1st PUC Business Studies Question Bank Chapter 10 Internal Trade

Karnataka 1st PUC Business Studies Question Bank Chapter 10 Internal Trade

One Mark Questions

Question 1.
What is Internal trade?
Answer:
Internal trade means the exchange of goods and services within the geographical boundaries of one country. This is also termed as home trade or domestic trade.

Question 2.
State the two types of maternal trade.
Answer:
(a) Retail trade
(b) Wholesale trade

Question 3.
What is wholesale trade (March – N -2019)
Answer:
Wholesale trade refers to buying and selling of goods and services in large quantities for the purpose of resale or intermediate use.

Question 4.
What is retail trade (March- S- 2018)
Answer:
A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. He normally buys goods in large quantities from wholesalers and sells them in small quantities to the ultimate consumers.

Question 5.
Which type of trader acts as a link between wholesalers and consumers?
Answer:
Retailer.

Question 6.
Which type of trader acts as a link between manufacturer and retailer?
Answer:
Wholesaler.

Question 7.
State any one difference between wholesaler and retailer.
Answer:

Wholesaler	Retailer
The wholesaler purchases goods in large quantities from different manufacturers and resells them to the retailers,	A retailer buys goods in large quantities and sells them in small quantities to the ultimate consumers.

Question 8.
State any one itinerant retaller commonly seen In 1nd.
Answer:
Peddlers and hawkers.

Question 9.
Name the type of retailers who open their shops at different places on flown days or dates.
Answer:
Market traders.

Question 10.
Where do you commonly find street traders in a town’.
Answer:
Street traders are commonly found at places where huge floating population gathers.

Question 11.
What type of services is given by cheap jacks’
Answer:
They provide service to consumers in terms of making the products available where needed.

Question 12.
What types of goods are dealt with in specialty shops?
Answer:
Children’s garments, men’s wear, ladies’ shoes, toys and gifts, school uniforms, college books or consumer electronic goods, etc.

Question 13.
Which type of small fixed shop retailer deals with used gods, books, antiqueuems, etc?
Answer:
Second-hand goods shop.

Question 14.
Carry ‘needle to the airplane’ this statement applies to which type of fixed shop retailers?
Answer:
Departmental stores.

Question 15.
Give an example for multiple shops.
Answer:
Bata Shoe stores.

Question 16.
ExpandAVM. (March-S-2019)
Answer:
Automated Vending machines.

Question 17.
Which is commonly seen automated vending machine 11 banking services?
Answer:
Automated Teller Machines.

Question 18.
Expand ASSOCHAM.
Answer:
Associated Chambers ôf Commerce and Industry of India.

Question 19.
Give an example for departmental stores
Answer:
Big Bazar.

Question 20.
State any one feature of the itinerant retailer.
Answer:
They are small traders operating with limited resources.

Question 21.
State any one features of Fixed shop retailers
Answer:
Fixed shop retailers may be dealing in different products, including consumer durables as well as non-durables.

Question 22.
State the bIggestithrantage of general stores
Answer:
Convenience to the customers in buying products of daily use such as grocery items, soft drinks, toiletry products, stationery, and confectionery.

Question 23.
State any one type of goods suitable for mail-order houses.
Answer:
Goods that are available in large quantity throughout the year is suitable for mail-order houses.

Question 24.
State any one advantages of consumer co-operative stores.
Answer:
Ease information.

Question 25.
State any two products suitable for selling through AY’Ms.
Answer:
Chocolates and soft drinks.

Multiple Choices One Mark Questions

Question 1.
Which of the following does not come under the types of itinerant retailers?
(a) Peddlers and Hawkers
(b) Market Traders
(c) Cheap Jacks
(d) Street Stall Holders
Answer:
(d) Street Stall Holders

Question 2.
Which of the following is not a fixed shop large retailer?
(a) General Stores
(b) Chain Stores
(c) Mail-Order Houses
(d) Super Markets
Answer:
(a) General Stores

Question 3.
The goods not suitable for Mail Order Houses are
(a) Those which can be graded and standardized
(b) Those which can be transported at low cost
(c) Those which have ready demand in the market
(d) Those which are perishable and bulky
Answer:
(d) Those which are perishable and bulky

Question 4.
Which of the following statement does not apply to a wholesaler
(a) He buys in bulk from manufacturers and sells in relatively small lots
(b) He undertakes to buy and sell in their own name
(c) He bears a variety of risks
(d) He acts as a link between manufacturers and consumers
Answer:
(d) He acts as a link between manufacturers and consumers

Two Mark Questions

Question 1.
How do wholesalers help in facilitating large-scale production?
Answer:
Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities.

