Why business is considered as an economic activity?
Answers
Therefore business is considered an economic activity because it ensures production, sale, distribution of goods and services in order to satisfy consumer wants, with the purpose of making good profits.
An example of an economic activity within a business is a business distributing and delivering its products to the store.
Business is regarded as an economic activity due to the following reasons:
● To sell goods or services for profit: Economic activities are those activities which are undertaken to generate an income. Business is an economic activity because it is carried out as a means of earning money. Businessman make money by producing and selling commodities which help to satisfy human wants. For example, a farmer who grows vegetables for the consumption of his family is not engaged in business. But a farmer who grows vegetables for the purpose of selling in the market is undertaking a business. His object is to earn income in excess of the cost of growing vegetables. This excess of income over expenditure is called profit. The chief end of any business enterprise is generation of profit and wealth.
● Use of scarce resources: Business activities require use of scarce resources such as raw material, labour, capital and other factors of production. A businessman provides the necessary funds from his personal and other sources to meet the capital requirements of of his business. He arranges for raw materials from the suppliers required to produce the goods. He employees labour to assist the production. Thus, a businessman has to produce goods utilising various scarce resources.
● Satisfy needs of the human beings: Business activities satisfy the needs of the people by making goods and services available. Human beings can buy these goods and services and satisfy their needs. Business is a source of income for the businessman. With the help of this income, he can satisfy his needs as well as the needs of his family members.