Economic and non-economic activities
An economic activity is done to earn a living, that is, to earn money or wealth. Examples: a farmer growing wheat to sell, a teacher paid by a school.
A non-economic activity is done for love, duty, faith, social service or fun, not for money. Examples: a mother cooking for her family, a volunteer cleaning a park, praying at a temple.
The same work can be either one. What decides it is the reason (motive) behind it.
Meaning and features of business
Business is an economic activity in which a person regularly makes or buys and sells goods or services to earn profit by meeting people's needs.
- Economic activity: done to earn money.
- Production or purchase of goods and services.
- Sale or exchange: goods are made for others, for money. Making things for your own use is not business.
- Dealings again and again (regularity): one single sale is not business.
- Profit is the main aim.
- Uncertain return: nobody can be sure of the profit.
- Element of risk: fire, theft, a change in fashion or a fall in demand can cause loss.
Business, profession and employment: comparison
A profession needs special knowledge and training, and membership of a professional body. Examples: doctor, lawyer, chartered accountant. Employment means working for another person under a service contract for a salary or wage.
| Basis | Business | Profession | Employment |
|---|---|---|---|
| How it starts | Owner's decision and legal formalities | Membership of a professional body, certificate of practice | Appointment letter and service agreement |
| Nature of work | Goods and services to the public | Personalised expert service | Work as per the contract |
| Qualification | None needed by law | Special degree and training needed | As fixed by the employer |
| Reward | Profit | Professional fee | Salary or wage |
| Capital | Needed, as per size | Limited | Not needed |
| Risk | High, return is uncertain | Low, fee is fairly regular | Almost none, fixed pay |
| Transfer of interest | Possible, with some formalities | Not possible | Not possible |
| Code of conduct | No fixed code | Professional code must be followed | Follow the employer's rules |
Objectives of business
A business needs goals in many areas, not just profit:
- Market standing: its place in the market compared with rivals.
- Innovation: new ideas, products and methods.
- Productivity: more output from the same input.
- Physical and financial resources: getting and using machines, buildings and money well.
- Earning profits.
- Manager performance and development.
- Worker performance and attitude.
- Social responsibility: care for customers, society and the environment.
Role of profit
Profit = Sales revenue − Costs. Profit matters because it:
- is a source of income for the owner and helps the business survive,
- gives money for growth and expansion,
- is a reward for risk taken by the owner,
- shows efficiency (good work earns more),
- builds goodwill and a good name.
But chasing only profit and forgetting customers, workers and society harms a business in the long run.
Try it
List five things your family did this week. Mark each one E (economic) or N (non-economic). Then, in the last 3D step, set sales below costs and see what happens to profit.
Key formulas and definitions
- Profit = Sales revenue − Total costs
- Business → profit; Profession → fee; Employment → salary/wage
- Economic or non-economic is decided by the motive, not by the work
Worked examples
1. A nurse looks after patients in a hospital for a salary. At home she looks after her sick father. Classify both.
Hospital: economic activity, employment (salary). Home: non-economic activity (done out of love and duty).
2. Ravi sells his old bicycle once for ₹2,000. Is this business?
No. There is no regularity in dealings. A single sale is not business. If he buys and sells used cycles again and again, it becomes business.
3. A bakery sells goods worth ₹90,000 in a month. Flour, gas, rent and wages cost ₹72,000. Find the profit and profit as a percentage of sales.
Profit = 90,000 − 72,000 = ₹18,000. Percentage = 18,000 ÷ 90,000 × 100 = 20%.
4. A chartered accountant opens her own office and charges clients. Business or profession? Why?
Profession: she gives expert service needing a special qualification and ICAI membership, follows a code of conduct and earns a fee.
Common mistakes
- Calling work "non-economic" because it is small. Size does not matter; the motive (money or not) decides.
- Saying profit is the only objective of business. It is the main one, but there are eight key areas of objectives.
- Writing "fee" as the reward of employment. Employees get a salary or wage; professionals get a fee.
- Treating making goods for your own use as business. Business needs sale or exchange for money.