Question 2.
How do retailers help in collecting market information for manufacturers and wholesalers?
Answer:
As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences, and attitudes of customers.

Question 3.
State any two itinerant retailers have commonly seen in India.
Answer:
Peddlers and hawkers.

Question 4.
State any two fixed shop small retailer.
Answer:
(a) General stores
(b) Speciality shops.

Question 5.
State any two fixed shop large retailer.
Answer:
(a) Departmental stores
(b) Chain stores or multiple shops.

Question 6.
Give the meaning of specialty’ stores.
Answer:
Specialty stores are a type of retail store that is, of late, becoming very popular, particularly in urban areas. Instead of selling a variety of products of different types, these retail stores specialize in the sale of a specific line of products.

Question 7.
Give the meaning of second-hand goods shop.
Answer:
These shops sell used or second-hand articles such as books, clothes, furniture, etc. They cater to the needs of poor people who cannot afford new articles.

Question 8.
What do you understand by departmental stores?’ (March N -2018)
Answer:
A Departmental Store is a large-scale retail shop where a large variety of goods are sold in a single building. The entire building is divided into a number of departments or sections. In each department specific types of goods like stationery items, books, electronic goods, garments, jewelry, etc. are made available.

Question 9.
How mail order businesses do retail business?
Answer:
Mail order houses are the retail outlets that sell their merchandise through the mail. There is generally no direct personal contact between the buyers and the sellers in this type of trading. For obtaining orders, potential customers are approached through advertisements in newspapers or magazines, circulars, catalogs, samples and bills, and price lists sent to them by post.

Question 10.
State any two alternatives available for customers to make payments in the mail order business.
Answer:
There can be different alternatives for receiving payments:
(a) First, the customers may be asked to make full payment in advance.
(b) Second, the goods may be sent by Value Payable Post (VPP). Under this arrangement, the goods are sent through the post and are delivered to the customers only on making full payment for the same.

Question 11.
Give the meaning of consumer cooperative stores.
Answer:
A consumer cooperative store is an organization owned, managed, and controlled by consumers themselves. The objective of such stores is to reduce the number of middlemen who increase the cost of production and thereby provide service to the members.

Question 12.
Give the meaning of supermarket. (March – S -2018) (March – S -2019)
Answer:
Super Market is a large-scale retail store that sells a wide variety of products like food items, vegetables, fruits, groceries, utensils, clothes, electronic appliances, household goods, etc. all under one roof.

Question 13.
Give the meaning of Automated Vending machines.
Answer:
Automated vending machines are the newest revolution in marketing methods. Coin-operated vending machines are proving useful in selling several products such as hot beverages, platform tickets, milk, soft drinks, chocolates, newspaper, etc. in many countries.

Question 14.
State any two products suitable for selling through AVMs.
Answer:
Chocolates and soft drinks.

Question 15.
State any two features of wholesalers.
Answer:
(a) The wholesaler purchases goods in large quantities from different manufacturers and resells them to the retailers.
(b) Wholesalers serve as an important link between manufacturers and retailers.

Question 16.
State any two features of the retailer.
Answer:
(a) A retailer sells goods and services directly to the ultimate consumers.
(b) A retailer buys goods in large quantities and sells them in small quantities.

Question 17.
State any two features of the itinerant retailer.
Answer:
(a) They are small traders operating with limited resources.
(b) They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and so on.

Question 18.
Give the meaning of multiple shops.
Answer:
These are a large-scale retail shops where they sell a similar range of commodities at the same price in all their shops. These shops are usually owned and run by big manufacturers/producers.

Question 19.
State any two services of the retailer to consumers.
Answer:
(a) Provide credit facilities.
(b) New product information.

Question 20.
State any two advantages of departmental stores.
Answer:
(a) Convenience in buying
(b) Attract a large number of customers.

