NCERT Textbook - Internal Trade Commerce Notes | EduRev

Business Studies (BST) Class 11

Commerce : NCERT Textbook - Internal Trade Commerce Notes | EduRev

 Page 1


CHAPTER 10
INTERNAL TRADE
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• describe the meaning and types of internal trade;
? specify the services of wholesalers to manufactures and retailers;
? explain the services of retailers;
? classify the types of retailers;
? explain the forms of small scale and large scale retailers; and
? state the role of Chambers of Commerce and industry in the
promotion of internal trade.
© NCERT
not to be republished
Page 2


CHAPTER 10
INTERNAL TRADE
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• describe the meaning and types of internal trade;
? specify the services of wholesalers to manufactures and retailers;
? explain the services of retailers;
? classify the types of retailers;
? explain the forms of small scale and large scale retailers; and
? state the role of Chambers of Commerce and industry in the
promotion of internal trade.
© NCERT
not to be republished
226 BUSINESS STUDIES
10.1 INTRODUCTION
Trade refers to buying and selling of
goods and services with the objective
of earning profit. Mankind has been
engaged in trading, in some form or
the other, since early days of
civilisation. The importance of trade
in modern times has increased as new
products are being developed every
day and are being made available for
consumption throughout the world.
No individual or country can claim to
be self-sufficient in producing all the
goods and services required by it.
Thus, each one is engaged in
producing what it is best suited to
produce and exchanging the excess
produce with others.
On the basis of geographical
location of buyers and sellers, trade can
broadly be classified into two categories
(i) Internal trade; and (ii) External trade.
Trade which takes place within a
country is called internal trade. Trade
between two or more countries, on the
other hand, is called external trade. The
present chapter discusses in detail the
meaning and nature of internal trade
and explains its different types and the
role of chambers of commerce in
promoting internal trade.
10.2 INTERNAL TRADE
Buying and selling of goods and
services within the boundaries of a
nation are referred to as internal trade.
Whether the products are purchased
from a neighbourhood shop in a locality
or a central market or a departmental
store or a mall or even from any door-
to-door salesperson or from an
exhibition, all these are examples of
internal trade as the goods are
purchased from an individual or
establishment within a country. No
custom duty or import duty is levied
Have you ever thought if there were no markets, how products of different
manufacturers would reach us? We are all aware of our general provisions store
round the corner which is selling items of our daily need. But is that enough?
When we need to buy items of a specialised nature, we like to look at bigger
markets or shops with variety. Our observation tells us that there are different
types of shops selling different items or specialised goods and depending on our
requirements we purchase from certain shops or markets. In rural areas, we
may have noticed people selling their goods on the streets, these goods may
range from vegetables to clothes. This is a completely different scene from what
we see in the urban areas. In our country, all kinds of markets co-exist in
harmony. With the advent of imported goods and multinational corporations, we
have shops selling these products too. In big towns and cities, there are many
retail shops selling particular branded products only. Another aspect of all this
is, how these products reach the shops from the manufacturers? There must be
some middlemen doing this job. Are they really useful or do prices increase
because of them?
© NCERT
not to be republished
Page 3


