NCERT Textbook - Nature and Purpose of Business | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Part I
Foundations of Business
Chapter 1 .indd   1 13-01-2021   09:40:02
2024-25
Page 2


Part I
Foundations of Business
Chapter 1 .indd   1 13-01-2021   09:40:02
2024-25
Cha Pter 1
Business , Trade and Commer Ce LEARNING OBJECTIVES
After studying this chapter, the learner:
i. Appreciates  the contribution of business activities in the growth and 
development of an economy;
ii. Discusses the concept and objectives of business;
iii. Categorises business activities into occupation, profession, and 
employment
iv. Classifies industry in different types;
v. Explains Risk and Profit as a reward of Risk; and
vi. Enumerates factors for starting a business.
Chapter 1 .indd   2 13-01-2021   09:40:02
2024-25
Page 3


Part I
Foundations of Business
Chapter 1 .indd   1 13-01-2021   09:40:02
2024-25
Cha Pter 1
Business , Trade and Commer Ce LEARNING OBJECTIVES
After studying this chapter, the learner:
i. Appreciates  the contribution of business activities in the growth and 
development of an economy;
ii. Discusses the concept and objectives of business;
iii. Categorises business activities into occupation, profession, and 
employment
iv. Classifies industry in different types;
v. Explains Risk and Profit as a reward of Risk; and
vi. Enumerates factors for starting a business.
Chapter 1 .indd   2 13-01-2021   09:40:02
2024-25
3 BUSINESS, TRADE AND COMMERCE
1.1 i n Trodu CTion All human beings, wherever they may 
be, require different types of goods 
and services to satisfy their needs. 
If we look around, we observe people 
require different types of products 
and services to satisfy their needs. 
How do they buy them? They go to the 
market, either physical or electronic 
over internet, where they find variety of 
shops and sellers offering the required 
commodities and choose the best 
which they require. 
Have you ever wondered how do 
these products and services are made 
available in the market. The necessity 
of supplying goods and services is 
done by different set of people engaged 
in various economic activities such 
as production, manufacturing and 
Imran, Manpreet, Joseph and Priyanka have been classmates in Class X. After 
their exams are over, they happen to meet at a common friend Ruchita’s house. 
Just when they were sharing their experiences of examination days, Ruchika’s 
father Raghuraj Chaudhary intervenes and asks about their well-being. He also 
enquires about their career plans. But none of them had a definite reply. Raghuraj 
who himself is a successful businessman tells them about business as a career 
opportunity. Joseph gets excited by the idea and says “yes, business is really good 
for making lots of money”. Raghuraj tells them that ‘there is a lot more to business 
than merely money’. Business activities lead to growth and development of any 
country, he added. He further tells them that the roots of business activities can be 
traced back to ancient times and how trading helps in the prosperity of the Indian 
subcontinent. Priyanka said that they have read about the Silk Route in their history 
textbooks. Raghuraj then gets busy with his day-to-day tasks. However, the four 
classmates begin raising questions. The conversation of the four classmates focused 
on how trading activities were conducted during ancient times. How far can the 
roots of trading activities be traced? Why was the Indian subcontinent referred to 
as ‘Swaran Bharat and Swaran Dweep’ by the then travellers to India? What made 
Columbus and Vasco da Gama undertake journeys to locate India? They decided 
to meet the commerce teacher of their school to find out answers to many such 
questions about the development, nature and purpose of business.
distribution and exchange so that the 
needs and wants of customers are 
satisfied. Business is a major economic 
activity which is concerned with the 
production and sale of goods and 
services required by people. Business 
is central to our lives. Although our 
lives are also influenced by many other 
institutions in modern society, such as 
schools, colleges, hospitals, political 
parties and religious bodies; business 
has a major influence on our daily 
lives. It, therefore, becomes important 
that we understand the concept, 
nature and purpose of business.
Business starts with production 
and end with consumption. Making the 
finished products reach the consumer 
involves a series of steps. The work of 
production of goods is covered under 
Chapter 1 .indd   3 13-01-2021   09:40:02
2024-25
Page 4


Part I
Foundations of Business
Chapter 1 .indd   1 13-01-2021   09:40:02
2024-25
Cha Pter 1
Business , Trade and Commer Ce LEARNING OBJECTIVES
After studying this chapter, the learner:
i. Appreciates  the contribution of business activities in the growth and 
development of an economy;
ii. Discusses the concept and objectives of business;
iii. Categorises business activities into occupation, profession, and 
employment
iv. Classifies industry in different types;
v. Explains Risk and Profit as a reward of Risk; and
vi. Enumerates factors for starting a business.