Question 21.
State any two limitations of departmental stores. (March – N -2019)
Answer:
(a) Luck of personal attention
(b) High operating COM

Question 22.
State any two advantages of chain stores.
Answer:
(a) Economies of scale
(b) Elimination of middlemen

Question 23.
State any two limitations of chain stores.
Answer:
(a) Limited selection of goods
(b) Lack of initiative

Question 24.
State any two advantages of mail-order business.
Answer:
(a) Elimination of middlemen
(b) Limited capital requirement

Question 25.
State any two limitations of mail-order business.
Answer:
(a) Delayed delivery
(b) No credit facilities

Question 26.
Stale any two advantages of consumer co-operative stores.
Answer:
(a) Ease information
(b) Limited liability

Question 27.
State any two limitations of consumer co-operative stores.
Answer:
(a) Lack of initiative
(b) Shortage of funds

Question 28.
State any one type of goods suitable for mail-order houses.
Answer:
Goods that are available in large quantity throughout the year is suitable for mail-order houses and goods that have ready demand in the market.

Four Mark Questions

Question 1.
Explain any four services of wholesalers to the manufacturer. (March – N -2018) (March – S -2019)
Answer:
Wholesalers services to the producer are:
(a) Facilitating large-scale production: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale.

(b) Bearing risk: The wholesale merchants deal in goods in their own name, take delivery of the goods and keep the goods purchased in large lots in their warehouses. In the process, they bear lots of risks such as the risk of fall in prices, theft, pilferage, spoilage, fire, etc.

(c) Financial assistance: The wholesalers provide financial assistance to the manufacturers in the sense that they generally make cash payments for the goods purchased by them. To that extent, the manufacturers need not block their capital in the stocks.

(d) Expert advice: As the wholesalers are in direct contact with the retailers, they are in a position to advise the manufacturers about various aspects including customer’s tastes and preferences, market conditions, competitive activities, and the features preferred by the buyers.

Question 2.
Explain any four services of wholesalers to retailers.
Answer:
Services of wholesale sellers to retailers are:
(a) Availability of goods: Retailers have to maintain adequate stock of varied commodities so that they can offer variety to their customers. The wholesalers make the products of various manufacturers readily available to the retailers. This relieves the retailers of the work of collecting goods from several producers.

(b) Marketing support: The wholesalers perform various marketing functions and provide support to the retailers. They undertake advertisements and other sales promotional activities to induce customers to purchase the goods.

(c) Grant of credit: The wholesalers generally extend credit facilities to their regular customers. This enables the retailers to manage their business with a relatively small amount of working capital.

(d) Specialised knowledge: The wholesalers specialize in one line of products and know the pulse of the market. They pass on the benefit of their specialized knowledge to the retailers. They inform the retailers about the new products, their uses, quality, prices, etc.

Question 3.
Explain any four services of retailers to consumers.
Answer:
Services of retailers towards the customer are:
(a) Regular availability of products: The most important service of a retailer to consumer is to maintain regular availability of various products produced by different manufacturers.

(b) New product information: By arranging for effective display of products and through their personal selling efforts, retailers provide important information about the arrival, special features, etc. of new products to the customers.

(c) Convenience in buying: Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers.

(d) Wide selection: Retailers generally keep stock of a variety of products of different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.

Question 4.
State the features of the itinerant retailer.
Answer:
The features are:
(a) They are small traders operating with limited resources.
(b) They normally deal in consumer products of daily use such as toiletry products, fruits and vegetables, and so on.
(c) The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers.
(d) As they do not have any fixed business establishment to operate from, these retailers have to keep their limited inventory of merchandise either at home or at some other place.

Question 5.
Explain different types of itinerant retailers.
Answer:
The different types of itinerant retailers are:
(a) Hawkers: A hawker moves about in residential localities. He carries his goods in a hand cart or bicycle. He deals in low-priced goods of daily use, e.g. combs, toys, soaps, mirrors, bangles, vegetables, fruits, ice cream, etc.

(b) Pedlars: A pedlar also moves from house to house and sells articles of daily use. But he carries his wares on his head or on the back of a mule.

(c) Cheap jacks: A cheap jack hires a small shop in a residential locality for a temporary period. He shifts his business from one locality to another depending on the availability of customers. He deals in low-priced household articles.

(d) Street traders: A pavement dealer displays his wares on footpaths and outside public places such as railway stations, bus stands, cinemas, temples, etc. He sells low-priced articles like newspapers, magazines, fruits, vegetables, footwear to the passerby. He is also called a street trader.

