Study SimplifyStudy Simplify

Economic Activities and Business

Meaning of economic and non-economic activities, types of economic activities, nature and characteristics of business.

Notes

Economic Activities and Business

Class 12 CBSE Entrepreneurship — Unit 2: Entrepreneurial Planning

Human Activities — Economic and Non-Economic

All human activities can be broadly classified into two categories based on their purpose:

Economic Activities
Activities undertaken to earn monetary gains, primarily concerned with production, distribution, and/or consumption of goods and services.
Non-Economic Activities
Activities done out of love, care, affection, self-satisfaction, emotions, sympathy, patriotism, etc., but not for money.
All human activities fall into one of these two categories

Types of Economic Activities

Economic activities are classified into three categories. Click any card to explore its definition, characteristics, and examples.

Nature and Meaning of Business

Business
Business is a continuous human economic activity with an objective to earn profit by producing, buying and selling of goods and services. Irrespective of size, nature, scale or ownership, an activity is referred to as business if it exhibits essential characteristics.

Definitions by Authors

F.C. Hooper
“Business is the whole complex field of commerce and industry, the basic industries, process and manufacturing and the network of ancillary services, distribution, banking, insurance, transport and so on which serve and interpenetrate the world of business as a whole.”

Hooper sees business as an interconnected ecosystem of industries and services.

Peterson and Plowman
“Business may be defined as an activity in which different persons exchange something of value whether goods and services for mutual gain or profit.”

Peterson and Plowman focus on exchange and mutual benefit as the essence of business.

Wheeler
“An institution organized and operated to provide goods and services to the society under the incentive of private gain.”

Wheeler emphasizes institutional structure and private gain as business's defining features.

Business activities can be broadly classified into three categories: Manufacturing (production of goods using labour and machines), Service (intangible commodity consumed at point of sale — e.g., banking, insurance, transport), and Trading (buying, selling, or exchanging goods/services).

Essential Characteristics of Business

For any activity to be considered a business, it must exhibit certain essential characteristics. Items marked with a star are exam-critical.

0 of 9 shown

Utility Creation by Business

Business activities result in the creation of three types of utilities. Hover over each to see examples.

Form Utility

Changing raw material into finished product.

Business

The Hub

Place Utility

Transporting goods from production to consumption place.

Time Utility

Storing goods when not required and supplying when needed.

Key Takeaways

Key Takeaways

  • Economic activities are undertaken for monetary gain; non-economic activities are driven by love, care, and emotions.
  • The three types of economic activities are Profession (specialized knowledge), Employment (work for others under contract), and Business (self-initiated, profit-driven, risk-bearing).
  • Business must involve sale/exchange of goods/services for value — production for self-consumption is not business.
  • Regularity is essential — a one-time transaction, however profitable, is not a business.
  • Business creates three types of utility: Form (transforming raw materials), Place (transporting goods), and Time (storing goods for future use).
  • Every business carries an element of risk — "higher the risk, higher the profit."
  • The nine essential characteristics of business include: entrepreneur's presence, economic activity, production/procurement, sale/exchange, regularity, utility creation, profit motive, uncertainty of return, and risk.