Q.Why is business considered as economic activity?

Human activities are grouped into economic activities (undertaken to earn a livelihood) and non-economic activities (done out of love, sympathy or sentiment), and business falls squarely into the first category.

Activities that people perform can be grouped into two broad kinds:

• Economic activities — those by which we earn our livelihood (a worker in a factory, a doctor in a clinic, a manager in an office, a teacher in a school).
• Non-economic activities — those done out of love, sympathy, sentiment or patriotism (a homemaker cooking for the family, or a boy helping an elderly man cross the road).

Why business falls in the economic category

• Business is carried on to earn money or a livelihood, and not out of love, affection or sympathy — this is the defining test of an economic activity.
• It involves the production or procurement of goods and services and their sale or exchange for value between a seller and a buyer.
• A main purpose of business is to earn income by way of profit (the excess of revenue over cost). No business can survive long without profit.
• It is done regularly and involves investment of capital with an expectation of return — hallmarks of an activity aimed at livelihood rather than personal satisfaction.

Because every one of these features points to earning a livelihood/profit, business is classified as an economic activity.