Chapter 1 .indd   2 13-01-2021   09:40:02
2024-25
3 BUSINESS, TRADE AND COMMERCE
1.1 i n Trodu CTion All human beings, wherever they may 
be, require different types of goods 
and services to satisfy their needs. 
If we look around, we observe people 
require different types of products 
and services to satisfy their needs. 
How do they buy them? They go to the 
market, either physical or electronic 
over internet, where they find variety of 
shops and sellers offering the required 
commodities and choose the best 
which they require. 
Have you ever wondered how do 
these products and services are made 
available in the market. The necessity 
of supplying goods and services is 
done by different set of people engaged 
in various economic activities such 
as production, manufacturing and 
Imran, Manpreet, Joseph and Priyanka have been classmates in Class X. After 
their exams are over, they happen to meet at a common friend Ruchita’s house. 
Just when they were sharing their experiences of examination days, Ruchika’s 
father Raghuraj Chaudhary intervenes and asks about their well-being. He also 
enquires about their career plans. But none of them had a definite reply. Raghuraj 
who himself is a successful businessman tells them about business as a career 
opportunity. Joseph gets excited by the idea and says “yes, business is really good 
for making lots of money”. Raghuraj tells them that ‘there is a lot more to business 
than merely money’. Business activities lead to growth and development of any 
country, he added. He further tells them that the roots of business activities can be 
traced back to ancient times and how trading helps in the prosperity of the Indian 
subcontinent. Priyanka said that they have read about the Silk Route in their history 
textbooks. Raghuraj then gets busy with his day-to-day tasks. However, the four 
classmates begin raising questions. The conversation of the four classmates focused 
on how trading activities were conducted during ancient times. How far can the 
roots of trading activities be traced? Why was the Indian subcontinent referred to 
as ‘Swaran Bharat and Swaran Dweep’ by the then travellers to India? What made 
Columbus and Vasco da Gama undertake journeys to locate India? They decided 
to meet the commerce teacher of their school to find out answers to many such 
questions about the development, nature and purpose of business.
distribution and exchange so that the 
needs and wants of customers are 
satisfied. Business is a major economic 
activity which is concerned with the 
production and sale of goods and 
services required by people. Business 
is central to our lives. Although our 
lives are also influenced by many other 
institutions in modern society, such as 
schools, colleges, hospitals, political 
parties and religious bodies; business 
has a major influence on our daily 
lives. It, therefore, becomes important 
that we understand the concept, 
nature and purpose of business.
Business starts with production 
and end with consumption. Making the 
finished products reach the consumer 
involves a series of steps. The work of 
production of goods is covered under 
Chapter 1 .indd   3 13-01-2021   09:40:02
2024-25
4 BUSINESS  STUDIES
Industry and the remaining activities 
belong to commerce. In a nutshell we 
call them ‘Business’ which is a wider 
term and includes Industry, trade and 
commerce. 
ECONOMIC 
ACTIVITIES
Exchange
TRANSFER OF GOODS AND SERVICES
(Monetary versus Barter)
DIVISION OF INCOME 
AMONG FACTORS OF 
PRODUCTION
SATISFACTION 
OF NEEDS 
AND WANTS
Distribution Consumption
Production 
or Purchase
The goods were traded both 
internally and to the foreign lands, 
which generated surplus income. As 
a result, the people were engaged 
in various economic activities such 
as agriculture and domestication 
of animals, weaving cotton, dyeing 
fabrics, making clay pots, utensils 
and handicrafts, sculpting, cottage 
industries, masonry, etc. Family 
based workshops [karkhanas], for 
manufacturing, were important 
components of economic life. This 
money was channelised into further 
investment, and led to the dominant 
growth of indigenous banking system 
to finance the trading activities.
An example of it is the use of 
age old Hundi and Chitties (used in 
southern region). These were used 
as documents to facilitate transfer of 
money from one hand to another for 
trading activities. As an instrument 
of exchange it involved a contract 
which — (i) warrant the payment of 
money, the promise or order which is 
unconditional (ii) capable of change 
through transfer by valid negotiation.
Why there was a need to create an 
intangible form of exchange of money. 