CHAPTER 10
INTERNAL TRADE
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• describe the meaning and types of internal trade;
? specify the services of wholesalers to manufactures and retailers;
? explain the services of retailers;
? classify the types of retailers;
? explain the forms of small scale and large scale retailers; and
? state the role of Chambers of Commerce and industry in the
promotion of internal trade.
© NCERT
not to be republished
226 BUSINESS STUDIES
10.1 INTRODUCTION
Trade refers to buying and selling of
goods and services with the objective
of earning profit. Mankind has been
engaged in trading, in some form or
the other, since early days of
civilisation. The importance of trade
in modern times has increased as new
products are being developed every
day and are being made available for
consumption throughout the world.
No individual or country can claim to
be self-sufficient in producing all the
goods and services required by it.
Thus, each one is engaged in
producing what it is best suited to
produce and exchanging the excess
produce with others.
On the basis of geographical
location of buyers and sellers, trade can
broadly be classified into two categories
(i) Internal trade; and (ii) External trade.
Trade which takes place within a
country is called internal trade. Trade
between two or more countries, on the
other hand, is called external trade. The
present chapter discusses in detail the
meaning and nature of internal trade
and explains its different types and the
role of chambers of commerce in
promoting internal trade.
10.2 INTERNAL TRADE
Buying and selling of goods and
services within the boundaries of a
nation are referred to as internal trade.
Whether the products are purchased
from a neighbourhood shop in a locality
or a central market or a departmental
store or a mall or even from any door-
to-door salesperson or from an
exhibition, all these are examples of
internal trade as the goods are
purchased from an individual or
establishment within a country. No
custom duty or import duty is levied
Have you ever thought if there were no markets, how products of different
manufacturers would reach us? We are all aware of our general provisions store
round the corner which is selling items of our daily need. But is that enough?
When we need to buy items of a specialised nature, we like to look at bigger
markets or shops with variety. Our observation tells us that there are different
types of shops selling different items or specialised goods and depending on our
requirements we purchase from certain shops or markets. In rural areas, we
may have noticed people selling their goods on the streets, these goods may
range from vegetables to clothes. This is a completely different scene from what
we see in the urban areas. In our country, all kinds of markets co-exist in
harmony. With the advent of imported goods and multinational corporations, we
have shops selling these products too. In big towns and cities, there are many
retail shops selling particular branded products only. Another aspect of all this
is, how these products reach the shops from the manufacturers? There must be
some middlemen doing this job. Are they really useful or do prices increase
because of them?
© NCERT
not to be republished
227 INTERNAL TRADE
on such trade as goods are part of
domestic production and are meant for
domestic consumption. Generally,
payment has to be made in the legal
tender of the country or any other
acceptable currency.
Internal trade can be classified into
two broad categories viz., (i) wholesale
trade and (ii) retail trade. Generally, for
products, which are to be distributed to
a large number of buyers who are
located over a wide geographical area, it
becomes very difficult for the producers
to reach all the consumers or users
directly. For example, if vegetable oil or
bathing soap or salt produced in a
factory in any part of the country are to
reach millions of consumers throughout
the country, the help of wholesalers and
retailers becomes very important.
Purchase and sale of goods and services
in large quantities for the purpose of
resale or intermediate use is referred to
as wholesale trade.
On the other hand, purchase and
sale of goods in relatively small
quantities, generally to the ultimate
consumers, is referred to as retail trade.
Traders dealing in wholesale trade are
called wholesale traders and those
dealing in retail trade are called
retailers. Both retailers and wholesalers
are important marketing intermediaries
who perform very useful functions in
the process of exchange of goods and
services  between producers and users
or ultimate consumers. Internal trade
aims at equitable distribution of goods
within a nation speedily and at
reasonable cost.
10.3 WHOLESALE TRADE
As discussed in the previous section,
wholesale trade refers to buying and
selling of goods and services in large
quantities for the purpose of resale or
intermediate use.
Wholesaling is concerned with the
activities of those persons or
establishments which sell to retailers
and other merchants, and/or to
industrial, institutional and commercial
users but who do not sell in significant
amount to ultimate consumers.
Wholesalers serve as an important link
between manufacturers and retailers.
They enable the producers not only to
reach large number of buyers spread
over a wide geographical area (through
retailers), but also  to perform a variety
of functions in the process of
distribution of goods and services. They
generally take the title of the goods and
bear the business risks by purchasing
and selling the goods in their own name.
They purchase in bulk and sell in small
lots to retailers or industrial users. They
undertake various activities such as
grading of products, packing into
smaller lots, storage, transportation,
promotion of goods, collection of market
information, collection of small and
scattered orders of retailers and
distribution of supplies to them. They
also relieve the retailers of maintaining
large stock of articles and extend credit
facilities to them. Most of the functions
performed by wholesalers are such
which cannot be eliminated. If there are
no wholesalers, these functions shall
have to be performed either by the
manufacturers or the retailers.
© NCERT
not to be republished
Page 4


