NCERT Solutions for Class 11 Business Studies Chapter 10: Internal Trade

Chapter at a glance

Exercises – Short Answer Questions

Question SA – Q1

What is meant by internal trade?

Answer

Internal trade refers to the buying and selling of goods and services within the boundaries of a country. No customs duty or import duty is levied, and payment is made in the national currency. It is classified into wholesale trade (buying in bulk and selling to retailers) and retail trade (selling in small quantities to final consumers).

Question SA – Q2

Specify the characteristics of fixed shop retailers.

Answer

1. They have permanent establishments (shops) from where they sell goods; they do not move from place to place.
2. They have greater resources and operate on a larger scale than itinerant traders.
3. They deal in different products — consumer durables as well as non-durables.
4. They have greater credibility in the eyes of customers, and can provide services like home delivery, credit, after-sales service and guarantees.

Question SA – Q3

What purpose is served by wholesalers providing warehousing facilities?

Answer

By storing goods in their warehouses, wholesalers:

1. Relieve manufacturers of the burden of storing finished goods, so they can concentrate on production.
2. Bridge the time gap between production and consumption; goods are released as and when retailers need them (time utility).
3. Ensure regular supply to retailers, so retailers need not keep large stocks.
4. Stabilise prices by releasing goods when supply falls and storing when supply is excess.
5. Protect goods from damage and help in grading and packing.

Question SA – Q4

How does market information provided by the wholesalers benefit the manufacturers?

Answer

Wholesalers are in direct contact with retailers and therefore know about customer tastes, preferences, fashion changes, competitors’ activities and market conditions. They pass this information to manufacturers, who use it to:

1. Improve the design and quality of products.
2. Plan production according to expected demand.
3. Fix prices and plan promotional activities.
4. Introduce new products and remain competitive.

Question SA – Q5

How does the wholesaler help the manufacturer in availing the economies of scale?

Answer

Wholesalers collect orders from a large number of retailers and place bulk orders with manufacturers. This enables manufacturers to produce on a large scale without worrying about distributing small quantities to numerous retailers. Large-scale production reduces the cost per unit through economies in purchasing, production, labour and administration. Thus wholesalers help manufacturers enjoy economies of scale.

Question SA – Q6

Distinguish between single line stores and speciality stores. Can you identify such stores in your locality?

Answer

Locality examples: a mobile-phone shop or footwear shop (single line); a shop selling only sarees or only toys for children (speciality). Students should name actual shops in their area.

Question SA – Q7

How would you differentiate between street traders and street shops?

Answer

Question SA – Q8

Explain the services offered by wholesalers to manufacturers.

Answer

1. Facilitating large-scale production — by collecting small orders from retailers and placing bulk orders.
2. Bearing risk — they take delivery in their own name and bear risks of price fall, theft, spoilage.
3. Financial assistance — they pay cash for goods purchased, and sometimes advance money to manufacturers.
4. Expert advice — information about customer tastes, market conditions and competition.
5. Help in marketing function — they distribute goods to many retailers spread over a wide area, so manufacturers are relieved of marketing activities.
6. Facilitating continuity of production by purchasing goods as and when produced.
7. Storage — providing warehousing facilities.

Question SA – Q9

What are the services offered by retailers to wholesalers and consumers?

Answer

To wholesalers and manufacturers

1. Help in distribution — make goods available to consumers spread over a wide area.
2. Personal selling — persuade consumers to buy, which helps realise sales.
3. Enabling large-scale operations — wholesalers need not deal with numerous consumers.
4. Collecting market information about consumer tastes and preferences.
5. Help in promotion — display, demonstration and local advertising.

To consumers

1. Regular availability of products.
2. New product information through display and personal selling.
3. Convenience in buying — small quantities near homes, at convenient times.
4. Wide selection of products and brands.
5. After-sales services — home delivery, installation, repairs.
6. Credit facilities to regular buyers.

Exercises – Long Answer Questions

Question LA – Q1

Itinerant traders have been an integral part of internal trade in India. Analyse the reasons for their survival in spite of competition from large scale retailers.

