NCERT Notes Class 11 Business Studies Chapter 1: Business, Trade and Commerce (Free PDF)

This chapter introduces the concept of business as an economic activity involving production, sale of goods and services to satisfy human needs with a profit motive. It explains the role of business in economic development, classification into industry and commerce, objectives, risks, and factors for starting a business. These notes summarise key concepts from Chapter 1 of the NCERT textbook Business Studies for effective revision. You can also download the free PDF for quick reference.

Explore Notes of Class 11: Business Studies

Chapter 2

Chapter 3

Chapter 4

Chapter 5

Download Free PDF of NCERT Notes Class 11 Business Studies Chapter 1: Business, Trade and Commerce

Introduction  

Human beings require goods and services to satisfy needs, obtained from markets where sellers offer varieties. Business supplies these through production, manufacturing, distribution and exchange. It is a major economic activity central to daily lives, including industry and commerce.

• People require different products and services; they buy from physical or electronic markets.  
• Products made available by people engaged in economic activities: production, manufacturing, distribution, exchange.  
• Business is concerned with the production and sale of goods and services required by people.  
• Influenced by institutions like schools, hospitals, businesses has a major influence on daily lives.  
• Business starts with production, ends with consumption; it involves a series of steps.  
• Production of goods under Industry; remaining activities under Commerce.  
• Business is a wider term including Industry, trade and commerce.

Role of Business in the Development of the Economy  

Business, including trade and commerce, played a vital role since ancient times in India’s prosperity through internal and foreign trade via land and water routes. Generated surplus, supported various economic activities, banking, led to trade centres, favourable balance of trade.

• Trading activities mainstay in ancient times; carried by water and land routes, the Silk Route, and maritime trade were prominent.  
• Goods traded internally and to foreign lands; generated surplus income.  
• People engaged in agriculture, animal domestication, weaving, dyeing, pottery, handicrafts, sculpting, cottage industries, and masonry.  
• Family-based workshops (karkhanas) are important.  
• Money channelised into investment; growth of indigenous banking: Hundi, Chitties.  
• Hundi: document to facilitate money transfer; warrant unconditional payment; capable of transfer by negotiation; written in vernacular; safe due to travel risks.  
• Credit transactions, loans, and enhanced operations.  
• Favourable balance of trade: exports > imports.  
• Indigenous banking provided capital to manufacturers, traders, and merchants.  
• Commercial and industrial banks evolved for trade/commerce; agricultural banks for farmers.  
• Trade centres: Patliputra, Peshawar, Taxila, Indraprastha, Mithila, Maduram, Surat, Ujjain, Kanchi.  
• Exports: Spices, wheat, sugar, indigo, opium, sesame oil, cotton, parrot, live animals, animal products.  
• Imports: Horses, animal products, Chinese silks, linen, wine, gold, silver, copper.  
• Towns: port, manufacturing, mercantile, sacred, pilgrimage; index of prosperity of merchants, professionals.  
• Aids to trade: transportation, banking, finance, communication.  
• India is called ‘Swaran Bhoomi and Swaran Deep’ by travellers: Megasthenes, Faxian, Xuanzang, Al Beruni, Ibn Batuta, Francois.  
• 1st-7th centuries CE: India largest economy, 1/3 to 1/4 world’s wealth.  
• British era: The East India Company used revenues to buy Indian goods; India became an exporter of raw materials, an importer of manufactured goods.  
• Post-independence: Planned development for a self-reliant socialist society; centralised planning, public investment in key industries, modern industries, tech institutes, space, and nuclear.  
• Issues: lack of capital formation, population rise, weak finance, inadequate infrastructure, high defence expenditure, fiscal deficits, and balance of payments deficits.  
• Major reforms in fiscal, monetary, trade, industry, agriculture, infrastructure, foreign exchange, and investment.  
• Faster-growing economy, preferred FDI; rising incomes, savings, investment, consumption, young population.  
• High growth sectors; initiatives: Make in India, Skill India, Digital India for exports/imports.

Concept of Business  

Business derived from ‘busy’; means regular engagement in the purchase, production, and sale of goods/services for profit. Economic activity to earn a livelihood differs from non-economic activity done out of love, sympathy.