CHAPTER 10
INTERNAL TRADE
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• describe the meaning and types of internal trade;
? specify the services of wholesalers to manufactures and retailers;
? explain the services of retailers;
? classify the types of retailers;
? explain the forms of small scale and large scale retailers; and
? state the role of Chambers of Commerce and industry in the
promotion of internal trade.
© NCERT
not to be republished
226 BUSINESS STUDIES
10.1 INTRODUCTION
Trade refers to buying and selling of
goods and services with the objective
of earning profit. Mankind has been
engaged in trading, in some form or
the other, since early days of
civilisation. The importance of trade
in modern times has increased as new
products are being developed every
day and are being made available for
consumption throughout the world.
No individual or country can claim to
be self-sufficient in producing all the
goods and services required by it.
Thus, each one is engaged in
producing what it is best suited to
produce and exchanging the excess
produce with others.
On the basis of geographical
location of buyers and sellers, trade can
broadly be classified into two categories
(i) Internal trade; and (ii) External trade.
Trade which takes place within a
country is called internal trade. Trade
between two or more countries, on the
other hand, is called external trade. The
present chapter discusses in detail the
meaning and nature of internal trade
and explains its different types and the
role of chambers of commerce in
promoting internal trade.
10.2 INTERNAL TRADE
Buying and selling of goods and
services within the boundaries of a
nation are referred to as internal trade.
Whether the products are purchased
from a neighbourhood shop in a locality
or a central market or a departmental
store or a mall or even from any door-
to-door salesperson or from an
exhibition, all these are examples of
internal trade as the goods are
purchased from an individual or
establishment within a country. No
custom duty or import duty is levied
Have you ever thought if there were no markets, how products of different
manufacturers would reach us? We are all aware of our general provisions store
round the corner which is selling items of our daily need. But is that enough?
When we need to buy items of a specialised nature, we like to look at bigger
markets or shops with variety. Our observation tells us that there are different
types of shops selling different items or specialised goods and depending on our
requirements we purchase from certain shops or markets. In rural areas, we
may have noticed people selling their goods on the streets, these goods may
range from vegetables to clothes. This is a completely different scene from what
we see in the urban areas. In our country, all kinds of markets co-exist in
harmony. With the advent of imported goods and multinational corporations, we
have shops selling these products too. In big towns and cities, there are many
retail shops selling particular branded products only. Another aspect of all this
is, how these products reach the shops from the manufacturers? There must be
some middlemen doing this job. Are they really useful or do prices increase
because of them?
© NCERT
not to be republished
227 INTERNAL TRADE
on such trade as goods are part of
domestic production and are meant for
domestic consumption. Generally,
payment has to be made in the legal
tender of the country or any other
acceptable currency.
Internal trade can be classified into
two broad categories viz., (i) wholesale
trade and (ii) retail trade. Generally, for
products, which are to be distributed to
a large number of buyers who are
located over a wide geographical area, it
becomes very difficult for the producers
to reach all the consumers or users
directly. For example, if vegetable oil or
bathing soap or salt produced in a
factory in any part of the country are to
reach millions of consumers throughout
the country, the help of wholesalers and
retailers becomes very important.
Purchase and sale of goods and services
in large quantities for the purpose of
resale or intermediate use is referred to
as wholesale trade.
On the other hand, purchase and
sale of goods in relatively small
quantities, generally to the ultimate
consumers, is referred to as retail trade.
Traders dealing in wholesale trade are
called wholesale traders and those
dealing in retail trade are called
retailers. Both retailers and wholesalers
are important marketing intermediaries
who perform very useful functions in
the process of exchange of goods and
