Business is an economic activity. Economic activity refers to any activity which is conducted with an intention to earn money.
Business refers to production and distribution of goods and services with an intention to make profits. The production also involves the production of agricultural goods. For example, growing mangoes, manufacturing of soaps etc. Distribution refers to all the activities involved in the movement of goods and services to the ultimate consumer. For example transport, warehousing etc.
Following are some of the features or characteristics of Business as an economic activity-
1. Involves Production and Distribution of Goods and Services - Any activity done during the process of making goods and services available to the ultimate consumer for a price will be called as a business.
2. Involves goods and services - Every business transaction involves either goods or services. Services are intangible but are provided for earning money. For example, transport, banking etc.
3. Involves minimum of 2 parties - Any business activity involves a minimum of 2 parties i.e., buyer and seller. One cannot do a business with himself.
4. Involves Exchange - Any business activity involves an exchange of goods and services for money or money's worth. Hence business involves a minimum of 2 parties. Any exchange requires minimum 2 parties. Goods and Services exchanged for money is referred to as a monetary exchange. Exchange of goods or services for some other goods or services is called Barter Exchange. No money is involved in a barter exchange.
5. Aims at a profit - Every business activity has an aim to make a profit. If there is no intention to make a profit, such an activity cannot be considered as business.
6. Risk - Every business involves risk i.e., the risk of making a loss. There is nothing called Risk Free Business.
7. Continuity - Business involves a continuous and regular production of goods and services. Any isolated activity of buying and selling cannot be considered as business. For example, selling off old furniture of your house. Even though it involves money it still can't be considered as a business for you, as you are not doing this on a regular basis.
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