(e) Market traders: A market trader sells goods at weekly markets when the shops are closed for a weekly holiday. He displays goods outside the closed shops. He deals in low-priced articles of daily use. He may also set up stalls at fairs and exhibitions.

Question 6.
Explain different types of fixed shop small retailers.
Answer:
(a) Street stall holders: These stalls are located in the main streets or street crossings. A stall is an improvised structure made of tin or wood. The street stall holder displays his goods on a temporary platform and sells toys, stationery, hosiery items, etc. at low prices.

(b) Secondhand goods shops: These shops sell used or second-hand articles such as books, clothes, furniture, etc. They cater to the needs of poor people who cannot afford new articles.

(c) General stores: These stores sell a wide variety of products under one roof. For example, a provision store deals in grocery, toothpaste, razor blades, bathing soap, washing powder, soft drinks, confectionery, cosmetics, etc. Consumers can buy most of their daily requirements in one place. Their time and effort are saved.

(d) Single line stores: These stores deal in one line of goods. They keep stock of different sizes, designs, and quality of goods in the same line. Book stores, chemist shops, electrical stores, shoe stores, cloth stores, jewelry shops, etc., are examples of single-line stores.

(e) Speciality shops: These shops generally specialize in one type of product rather than dealing in a line of products. Shops selling children’s garments, educational books, etc. are examples of such shops.

Question 7.
State any four differences between departmental stores and chain stores.
Answer:
Departmental stores are different from multiple shops or chain stores for the following reason:
(a) Location: A departmental store is located in a central place, where a large number of customers can be attracted to it. However, the multiple stores are located at a number of places for approaching a large number of customers. Thus, a central location is not necessary for multiple shops.

(b) Range of products: Departmental stores aim at satisfying all the needs of customers under one roof. As such, they have to carry a variety of products of different types. However, the multiple stores aim to satisfy the requirements of customers relating to a specified range of their products only.

(c) Services offered: The departmental stores lay great emphasis on providing maximum service to their customers. Some of the services, provided by them include a post office, restaurant, and so on. As against this, the multiple shops provide very limited service confined to guarantees and repairs if the sold-out goods turn out to be defective.

(d) Pricing: The multiple shop chains sell goods at fixed prices and maintain uniform pricing policies for all the shops. The departmental stores, however, do not have a uniform pricing policy for all the departments; rather they have to occasionally offer discounts on certain products and varieties to clear their stock.

Question 8.
Mail order houses are not suitable for all types of products. State the types of products suitable for the mail order services.
Answer:
Mail-order business is not suitable for all types of products. For example, goods that are perishable in nature or are bulky and cannot be easily handled, are not recommended for mail-house trading. Mail order houses usually deal only in the goods that can be:
(a) Graded and standardized.
(b) Easily transported at low cost.
(c) Have ready demand in the market.
(d) Are available in large quantity throughout the year.
(e) Involve least possible competition in the market.
(f) Can be described through pictures, etc.

Question 9.
Write a short note on the vending machine.
Answer:
(a) Vending machines are the newest revolution in marketing methods. Coin-operated vending machines are proving useful in selling several products such as hot beverages, platform tickets, milk, soft drinks, chocolates, newspaper, etc. in many countries.

(b) Apart from some of the products mentioned here, the latest area in which this concept is getting popular in many parts of our country is the case of Automated Teller Machines (ATM) in the banking service. As the name suggests, these machines have altogether changed the concept of banking and made it possible to withdraw money at any time without visiting any branch of a bank.

(c) Vending machines can be useful for selling pre-packed brands of low-priced products which have high turnover and which are uniform in size and weight.

(d) However, the initial cost of installing a vending machine and the expenditure on regular maintenance and repair is quite high. Also, consumers cannot feel or see the product before buying and don’t have the opportunity of returning unwanted goods.

(e) Apart from that, special packs have to be developed for the machines. The machines have to be made reliable in their operations. In spite of these limitations, with the growth in the economy, vending machines have a promising future in retail sales of high turnover and low-priced consumer products.

Eight Mark Questions

Question 1.
Who is a wholesaler? Explain services of wholesalers to the manufacturer.
Answer:
A wholesaler is an intermediary entity in the distribution channel that buys in bulk and sells to resellers rather than to consumers:
(a) Facilitating large-scale production: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale.