services  between producers and users
or ultimate consumers. Internal trade
aims at equitable distribution of goods
within a nation speedily and at
reasonable cost.
10.3 WHOLESALE TRADE
As discussed in the previous section,
wholesale trade refers to buying and
selling of goods and services in large
quantities for the purpose of resale or
intermediate use.
Wholesaling is concerned with the
activities of those persons or
establishments which sell to retailers
and other merchants, and/or to
industrial, institutional and commercial
users but who do not sell in significant
amount to ultimate consumers.
Wholesalers serve as an important link
between manufacturers and retailers.
They enable the producers not only to
reach large number of buyers spread
over a wide geographical area (through
retailers), but also  to perform a variety
of functions in the process of
distribution of goods and services. They
generally take the title of the goods and
bear the business risks by purchasing
and selling the goods in their own name.
They purchase in bulk and sell in small
lots to retailers or industrial users. They
undertake various activities such as
grading of products, packing into
smaller lots, storage, transportation,
promotion of goods, collection of market
information, collection of small and
scattered orders of retailers and
distribution of supplies to them. They
also relieve the retailers of maintaining
large stock of articles and extend credit
facilities to them. Most of the functions
performed by wholesalers are such
which cannot be eliminated. If there are
no wholesalers, these functions shall
have to be performed either by the
manufacturers or the retailers.
© NCERT
not to be republished
228 BUSINESS STUDIES
Services of Wholesalers
Wholesalers provide various services to
manufacturers as well as retailers and
provide immense help in the
distribution of goods and services. By
making the products available at a place
where these are needed and at a time
when these are needed for consumption
or use, they provide both the time and
place utility. The various services of
wholesalers to different sections are
discussed below:
10.3.1 Services to Manufacturers
Major services offered by wholesalers to
the producers of goods and services are
given as below:
(i) Facilitating large scale production:
Wholesalers collect small orders from a
number of retailers and pass on the pool
of such orders to the manufacturers and
make purchases in bulk quantities. This
enables the producers to undertake
production on a large scale and take
advantage of the economies of scale.
(ii) Bearing risk: The wholesale
merchants deal in goods in their own
name, take delivery of the goods and
keep the goods purchased in large lots
in their warehouses. In the process, they
bear variety of risks such as the risk of
fall in prices, theft, pilferage, spoilage,
fire, etc. To that extent, they relieve the
manufacturers from bearing these risks.
(iii) Financial assistance: The
wholesalers provide financial assistance
to the manufacturers in the sense that
they generally make cash payment for
the goods purchased by them. To that
extent, the manufacturers need not
block their capital in the stocks.
Sometimes they also advance money to
the producers for bulk orders placed
by them.
(iv) Expert advice: As the wholesalers
are in direct contact with the retailers,
they are in a position to advice the
manufacturers about various aspects
including customer’s tastes and
preferences, market conditions,
competitive activities and the features
preferred by the buyers. They serve as
an important source of market
information on these and related
aspects.
(v) Help in marketing function: The
wholesalers take care of the
distribution of goods to a number of
retailers who, in turn, sell these goods
to a large number of customers spread
over a large geographical area. This
relieves the manufacturers from many
of the marketing activities and enable
them to concentrate on the production
activity.
(vi) Facilitate production continuity:
The wholesalers facilitate continuity of
production activity throughout the
year by purchasing the goods as and
when these are produced and storing
them till the time these are demanded
by retailers or consumers in the
market.
(vii) Storage: Wholesalers take delivery
of goods when these are produced in
factory and keep them in their
godowns/warehouses. This reduces
the burden of manufacturers of
providing for storage facilities for the
finished products. They thus provide
time utility.
© NCERT
not to be republished
Page 5