• Business: An occupation people regularly engage in activities related to the purchase, production and/or sale of goods/services to earn profits. It is an economic activity involving the production and sale of goods/services with a profit motive to satisfy human needs in society.
• Activities to satisfy needs: economic (earn a livelihood) and non-economic (love, sympathy, sentiment, patriotism).  
• Examples economic: a worker in a factory, a doctor in a clinic, a manager in an office, a teacher in school.  
• Examples non-economic: a housewife cooking for her family, a boy helping an old man cross the road.  
• Economic activities: business, profession, employment.  

Characteristics of Business Activities  

Business is economic activity for money; it involves production/procurement, regular sale/exchange for value, profit motive, uncertainty of return, and an element of risk. Differs from other activities in these distinguishing features.

(i) Economic activity is for earning money/livelihood, not love/affection; small (shopkeeper) or large (company).  

(ii) Production/procurement of goods/services: These are the manufacture or acquisition from producers; goods: consumable (sugar, pen) or capital (machinery); services: transportation, banking, electricity.  

(iii) Sale/exchange for value: They transfer goods/services; not for personal consumption (cooking at home, not business; in a restaurant is).  

(iv) Regular dealings: These are not a single transaction (selling a radio set once, not a business; regularly is).  

(v) Profit earning: Profit earning is the main purpose; survive long-term; maximise by increasing sales/reducing costs.  

(vi) Uncertainty of return: They are due to the lack of knowledge of the profit amount, the possibility of losses despite efforts.  

(vii) Element of risk: It means the uncertainty of loss from unfavourable events; factors: consumer taste, production method, strike, competition, fire, theft, accidents, calamities; cannot be eliminated.

Comparison of Business, Profession and Employment  

Economic activities are divided into business (profit motive, regular production/sale), profession (specialised knowledge, fees), and employment (work for wages/salary). Differences based on mode, qualification, reward, risk, capital, and transfer.

•  Business: production/sale for profit; no minimum qualification; reward profit; risk present; capital investment needed; not transferable.  
• Profession: Profession is the personalised service with expertise, qualification/training; fee; no/low risk, limited capital, personal, not transferable.  
• Employment: Employment is the fixed work for an employer; qualification per job; salary/wages; no risk; no capital; not transferable.

Classification of Business Activities  

Business activities are classified into industry (production/processing goods) and commerce (facilitating exchange). Industry: primary, secondary, tertiary. Commerce: trade and auxiliaries (transport, banking, insurance, warehousing, communication, packaging, advertising).

• Two categories: industry and commerce.  
• Industry: It involves the production/processing of goods/materials; mechanical appliances, technical skills; breeding animals; groups of firms (cotton textile industry).  
• Commerce: Commerce activities are for the exchange of goods/services; the link between producers/consumers.

Industry  

Industry: economic activities converting resources into useful goods; it involves mechanical appliances, technical skills, producing/processing goods, and breeding animals. Classified primary (extraction, genetic), secondary (manufacturing, construction), tertiary (support services to industry/trade).

• Connected with the conversion of resources into useful goods.  
• Includes producing/processing goods, breeding/raising animals.  
• Groups: e.g., cotton textile industry, all units producing cotton textiles.  
• Services like banking and insurance are called the industry (banking industry).  

(i) Primary: Primary activities are the extraction/production of natural resources, the reproduction of living organisms.  

  (a) Extractive: It draws from natural sources; basic raw materials, e.g., farming, mining, lumbering, hunting, and fishing.  

  (b) Genetic: These are the breeding plants/animals for reproduction; e.g., seeds/nursery, cattle breeding, poultry, fish hatchery.  

(ii) Secondary: Secondary activities use materials from primary; process for consumption/further processing.  

  (a) Manufacturing: It is the process of raw materials being transformed into finished products.  

    • Analytical: separates elements (oil refinery).  

    • Synthetical: combines ingredients (cement).  

    • Processing: successive stages (sugar, paper).  

    • Assembling: component parts into a product (television, car, computer).  

  (b) Construction: buildings, dams, bridges, roads, tunnels, canals; engineering, architectural skills.  

(iii) Tertiary: Tertiary activities support primary/secondary, trade, service facilities; part of commerce; e.g., transport, banking, insurance, warehousing, communication, packaging, advertising.

Commerce  

Commerce means the trade (buying/selling) and auxiliaries (transport, banking, insurance, communication, advertisement, packaging, warehousing). Removes hindrances of persons, place, time, risk, finance, and information in the exchange process; maintains the flow of goods/services.