Answer

Itinerant traders (hawkers, peddlers, market traders, street traders, cheap jacks) survive because:

1. Low investment and operating cost — no shop rent or decoration; they can sell at lower prices.
2. Convenience to consumers — they bring goods to the doorstep or to busy places, saving customers time and travel.
3. Serve low-income and rural consumers — sell cheap, everyday items in small quantities.
4. Flexibility — they can change location, products and timings according to demand, festivals and seasons.
5. Personal relationship with regular customers; bargaining is possible.
6. Reach — they serve areas (villages, residential colonies, weekly markets) where large retailers are absent.
7. Self-employment — easy entry for people with little capital or education.
8. Fresh and perishable products like vegetables and fruits are sold daily.

Question LA – Q2

Discuss the features of a departmental store. How are they different from multiple shops or chain stores.

Answer

Departmental store: a large retail establishment offering a wide variety of products, divided into well-defined departments, under one roof, aimed at satisfying almost all needs of customers.

Features

1. Provide maximum services — restaurants, rest rooms, telephone, ATM, home delivery.
2. Combine retailing and warehousing — buy directly from manufacturers.
3. Centralised purchasing, with sales decentralised in departments.
4. Usually located in the heart of the city.
5. Large size; formed as a joint stock company with a board of directors.

Question LA – Q3

Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?

Answer

A consumer cooperative store is owned, managed and controlled by consumers themselves to obtain goods at reasonable prices.

Why less expensive

1. Elimination of middlemen — goods are bought directly from manufacturers or wholesalers.
2. Economies in operation — management is voluntary or by elected members, reducing costs.
3. No profit motive — the aim is service, so margins are low.
4. Cash sales — no bad debts.
5. Government support — subsidies, loans and tax concessions.

Relative advantages

1. Easy formation — any ten adults can form a society by registering.
2. Limited liability of members.
3. Democratic management — one member, one vote.
4. Lower prices compared with other retailers.
5. Cash sales and fewer overheads.
6. Patronage dividend — surplus is distributed to members in proportion to purchases.
7. Government patronage — supply of essential goods through cooperatives.

Question LA – Q4

Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?

Answer

Without retail shops consumers would face:

1. Non-availability of goods nearby — they would have to travel long distances to wholesalers or manufacturers.
2. Need to buy in bulk — wholesalers sell in large quantities, requiring more money and storage space.
3. Loss of time and money in travelling and searching for goods.
4. No choice — inability to compare brands, qualities and prices at one place.
5. No credit facilities — retailers often give credit to regular customers.
6. No after-sales service — installation, repair, exchange of goods.
7. No information about new products usually obtained from retailers.
8. Difficulty in buying perishable daily needs like milk, bread and vegetables.
9. Inconvenience for elderly people and those without transport.

Thus the local market and retail shops are essential for convenient and economical consumption.

Question LA – Q5

Explain the usefulness of mail order houses. What type of products are generally handled by them? Specify.

Answer

Mail order houses are retail outlets that sell goods through mail (post). There is no direct personal contact between buyer and seller. Customers are contacted through advertisements in newspapers, magazines, catalogues, circulars; orders are received by post, and goods are sent by post (often by VPP — value payable post).

Usefulness

1. Limited capital requirement — no need for expensive shops.
2. Elimination of middlemen — lower prices.
3. Absence of bad debts — goods are sent on cash-on-delivery basis.
4. Wide reach — customers anywhere with postal service can buy.
5. Convenience — goods are delivered at the customer’s doorstep.

Suitable products: goods that can be graded and standardised, easily transported at low cost, have ready demand, are available in large quantity and can be described through pictures — e.g. books, magazines, educational materials, small electronic items, garments, cosmetics, health products, gadgets. Bulky, perishable and costly goods are not suitable.

Topic checklist

• Internal trade: wholesale and retail
• Services of wholesalers to manufacturers and retailers
• Services of retailers to wholesalers and consumers
• Itinerant retailers and fixed shop retailers (small and large)
• Departmental stores, chain stores, consumer cooperatives, mail order houses
• Goods and Services Tax (GST)

Total questions answered: 14 of 14