(e) Help in the marketing function: The wholesalers take care of the distribution of goods to a number of retailers who, in turn, sell to a large number of customers spread over a large geographical area. This relieves the manufacturers from marketing activities and enables them to concentrate on the production activity.

(f) Facilitate continuity: The wholesalers facilitate continuity of production activity throughout the year by purchasing the goods as and when they are produced.

(g) Storage: Wholesalers take delivery of goods when these are produced in a factory and keep them in their godowns. This reduces the burden of manufacturers of providing storage facilities for the finished products.

Question 2.
What is retail trade? Explain services of retailers to consumers.
Answer:
A retailer is a business enterprise that is engaged in the sale of goods and services directly to the ultimate consumers. He normally buys goods in large quantities from wholesalers and sells them in small quantities to the ultimate consumers.
(a) Regular availability of products: The most important service of a retailer to consumer is to maintain regular availability of various products produced by different manufacturers.

(c) Convenience in buying: Retailers generally buy goods in large quantities and sell these in small quantities, according to the requirements of their customers.

(d) Wide selection: Retailers generally keep stock of a variety of products from different manufacturers. This enables the consumers to make their choice out of a wide selection of goods.

(e) Provide credit facilities: The retailers sometimes provide credit facilities to their regular buyers. This enables the latter to increase their level of consumption and, thereby, their standard of living.

(f) After-sales services: Retailers provide important after-sales services in the form of home delivery, supply of spare parts, and attending to customers.

Question 3.
Explain different types of fixed shop small retailers. (March – N -20.18)
Answer:
(a) Street stall holders: These stalls are located in the main streets or street crossings. A stall is an improvised structure made of tin or wood. The street stall holder displays his goods on a temporary platform and sells toys, stationery, hosiery items, etc. at low prices.

(b) Secondhand goods shops: These shops sell used or second-hand articles such as books, clothes, furniture, etc. They cater to the needs of poor people who cannot afford new articles.

(d) Single line stores: These stores deal in one line of goods. They keep stock of different sizes, designs,s, and quality of goods in the same line. Book stores, chemist shops, electrical stores, shoe stores, cloth stores, jewelry shops, etc., are examples of single-line stores.

Question 4.
Explain the merits and limitations of departmental stores. (March – S -2018)
Answer:
Merits
(a) Attract a large number of customers: As these stores are usually located in central places they attract a large number of customers during the best part of the day.

(b) Convenience in buying: By offering a large variety of goods under one roof the departmental stores provide great convenience to customers in buying almost all goods of their requirements at one place. As a result, they do not have to run from one place to another to complete their shopping.

(c) Attractive services: A departmental store aims at providing maximum services to the customers. Some of the services offered by it include home delivery of goods, execution of telephone orders, grant of credit facilities, and provision for restrooms, telephone booths, restaurants, salons, etc.

(d) Economy of large-scale operations: As these stores are organized at a very large scale, the benefits of large-scale operations, particularly, in respect of the purchase of goods are available to them.

(e) Promotion of sales: The departmental stores are in a position to spend a considerable amount of money on advertising and other promotional activities, which help in boosting their sales.

Limitations
(a) Lack of personal attention: Because of the large-scale operations, it is very difficult to provide adequate personal attention to the customers in these stores.
(b) High operating cost: As these stores give more emphasis on providing services, their operating costs tend to be on the higher side. These costs, in mm, make the prices of the goods high. They are, therefore, not attractive to the lower-income group of people.
(c) High possibility of loss: As a result of high operating costs and large-scale operations, the chances of incurring losses in a departmental store are high.
(d) Inconvenient location: As a departmental store is generally situated at a central location, it is not convenient for the purchase of goods that are needed at short notice.

Question 5.
Explain the merits and limitations of chain stores.
Answer:
Merits
(a) Economies of scale: As there is central procurement/manufacturing, the multiple-shop organization enjoys economies of scale.

(b) Elimination of middlemen: By selling directly to the consumers, the multiple-shop organization is able to eliminate unnecessary middlemen in the sale of goods and services.

(c) No bad debts: Since all the sales in these shops are made on a cash basis, there are no losses on account of bad debts.

(d) Transfer of goods: The goods not in demand in a particular locality may be transferred to another locality where it is in demand. This reduces the chances of dead stock in these shops.

(e) Diffusion of risk: The losses incurred by one shop may be covered by profits in other shops, reducing the total risk of an organization.

