley Civilization had trade links with Mesopotamia.
• This shows India was involved in international trade even thousands of years ago.

Maurya Empire

• Trade routes like Uttarapatha and Dakshinapatha helped move goods across the country.
• Internal trade flourished, connecting cities and regions efficiently.

Medieval Period

• Indian traders exported spices, textiles, and handicrafts to Arab and European merchants.
• India became famous for quality goods and active trading networks.

British Era

• Trade policies favoured Britain, hurting local businesses and industries.
• Indian traders had limited freedom and profits were mostly for the colonizers.

Post-Independence

• Economic reforms helped revive trade and commerce.
• Focus shifted to boosting local industries, entrepreneurship, and modern business growth.

FAQs

Q1. What are the main objectives of business?

Ans. The main objectives are earning profit, building a strong market reputation, promoting innovation, improving productivity, efficiently using resources, developing managers and workers, and fulfilling social responsibility.

Q2. What is trade?

Ans. Trade is the buying and selling of goods and services. It can be internal (within the country) or external (with other countries).

Q3. What are the types of industries?

Ans. Industries are classified into three types:

• Primary: extracting natural resources (e.g., mining, agriculture)
• Secondary: making products from raw materials (e.g., manufacturing, construction)
• Tertiary: services supporting other industries (e.g., transport, banking, warehousing)

Q4. What are auxiliaries to trade?

Ans. Auxiliaries to trade are services that support trade, like transport, warehousing, banking, insurance, advertising, and communication.

Q5. Why is profit important in business?

Ans. Profit is the reward for taking risks, helps the business grow and survive, and allows it to provide better goods and services.