It was so because travelling long 
distances either by land or sea involved 
risk of theft and robbery. Hundi which 
literally means ‘to collect’ was written 
in vernacular language and facilitated 
the safe transfer of money between 
parties and helped promotion of 
trading activities. 
The emergence of credit transactions 
and availability of loans and advances 
enhanced commercial operations. The 
1.1.1 Role of Business in the 
Development of Economy
Business which includes trade and 
commerce have played a vital role 
since times memorial. You have 
studied in your earlier classes that our 
country, India, had a golden past and 
the trading activities had a significant 
contribution to its prosperity and 
gains. The archaeological evidences 
have shown that trading activities were 
the mainstay of the economy in ancient 
times which were carried out by both 
water and land routes. Silk route and 
maritime trade were quite prominent 
in transporting goods and commodities 
for trading purposes.
Chapter 1 .indd   4 13-01-2021   09:40:02
2024-25
Page 5


Part I
Foundations of Business
Chapter 1 .indd   1 13-01-2021   09:40:02
2024-25
Cha Pter 1
Business , Trade and Commer Ce LEARNING OBJECTIVES
After studying this chapter, the learner:
i. Appreciates  the contribution of business activities in the growth and 
development of an economy;
ii. Discusses the concept and objectives of business;
iii. Categorises business activities into occupation, profession, and 
employment
iv. Classifies industry in different types;
v. Explains Risk and Profit as a reward of Risk; and
vi. Enumerates factors for starting a business.
Chapter 1 .indd   2 13-01-2021   09:40:02
2024-25
3 BUSINESS, TRADE AND COMMERCE
1.1 i n Trodu CTion All human beings, wherever they may 
be, require different types of goods 
and services to satisfy their needs. 
If we look around, we observe people 
require different types of products 
and services to satisfy their needs. 
How do they buy them? They go to the 
market, either physical or electronic 
over internet, where they find variety of 
shops and sellers offering the required 
commodities and choose the best 
which they require. 
Have you ever wondered how do 
these products and services are made 
available in the market. The necessity 
of supplying goods and services is 
done by different set of people engaged 
in various economic activities such 
as production, manufacturing and 
Imran, Manpreet, Joseph and Priyanka have been classmates in Class X. After 
their exams are over, they happen to meet at a common friend Ruchita’s house. 
Just when they were sharing their experiences of examination days, Ruchika’s 
father Raghuraj Chaudhary intervenes and asks about their well-being. He also 
enquires about their career plans. But none of them had a definite reply. Raghuraj 
who himself is a successful businessman tells them about business as a career 
opportunity. Joseph gets excited by the idea and says “yes, business is really good 
for making lots of money”. Raghuraj tells them that ‘there is a lot more to business 
than merely money’. Business activities lead to growth and development of any 
country, he added. He further tells them that the roots of business activities can be 
traced back to ancient times and how trading helps in the prosperity of the Indian 
subcontinent. Priyanka said that they have read about the Silk Route in their history 
textbooks. Raghuraj then gets busy with his day-to-day tasks. However, the four 
classmates begin raising questions. The conversation of the four classmates focused 
on how trading activities were conducted during ancient times. How far can the 
roots of trading activities be traced? Why was the Indian subcontinent referred to 
as ‘Swaran Bharat and Swaran Dweep’ by the then travellers to India? What made 
Columbus and Vasco da Gama undertake journeys to locate India? They decided 
to meet the commerce teacher of their school to find out answers to many such 
questions about the development, nature and purpose of business.
distribution and exchange so that the 
needs and wants of customers are 
satisfied. Business is a major economic 
activity which is concerned with the 
production and sale of goods and 
services required by people. Business 
is central to our lives. Although our 
lives are also influenced by many other 
institutions in modern society, such as 
schools, colleges, hospitals, political 
parties and religious bodies; business 
has a major influence on our daily 
lives. It, therefore, becomes important 
that we understand the concept, 
nature and purpose of business.
Business starts with production 
and end with consumption. Making the 
finished products reach the consumer 
involves a series of steps. The work of 
production of goods is covered under 
Chapter 1 .indd   3 13-01-2021   09:40:02
2024-25
4 BUSINESS  STUDIES
Industry and the remaining activities 
belong to commerce. In a nutshell we 
call them ‘Business’ which is a wider 
term and includes Industry, trade and 
commerce. 