CHAPTER 10
INTERNAL TRADE
LEARNING OBJECTIVES
After studying this chapter, you should be able to:
• describe the meaning and types of internal trade;
? specify the services of wholesalers to manufactures and retailers;
? explain the services of retailers;
? classify the types of retailers;
? explain the forms of small scale and large scale retailers; and
? state the role of Chambers of Commerce and industry in the
promotion of internal trade.
© NCERT
not to be republished
226 BUSINESS STUDIES
10.1 INTRODUCTION
Trade refers to buying and selling of
goods and services with the objective
of earning profit. Mankind has been
engaged in trading, in some form or
the other, since early days of
civilisation. The importance of trade
in modern times has increased as new
products are being developed every
day and are being made available for
consumption throughout the world.
No individual or country can claim to
be self-sufficient in producing all the
goods and services required by it.
Thus, each one is engaged in
producing what it is best suited to
produce and exchanging the excess
produce with others.
On the basis of geographical
location of buyers and sellers, trade can
broadly be classified into two categories
(i) Internal trade; and (ii) External trade.
Trade which takes place within a
country is called internal trade. Trade
between two or more countries, on the
other hand, is called external trade. The
present chapter discusses in detail the
meaning and nature of internal trade
and explains its different types and the
role of chambers of commerce in
promoting internal trade.
10.2 INTERNAL TRADE
Buying and selling of goods and
services within the boundaries of a
nation are referred to as internal trade.
Whether the products are purchased
from a neighbourhood shop in a locality
or a central market or a departmental
store or a mall or even from any door-
to-door salesperson or from an
exhibition, all these are examples of
internal trade as the goods are
purchased from an individual or
establishment within a country. No
custom duty or import duty is levied
Have you ever thought if there were no markets, how products of different
manufacturers would reach us? We are all aware of our general provisions store
round the corner which is selling items of our daily need. But is that enough?
When we need to buy items of a specialised nature, we like to look at bigger
markets or shops with variety. Our observation tells us that there are different
types of shops selling different items or specialised goods and depending on our
requirements we purchase from certain shops or markets. In rural areas, we
may have noticed people selling their goods on the streets, these goods may
range from vegetables to clothes. This is a completely different scene from what
we see in the urban areas. In our country, all kinds of markets co-exist in
harmony. With the advent of imported goods and multinational corporations, we
have shops selling these products too. In big towns and cities, there are many
retail shops selling particular branded products only. Another aspect of all this
is, how these products reach the shops from the manufacturers? There must be
some middlemen doing this job. Are they really useful or do prices increase
because of them?
© NCERT
not to be republished
227 INTERNAL TRADE
on such trade as goods are part of
domestic production and are meant for
domestic consumption. Generally,
payment has to be made in the legal
tender of the country or any other
acceptable currency.
Internal trade can be classified into
two broad categories viz., (i) wholesale
trade and (ii) retail trade. Generally, for
products, which are to be distributed to
a large number of buyers who are
located over a wide geographical area, it
becomes very difficult for the producers
to reach all the consumers or users
directly. For example, if vegetable oil or
bathing soap or salt produced in a
factory in any part of the country are to
reach millions of consumers throughout
the country, the help of wholesalers and
retailers becomes very important.
Purchase and sale of goods and services
in large quantities for the purpose of
resale or intermediate use is referred to
as wholesale trade.
On the other hand, purchase and
sale of goods in relatively small
quantities, generally to the ultimate
consumers, is referred to as retail trade.
Traders dealing in wholesale trade are
called wholesale traders and those
dealing in retail trade are called
retailers. Both retailers and wholesalers
are important marketing intermediaries
who perform very useful functions in
the process of exchange of goods and
services  between producers and users
or ultimate consumers. Internal trade
aims at equitable distribution of goods
within a nation speedily and at
reasonable cost.
10.3 WHOLESALE TRADE
As discussed in the previous section,
wholesale trade refers to buying and
selling of goods and services in large
quantities for the purpose of resale or
intermediate use.
Wholesaling is concerned with the
activities of those persons or
establishments which sell to retailers
and other merchants, and/or to
industrial, institutional and commercial
users but who do not sell in significant
amount to ultimate consumers.
Wholesalers serve as an important link
between manufacturers and retailers.
They enable the producers not only to
reach large number of buyers spread
over a wide geographical area (through
retailers), but also  to perform a variety
of functions in the process of
distribution of goods and services. They
generally take the title of the goods and
bear the business risks by purchasing
and selling the goods in their own name.
They purchase in bulk and sell in small
lots to retailers or industrial users. They
undertake various activities such as
grading of products, packing into
smaller lots, storage, transportation,
promotion of goods, collection of market
information, collection of small and
scattered orders of retailers and
distribution of supplies to them. They
also relieve the retailers of maintaining
large stock of articles and extend credit
facilities to them. Most of the functions
performed by wholesalers are such
which cannot be eliminated. If there are
no wholesalers, these functions shall
have to be performed either by the
