Sure Shot Questions: Nature and Purpose of Business | Business Studies (BST) Class 11 - Commerce PDF Download

Based on a careful analysis of the previous years' questions and trends, we've put together a list of questions that are most likely to appear in the Class 11 Business Studies exams. These predictions aren’t just guesses—they’re based on how often these questions show up and how CBSE usually frames its papers.

Q1: Which of the following is classified as an economic activity?
(a) Social service
(b) Business
(c) Patriotism
(d) Charity
Ans: (b) Business
Explanation: Economic activities involve earning a livelihood through production, purchase, or sale of goods and services with a profit motive. Business fits this definition as it focuses on trading goods or services for profit, unlike social service, patriotism, or charity, which are non-economic and driven by social or emotional motives.

Q2: Which auxiliary to trade removes the hindrance of finance?
(a) Advertising
(b) Banking
(c) Warehousing
(d) Transport
Ans: (b) Banking
Explanation: Banking facilitates trade by providing financial resources through loans, overdrafts, and credit facilities, overcoming the hindrance of finance. It enables businesses to acquire assets, purchase raw materials, and manage expenses, unlike advertising (information), warehousing (time), or transport (place), which address different trade barriers.

Q3: Which of the following does not contribute to business risk?
(a) Natural disasters
(b) Efficient management
(c) Human errors
(d) Economic fluctuations
Ans: (b) Efficient management
Explanation: Business risks arise from uncertainties like natural disasters (e.g., floods damaging inventory), human errors (e.g., employee negligence), or economic fluctuations (e.g., demand drops). Efficient management, however, reduces risks by improving planning and operations, ensuring better decision-making and resource utilization.

Q4: Define business and explain two key characteristics in detail.
Ans: Business refers to an economic activity involving the regular production, purchase, or sale of goods and services with the aim of earning profit. Characteristics: 
(i) Regular Exchange: Business involves continuous buying and selling of goods or services, not isolated transactions. For example, a shop selling clothes daily is a business, but a one-time sale of a personal item is not. 
(ii) Profit Motive: The primary goal is to generate profit to ensure survival and growth. For instance, a manufacturer aims to sell products at a price higher than production costs to fund operations and expansion.

Q5: What are the two broad categories of business activities?
Ans: Industry and Commerce
Business activities are broadly classified into industry, which involves the production or processing of goods (e.g., manufacturing textiles), and commerce, which encompasses trade and activities facilitating trade, such as transportation and banking, ensuring goods and services reach consumers efficiently.

Q6: Name the industry concerned with extracting natural resources.
Ans: Primary industry
Primary industries focus on extracting and producing natural resources, such as mining for coal or fishing for seafood, and include activities like agriculture and forestry that directly harness nature’s resources for further processing or consumption.

Q7: Provide two examples of manufacturing industries.
Ans: (i) Textile industry (ii) Cement industry
The textile industry transforms raw materials like cotton into finished products such as clothes, while the cement industry processes limestone and other materials to produce cement used in construction, both being key examples of manufacturing industries under the secondary sector.

Q8: What is speculative risk? Provide an example and explain its nature.
Ans: Speculative risk involves the possibility of either profit or loss due to uncertain future events. Unlike pure risk, which only leads to loss, speculative risk can result in gains. Example: Launching a new smartphone model may lead to high profits if it gains market popularity or losses if consumer preferences shift to competitors. This risk arises from market dynamics like changing tastes or competition.

Q9: Explain the role of warehousing as an auxiliary to trade in detail.
Ans: Warehousing is an auxiliary to trade that removes the hindrance of time by storing goods between production and consumption. It ensures goods are available when demand arises, especially for seasonal products like agricultural goods. For example, wheat harvested in summer is stored in warehouses to supply markets year-round, preventing shortages and price spikes. Warehousing also protects goods from spoilage or damage, maintaining quality and stabilizing supply chains for businesses and consumers.

Q10: Differentiate between business and employment based on the nature of work.
Ans:

• Business: Involves entrepreneurial activities such as production, trading, or providing services, requiring decision-making, investment, and risk-taking for profit. For example, running a retail store involves managing inventory and sales. 
• Employment: Involves working for an employer under a contract, performing specific tasks without entrepreneurial responsibility or risk, earning wages/salary. For instance, a store employee sells goods as per the employer’s instructions, receiving a fixed salary.
  
  

Q11: What are the social objectives of a business? Explain any two in detail.
Ans: Social objectives involve businesses contributing to societal welfare as part of their responsibility. 
(i) Quality Goods at Fair Prices: Businesses must provide safe, certified products at reasonable prices to meet consumer expectations. For example, a pharmaceutical company ensuring affordable, quality medicines enhances public health and trust. 
(ii) Employment Generation: Creating job opportunities, especially for underprivileged groups, improves living standards and reduces unemployment. For instance, a factory in a rural area hiring local youth boosts the economy and supports community development.

Q12: Describe the role of transport as an auxiliary to trade in detail.
Ans: Transport is a crucial auxiliary to trade that removes the hindrance of place by moving goods from production sites to markets or consumers. It ensures raw materials reach factories and finished goods reach customers across regions. For example, transporting cotton from Gujarat to textile markets in Delhi enables production and sales nationwide. Efficient transport systems like railways or trucks reduce delivery times, lower costs, and enhance market reach, supporting both local and global trade.

Q13: Explain three causes of business risk with examples and their impact.
Ans: 
(i) Natural Causes: Uncontrollable events like floods or earthquakes can destroy assets, e.g., a cyclone damaging a warehouse, leading to financial losses. 
(ii) Human Causes: Employee negligence or dishonesty, such as a cashier embezzling funds, disrupts operations and erodes trust. 
(iii) Economic Causes: Market fluctuations like a sudden drop in demand due to changing fashion trends can reduce sales, e.g., a clothing brand facing losses from outdated inventory, impacting profitability.

Q14: Discuss three types of industries with one example each and their significance.
Ans: 
(i) Primary Industry: Extracts natural resources, e.g., mining coal, providing raw materials for other industries. 
(ii) Secondary Industry: Transforms raw materials into finished goods, e.g., sugar industry processing sugarcane, meeting consumer needs. 
(iii) Tertiary Industry: Offers services like banking, supporting primary and secondary industries by providing financial or logistical aid, ensuring smooth economic operations.

Q15: Why is profit essential for a business? Explain three reasons in detail.
Ans: 
(i) Survival: Profit ensures a business can cover operational costs like salaries and raw materials, sustaining its existence. Without profit, a firm may shut down, e.g., a retailer needs profit to pay rent and staff. 
(ii) Growth: Profits fund expansion, innovation, or new equipment, e.g., a factory investing in advanced machinery to increase production. 
(iii) Reward for Risk: Entrepreneurs take risks like market uncertainties; profit compensates them, encouraging investment, e.g., a startup founder risking capital expects returns to justify the venture.