• Two types: (i) trade, (ii) auxiliaries to trade.  
• Trade is the buying/selling of goods.  
• Auxiliary facilitates purchase/sale; services.  
• It includes trade + auxiliaries (transport, banking, etc.).  
• Link between producers/consumers.  
• Removes hindrances in exchange:  

(i) Persons: trade makes goods available from producers to consumers.  

(ii) Place: transport moves goods from production to markets. 

(iii) Time: storage/warehousing holds stocks.  

(iv) Risk: insurance protects against theft, fire, and accidents.  

(v) Finance: banking/financing provides capital.  

(vi) Information: advertising informs about goods/services.

Also Read: NCERT Notes Class 11 English Hornbill Poem 4: Childhood (Free PDF)

Trade and Auxiliaries to Trade  

Trade is the sale or transfer/exchange of goods (physical/virtual), making goods available to consumers. Auxiliaries: services facilitating industry/trade; remove hindrances; include transport/communication, banking/finance, insurance, warehousing, advertising/PR. Essential for large-scale production/distribution.

• Trade: It is an essential part of commerce; it makes produced goods available to consumers/users.  
• Large-scale production; producers cannot reach individual buyers; traders bridge.  
• Auxiliaries assist trade, services, and support industry, too.  
• Remove hindrances in production/distribution.  

(i) Transport and Communication: It moves goods (road, rail, shipping); raw materials to production, finished goods to consumption; communication (postal, telephone) for information exchange. E.g., tea Assam, cotton Gujarat/Maharashtra, jute West Bengal/Odisha, sugar U.P./Bihar/Maharashtra.  

(ii) Banking and Finance: It funds assets, raw materials, expenses, overdraft, cash credit, loans, advances; collects cheques, remits funds, discounts bills; helps exporters, raise capital.  

(iii) Insurance: It protects against risks (fire, theft); goods in stock/transit; employees’ accidents; pays premiums, recovers loss/damage/injury.  

(iv) Warehousing: It has storage to hold goods till needed; prevents loss/damage; maintains prices via continuous supply.  

(v) Advertising and Public Relations: It promotes sales; informs features, price; persuades utility, quality; paid (advertising in media); unpaid (PR via press release, social media); builds relationships.

Objectives of Business  

Objectives of Business include what a business aims to achieve; they include profit (income, finance, efficiency, approval, reputation), but also multiple aspects like market standing, innovation, productivity, resources, and social responsibility. Balance needed for survival, prosperity; excessive profit focus is dangerous.

• Starting point of business; direct activities.  
• Primarily, profit is the excess revenue over cost; produce/distribute for profit.  
• Increasingly, social responsibility is for long-run survival.  
• Profit essential:  

  (i) Income for persons.  

  (ii) Finance for expansion.  

  (iii) Indicates efficiency.  

  (iv) Society’s approval of utility.  

  (v) Builds reputation.  

• Too much profit neglects responsibilities to customers, employees, investors, society; may exploit, lead to opposition, and loss of business.  
• Multiple objectives are needed in areas for excellence, performance analysis.

Multiple Objectives of Business  

Business requires multiple objectives: market standing (competitive products, satisfaction), innovation (products/services, skills), productivity (output/input efficiency), physical/financial resources (acquire/use efficiently), earning profits (on capital), and social responsibility (solve social problems).

• Needed in areas influencing survival/prosperity.  
• Balance needs/goals; cannot follow one.  
• Specific in every area/sphere.  
• Enable performance analysis, improvement.  

(i) Market standing: Market standing is the stronger footing vs competitors; competitive products, reasonable prices, and customer satisfaction.  

(ii) Innovation: It means new ideas/methods; product/services or skills/activities; no flourish without; competitive edge.  

(iii) Productivity: It is the value output vs inputs; measures efficiency; best use of resources for survival/progress.  

(iv) Physical and financial resources: These are the plants, machines, offices; funds; acquire per requirements, use efficiently.  

(v) Social responsibility: It contributes to solving social problems; work is socially desirable.

Business Risk  

Business risk is the possibility of inadequate profits/losses due to uncertainties (demand decline, price rise). Types: speculative (gain/loss), pure (loss/no loss). Nature: essential, from uncertainties, varies by nature/size, and rewards profit.

• Inadequate profits/losses from uncertainties/unexpected events.  
• E.g., demand decline (taste change, competition) → low sales/profits; raw material shortage → high price/cost → reduced profits.  
• Types:  

  Speculative: gain or loss; market conditions (demand/supply, prices, fashion).  

  Pure: loss or no loss; fire, theft, strike.  

