Nature and Purpose of Business: Case Based Type Questions | Business Studies (BST) Class 11 - Commerce PDF Download

Read the following passage and answer the questions given below
Saransh and Vishal have their pharmaceutical factory in Jaipur. Their main focus is providing quality products at reasonable prices. They procure the services of a renowned medicine specialist, Mr. Andrews from Germany, who gives them feedback about the quality of their products. Because of increasing competition with foreign

Pharmaceutical Companies, their market share is decreasing, and they are suffering huge losses.
To ensure their existence  in the market, their management is concentrating on full usage of machines, and reducing wastage, and effective promotion of their products to increase the sales.
Question 1: ”Mr. Andrews from Germany who gives them feedback about the quality of their ........”Identify the economic activity Mr. Andrews performs.
(a) Business
(b) Profession
(c) Employment
(d) Partnership

Correct Answer is Option (b)

Mr. Andrews is a medicine specialist from Germany who is giving feedback about the quality of products. This implies he is using his specialised knowledge and expertise in the field of medicine to offer professional advice.

This fits the definition of a Profession, which involves:

• Specialised knowledge and training

• Rendering expert services (often intellectual in nature)

• Being governed by professional bodies or standards

He is not running a business, not employed by the company, and there’s no mention of partnership.

Question 2: “Because of increasing competition with foreign Pharmaceutical Companies, their market share is decreasing...” Name the type of risk related to the above-stated line.
(a) Speculative risk
(b) Foreign risk
(c) Pure risk
(d) All of the above

Correct Answer is Option (a)

The risk mentioned is about market share decreasing due to competition, which means there is a possibility of either loss or gain depending on how the business responds to the competition.

This fits the definition of Speculative Risk, which involves:

• The possibility of gain, loss, or no change

• Common in business situations

• Linked to market dynamics, such as competition, pricing, and consumer demand

So, the type of risk here is best described as Speculative Risk. 

Question 3: The pharmaceutical industry is an example of which of the following types of secondary industries?
(a) Genetic
(b) Analytical
(c) Synthetic
(d) Processing         

Correct Answer is Option (c)

The pharmaceutical industry is involved in combining various chemical ingredients to create medicines. This process of bringing together different raw materials to produce a final product is known as Synthetic Industry.

Types of Secondary Industries:

• Genetic: Related to breeding and reproduction (e.g., poultry farms, fish hatcheries)

• Analytical: Breaking down a product into several parts (e.g., oil refinery)

• Synthetic: Combining different raw materials to make a new product (e.g., pharmaceuticals, cosmetics, cement)

• Processing: Raw material is processed through various stages (e.g., sugar from sugarcane)

So, pharmaceuticals fit under the Synthetic industry.

Question 4: Match the different manufacturing industries with their suitable examples.

(a) 1. (i), 2. (iii), 3. (iv), 4. (ii)
(b) 1. (iii), 2. (i), 3. (iv), 4. (ii)
(c) 1. (iv), 2. (i), 3. (iii), 4. (ii)
(d) 1. (iii), 2. (i), 3. (ii), 4. (iv)

Correct Answer is Option (b)

1. Analytical industry is the industry which analysis and separates different elements from the same materials.
2. Synthetic industries are those industries that combine various ingredients and make a new product like Cement, fragrance and plastics.
3. The process industries are those industries where the primary production processes are either continuous, or occur on a batch of materials that is indistinguishable.
4. Assembling industry: These industries are engaged in bringing together various components or parts of bicycles, television, radio and these are some examples of assembling industries.

Question 5: ”To ensure their existence in the market, their management is concentrating...” Which economic objective is indicated in this statement?
(a) Survival
(b) Profit  
(c) Growth
(d) Diversification

Correct Answer is Option (a)

The statement clearly shows that the company is focusing on staying in business, especially during tough competition and losses. This is directly related to the economic objective of survival, which is the basic and immediate goal of any business when it is facing difficulties.

Here’s a quick breakdown of the options:

• Survival – Staying in the market during tough times (the correct answer here)

• Profit – Earning income over and above costs

• Growth – Expanding the size, sales, or operations of the business

• Diversification – Starting new products or entering new markets

Read the following passage and answer the questions given below.
Oorza Limited is the manufacturer and trader of electrical goods.  The company’s efficient management team and effective marketing strategies have enabled it to carve a niche in the industry, allowing it to stand out. However, over the past few years, its profit margins and customer loyalty have been going down. After an analysis of the reasons for lowering performance,  the company executives suggested how CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace, which can result in higher sales and enhance employee loyalty. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiency as well. The company followed the CSR initiatives and is able to regain its market position and increase its goodwill.

Question 6: Which objective will be fulfilled by the company through CSR?
(a) Economic
(b) Social
(c) Legal
(d) Personal

Correct Answer is Option (b)

• Corporate Social Responsibility (CSR) focuses on the company's duty to contribute positively to society.
• It involves:
  1. Addressing social issues like poverty and education.
  2. Promoting environmental sustainability.
  3. Engaging with stakeholders to ensure their interests are considered.
• While profit is important, CSR highlights the need for businesses to operate in a socially responsible manner.

Question 7: Identify which of these is not a role of profit as stated above.
(a) Survival of business
(b) Enhancing goodwill
(c) Increasing efficiency
(d) Enhancing customer loyalty

Correct Answer is Option (d)
Customer loyalty is an ongoing positive relationship between a customer and a business. It's what drives repeat purchases and prompts existing customers to choose your company over a competitor offering similar benefits.

Question 8: Match the following services to trade with the hindrances which they remove.

(a) 1. (iv), 2. (iii), 3. (ii), 4. (i)
(b) 1. (iii), 2. (ii), 3. (iv), 4. (i)
(c) 1. (iii), 2. (iv), 3. (ii), 4. (i)
(d) 1. (iii), 2. (iv), 3. (i), 4. (ii)

Correct Answer is Option (c)
Traders act as link between consumers and producers. Traders remove hindrance of persons by making goods available to consumer from producers.

Question 9: Identify the term which is related to uncertainties about the returns and chances of losses in the business.
(a) Risk 
(b) Market trend 
(c) Natural calamities
(d) Market standing

Correct Answer is Option (a)

Business risk refers to the possibility of facing losses or lower profits due to various uncertainties. Key points include:

• Uncertainties: Factors such as market conditions, changes in demand, and government policies can create risks.
• Types of Risks:There are two main types:
  1. Speculative Risks: Involve both potential gains and losses.
  2. Pure Risks: Only involve the possibility of loss.
• Causes: Risks can arise from natural events, human actions, or economic changes.
• Impact: The degree of risk often depends on the nature and size of the business.

Question 10: ”...may lower costs and improve efficiency as well.” If the company is able to achieve it, which business objectives are accomplished by the company?
(a) Profit maximization
(b) Social responsibility
(c) Growth and expansion
(d) All of the above

Correct Answer is Option (a)

• Profit maximization is the primary objective, focusing on achieving the highest possible returns.
• It involves balancing output and costs to maximise revenue.
• While profit is crucial, businesses must also consider social responsibility and other objectives for long-term success.
• Focusing solely on profit can lead to neglecting duties to customers, employees, and society.