Meaning and Nature of Business

Every economy runs on the everyday buying, selling, making, and moving of goods and services that people need. The word "business" is used loosely in ordinary speech, but in commerce it has a precise meaning: business is any economic activity that is carried on regularly, involving the production or exchange of goods and services, with the object of earning profit by satisfying human wants. For a student beginning AP Inter I year Commerce, this definition is the foundation on which almost every later chapter -- forms of organisation, business finance, MNCs, emerging trends -- is built.

Three ingredients together mark out a business activity from an ordinary personal act. First, it must be an economic activity -- undertaken for a living and measurable in money, not a personal or emotional act (cooking a meal for one's own family is not business; running a restaurant that cooks and sells meals is). Second, it must show regularity and continuity -- a single, one-off sale of an old scooter is not business, but a person who repeatedly buys and resells used vehicles is doing business. Third, it is undertaken, in the ordinary understanding of the term, with the object of earning profit through satisfying the wants of others, even though any particular year's actual result may turn out to be a loss.

Business activity as a whole is commonly split into two broad streams: industry, concerned with producing, processing, or extracting goods, and commerce, concerned with moving those goods to the people who need them -- through trade (buying and selling) and the services that support trade (the aids or auxiliaries to trade, such as transport, banking, insurance, warehousing, and advertising). Industry, trade, and the aids to trade together make up the full commercial machinery of an economy, and the sections that follow build on this three-part idea.