• Nature:  

  (i) Essential part; varies, minimised, not eliminated.  

  (ii) Due to uncertainties: future unknown (calamities, demand/prices, policy, technology).  

  (iii) Degree depends on nature (fashionable high), size (large higher).  

  (iv) Profit reward for risk-taking; no risk, no gain; higher risk, higher profit chance.

Causes of Business Risks  

Risks from natural (calamities), human (dishonesty, negligence, strikes), economic (demand, competition, price, technology, finance), and other (political, mechanical, exchange rates). Lead to unexpected costs/losses.

(i) Natural: It has little control; floods, earthquakes, lightning, rains, and famine affect property/income.  

(ii) Human: They are unexpected; dishonesty, carelessness, negligence, employees; power failure, strikes, riots, inefficiency.  

(iii) Economic: It includes demand, competition, price, dues collection, technology/method change, interest rise, taxes, and higher costs.  

(iv) Other: They are the unforeseen political disturbances, mechanical failures (boiler burst), and exchange rate fluctuations.

Starting a Business: Basic Factors  

Starting a business (entrepreneurship) begins with identifying a need, mobilising resources, organising production for value/returns/profits amid risks. Factors: type, size, location, financing, physical facilities, workforce, tax planning, and launching. Provides self-employment, creates opportunities, and aids economic development.

• Similar to human effort, resources are for objectives.  
• Entrepreneurship: It is the systematic, purposeful, creative; identifying needs, mobilising resources, organising production, delivering value to customers, returning investors, profits, and oneself with risks/uncertainties.  
• Entrepreneur sets up business; output: enterprise.  
• It provides self-employment; creates opportunities for employment, profession; crucial for economic development.  
• Job-provider, not seeker; financial/psychological rewards.  
• Interaction between person and environment; individual choice on desirability/feasibility.  
• Factors:  

  (i) Selection type: nature/type; profit possibility; customer requirements, technical knowledge, interest.  

  (ii) Size: firm scale; MSME or large; manufacturing/tertiary; demand good, capital arrange → large.  

  (iii) Location: place; mistake high cost, inconvenience; raw materials, labour, power, banking, transport, communication, warehousing.  

  (iv) Financing: capital for fixed (land, building, machinery), current (raw materials, debts, stock), day-to-day; requirement, sources, utilisation.  

  (v) Physical facilities: machines, equipment, buildings, services; depend on nature, size, funds, production process.  

  (vi) Competent workforce: skilled/unskilled, managerial; identify requirements; train, motivate.  

  (vii) Tax planning: tax laws influence; consider liability, impact on decisions.  

  (viii) Launching: mobilise resources, legal formalities, start production, sales promotion; form: sole, partnership, company; financial planning: capital requirement, sources, utilisation.

Important Definitions in NCERT Notes Class 11 Business Studies Chapter 1: Business, Trade and Commerce  

This section lists key terms for clarity and revision:

• Business: An economic activity involving the production and sale of goods and services undertaken with the motive of earning profit by satisfying human needs in society. 
• Economic Activity: Activities by which we earn a livelihood (vs non-economic out of love/sympathy).  
• Industry: Economic activities connected with the conversion of resources into useful goods; includes producing/processing, breeding animals.  
• Commerce: Activities necessary for facilitating the exchange of goods/services; includes trade and auxiliaries.  
• Trade: Sale, transfer or exchange of goods.  
• Auxiliaries to Trade: Services facilitating industry/trade; e.g., transport, banking, insurance, warehousing, advertising.  
• Business Risk: Possibility of inadequate profits or losses due to uncertainties or unexpected events.  
• Entrepreneurship: Systematic, purposeful activity of identifying need, mobilising resources, organising production for value, returns, profits amid risks.

Explore Solutions of Class 11: Business Studies

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Related Reads

NCERT Class 8 History Chapter 1 How, When, and Where Notes (Free PDF)	NCERT CBSE Class 10 Economics Chapter 5 Notes
NCERT Notes Class 11 English Hornbill Chapter 4: The Ailing Planet: The Green Movement’s Role (Free PDF)	NCERT Class 11 Sociology Chapter 3: Understanding Social Institutions Notes (Free PDF)

Explore Notes of Other Subjects of NCERT Class 11

Geography

Business Studies

Sociology

Economics

English

FAQs  

For NCERT study material, follow NCERT Notes and Solutions Class 11 Business Studies by Leverage Edu now.