manufacturers or the retailers.
© NCERT
not to be republished
228 BUSINESS STUDIES
Services of Wholesalers
Wholesalers provide various services to
manufacturers as well as retailers and
provide immense help in the
distribution of goods and services. By
making the products available at a place
where these are needed and at a time
when these are needed for consumption
or use, they provide both the time and
place utility. The various services of
wholesalers to different sections are
discussed below:
10.3.1 Services to Manufacturers
Major services offered by wholesalers to
the producers of goods and services are
given as below:
(i) Facilitating large scale production:
Wholesalers collect small orders from a
number of retailers and pass on the pool
of such orders to the manufacturers and
make purchases in bulk quantities. This
enables the producers to undertake
production on a large scale and take
advantage of the economies of scale.
(ii) Bearing risk: The wholesale
merchants deal in goods in their own
name, take delivery of the goods and
keep the goods purchased in large lots
in their warehouses. In the process, they
bear variety of risks such as the risk of
fall in prices, theft, pilferage, spoilage,
fire, etc. To that extent, they relieve the
manufacturers from bearing these risks.
(iii) Financial assistance: The
wholesalers provide financial assistance
to the manufacturers in the sense that
they generally make cash payment for
the goods purchased by them. To that
extent, the manufacturers need not
block their capital in the stocks.
Sometimes they also advance money to
the producers for bulk orders placed
by them.
(iv) Expert advice: As the wholesalers
are in direct contact with the retailers,
they are in a position to advice the
manufacturers about various aspects
including customer’s tastes and
preferences, market conditions,
competitive activities and the features
preferred by the buyers. They serve as
an important source of market
information on these and related
aspects.
(v) Help in marketing function: The
wholesalers take care of the
distribution of goods to a number of
retailers who, in turn, sell these goods
to a large number of customers spread
over a large geographical area. This
relieves the manufacturers from many
of the marketing activities and enable
them to concentrate on the production
activity.
(vi) Facilitate production continuity:
The wholesalers facilitate continuity of
production activity throughout the
year by purchasing the goods as and
when these are produced and storing
them till the time these are demanded
by retailers or consumers in the
market.
(vii) Storage: Wholesalers take delivery
of goods when these are produced in
factory and keep them in their
godowns/warehouses. This reduces
the burden of manufacturers of
providing for storage facilities for the
finished products. They thus provide
time utility.
© NCERT
not to be republished
229 INTERNAL TRADE
10.3.2 Services to Retailers
The important services offered by
manufacturers to the retailers are
described as below:
(i) Availability of goods: Retailers
have to maintain adequate stock of
varied commodities so that they can
offer variety to their customers. The
wholesalers make the products of
various manufacturers readily
available to the retailers. This relieves
the retailers of the work of collecting
goods from several producers and
keeping big inventory of the same.
(ii) Marketing support: The whole-
salers perform various marketing
functions and provide support to the
retailers. They undertake advertising
and other sales promotional activities
to induce customers to purchase the
goods. The retailers are benefitted as it
helps them in increasing the demand
for various new products.
(iii) Grant of credit: The wholesalers
generally extend credit facilities to their
regular customers. This enables the
retailers to manage their business with
relatively small amount of working capital.
(iv) Specialised knowledge: The
wholesalers specialise in one line of
products and know the pulse of the
market. They pass on the benefit of
their specialised knowledge to the
retailers. They inform the retailers
about the new products, their uses,
quality, prices, etc. They may also
advise them on the decor of the retail
outlet, allocation of shelf space and
demonstration of certain products.
(v) Risk sharing: The wholesalers
purchase in bulk and sell in relatively
small quantities to the retailers. Being
able to purchase merchandise in
smaller quantities, retailers are in a
position to avoid the risk of storage,
pilferage, obsolescence, reduction in
prices and demand fluctuations in
respect of larger quantites of goods that
they would have to purchase in case
the services of wholesalers are not
available.
10.4 RETAIL TRADE
A retailer is a business enterprise that
is engaged in the sale of goods and
services directly to the ultimate
consumers. The retailer normally buys
goods in large quantities from the
wholesalers and sells them in small
quantities to the ultimate consumers.
The retails represents the final  stage
in the distribution where goods are
transferred from the hands of the
manufacturers or wholesalers to the
final consumers or users. Retailing is,
thus, that branch of business which is
devoted to the sale of goods and
services to the ultimate consumers for
their personal and non-business use.
There may be different ways of
selling the goods viz., personally, on
telephone, or through vending
machines. Also, the products may be
sold at different places, viz., in a store,
at the customer’s house or any other
place. Some of the common situations
that we encounter in our daily life, for
example, are the sale of ball pens or
some magic medicine or book of jokes
© NCERT
not to be republished
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MCQs

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Sample Paper

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NCERT Textbook - Internal Trade Commerce Notes | EduRev

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Important questions

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Semester Notes

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video lectures

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