ECONOMIC 
ACTIVITIES
Exchange
TRANSFER OF GOODS AND SERVICES
(Monetary versus Barter)
DIVISION OF INCOME 
AMONG FACTORS OF 
PRODUCTION
SATISFACTION 
OF NEEDS 
AND WANTS
Distribution Consumption
Production 
or Purchase
The goods were traded both 
internally and to the foreign lands, 
which generated surplus income. As 
a result, the people were engaged 
in various economic activities such 
as agriculture and domestication 
of animals, weaving cotton, dyeing 
fabrics, making clay pots, utensils 
and handicrafts, sculpting, cottage 
industries, masonry, etc. Family 
based workshops [karkhanas], for 
manufacturing, were important 
components of economic life. This 
money was channelised into further 
investment, and led to the dominant 
growth of indigenous banking system 
to finance the trading activities.
An example of it is the use of 
age old Hundi and Chitties (used in 
southern region). These were used 
as documents to facilitate transfer of 
money from one hand to another for 
trading activities. As an instrument 
of exchange it involved a contract 
which — (i) warrant the payment of 
money, the promise or order which is 
unconditional (ii) capable of change 
through transfer by valid negotiation.
Why there was a need to create an 
intangible form of exchange of money. 
It was so because travelling long 
distances either by land or sea involved 
risk of theft and robbery. Hundi which 
literally means ‘to collect’ was written 
in vernacular language and facilitated 
the safe transfer of money between 
parties and helped promotion of 
trading activities. 
The emergence of credit transactions 
and availability of loans and advances 
enhanced commercial operations. The 
1.1.1 Role of Business in the 
Development of Economy
Business which includes trade and 
commerce have played a vital role 
since times memorial. You have 
studied in your earlier classes that our 
country, India, had a golden past and 
the trading activities had a significant 
contribution to its prosperity and 
gains. The archaeological evidences 
have shown that trading activities were 
the mainstay of the economy in ancient 
times which were carried out by both 
water and land routes. Silk route and 
maritime trade were quite prominent 
in transporting goods and commodities 
for trading purposes.
Chapter 1 .indd   4 13-01-2021   09:40:02
2024-25
5 BUSINESS, TRADE AND COMMERCE
Indian subcontinent enjoyed the fruits 
of favourable balance of trade, where 
exports exceeded imports with large 
margins and the indigenous banking 
system benefitted the manufacturers, 
traders and merchants with additional 
capital funds for expansion and 
development. Commercial and 
Industrial banks later evolved to 
finance trade and commerce and 
agricultural banks to provide both 
short and long-term loans to finance 
agriculturists.
Many leading trade centres were 
developed in ancient times for the import 
and export of goods, some of them 
being Patliputra, Peshawar, Taxila, 
Indraprastha, Mithila, Maduram, 
Surat, Ujjain, Kanchi, Mithila. Major 
exports items were Spices, wheat, 
sugar, indigo, opium, sesame oil, 
cotton,  parrot,  live animals and 
animal products, etc. Major imports 
were Horses, animal products, Chinese 
silks, linen, wine, gold, silver, copper, 
etc. There were all kinds of towns—
port towns, manufacturing towns, 
mercantile towns, the sacred centres, 
and pilgrimage towns. Their existence 
is an index of prosperity of merchant 
communities and professional classes.
Business activities led to the 
growth of different aids to trade such 
as transportation, banking, finance 
and communication which grew the 
prospects of trading activities. With the 
active contribution of Indian traders 
and other merchant communities, the 
Indian sub-continent was popularly 
called ‘Swaran Bhoomi and Swaran 
Deep’ in the writings of many travellers, 
such as Megasthenes, Faxian (FaHien), 
Hundi as practised by Indian Merchant Communities
Dhani-jog Darshani Payable to any person—no liability over who 
received payment.
Sah-jog Darshani Payable to a specific person, someone 
‘respectable’. Liability over who received payment.
Firman-jog Darshani Hundi made payable to order.
Dekhan-har Darshani Payable to the presenter or bearer.
Dhani-jog Muddati Payable to any person—no liability over who 
received payment, but payment over a fixed term.
Firman-jog Muddati Hundi made payable to order following a fixed 
term.
Jokhmi Muddati Drawn against dispatched goods. If goods lost in 
transit, the drawer or holder bears the coasts, 
and the Drawee carries no liability.
Chapter 1 .indd   5 13-01-2021   09:40:02
2024-25