(f) Low cost: Because of centralized purchasing, elimination of middlemen, centralized promotion of sales, and increased sales, the multiple shops have a lower cost of business.

(g) Flexibility: Under this system, if a shop is not operating at a profit, the management may decide to close it or shift it to some other place without really affecting the profitability of the organization as a whole.

Limitations
(a) Limited selection of goods: The multiple shops deal only in a limited range of products, mostly those produced by the marketers. They do not sell products of other manufacturers.

(b) Lack of initiative: The personnel managing the multiple shops have to obey the instructions received from the head office. This makes them habitual of looking up to the head office for guidance on all matters and takes away the initiative from them to use their creative skills to satisfy the customers.

(c) Lack of personal touch: Lack of initiative in the employees sometimes leads to indifference and lack of personal touch in them.

(d) Difficult to change demand: If the demand for the merchandise handled by multiple shops changes rapidly, the management may have to sustain huge losses because of large stocks lying unsold at the central depot.

Question 6.
Explain the merits and limitations of mail-order business. (March – S -2018)
Answer:
Merits
(a) Limited capital requirement: Mail order business does not require heavy expenditure on building and other infrastructural facilities. Therefore, it can be started with a relatively low amount of capital.

(b) Elimination of middlemen: The biggest advantage of mail-order business from the point of view of consumers is that unnecessary middlemen between the buyers and sellers are eliminated. This may result in a lot of savings both to the buyers as well as to the sellers.

(c) Wide reach: Under this system, the goods can be sent to all the places having postal services. This opens a wide scope for business as a large number of people throughout the country can be served through the mail.

(d) Convenience: Under this system goods are delivered to the doorstep of the customers. This results in great convenience to the customers in buying these products.

(e) Absence of bad debt: Since the mail-order houses do not extend credit facilities to the customers, there are no chances of any bad debt on account of non-payment of cash by the customers.

(b) No personal attention: Supermarkets work on the principle of self-service. The customers, therefore, don’t get any personal attention. As a result, such commodities that require personal attention by salespeople cannot be handled effectively in supermarkets.

(c) Mishandling of goods: Some customers handle the goods kept on the shelf carelessly. This may raise costs in supermarkets.

(d) High overhead expenses: Supermarket incurs high overhead expenses. As a result, there have not been able to create low price appeal among the customers.

(e) Possibility of abuse: This type of business provides a greater possibility of abuse to dishonest traders to cheat the customers by making false claims about the products or not honoring the commitments made through handbills or advertisements.

(f) High dependence on postal services: The success of mail-order business depends heavily on the availability of efficient postal services at a place. But in a vast country like ours, where many places are still without postal facilities, this type of business has limited prospects.

Question 7.
Explain the merits and limitations of supermarkets. (March – N -2019)
Answer:
Merits
(a) Central location: The supermarkets are generally located in the heart of the city. As a result, these are easily accessible to a large number of people staying in the surrounding localities.
(b) Wide selection: Supermarkets keep a wide variety of goods of different designs, colors, etc. which enables the buyers to make a better selection.
(c) No bad debts: As generally the sales are made on a cash basis, there are no bad debts in supermarkets.
(d) Benefits of being large scale: A supermarket is a large scale retailing store. It enjoys all the benefits of large-scale buying and selling because of which its operating costs are lower.
(e) One roof, low cost: Supermarkets offer a wide variety of products at low cost, under one roof. These outlets are, therefore, not only convenient but also economical to the buyers for making their purchases.

Limitations
(a) No credit: Supermarkets sell their products on a cash basis only. No credit facilities are made available to the buyers. This restricts the purchasing power of buyers from such markets.
(b) No personal attention: Supermarkets work on the principle of self-service. The customers, therefore, don’t get any personal attention. As a result, such commodities that require personal attention by salespeople cannot be handled effectively in supermarkets.
(c) Mishandling of goods: Some customers handle the goods kept on the shelf carelessly. This may raise costs in supermarkets.
(d) High overhead expenses: Supermarket incurs high overhead expenses. As a result, there have not been able to create low price appeal among the customers.
(e) Huge capital requirement: Establishing and running a supermarket requires a huge investment. The turnover of a store should be high so that the overheads are kept under reasonable level. This can be possible in bigger towns but not in small towns.

Question 8.
Explain the role of the chamber of commerce and industry associations in the promotion of internal trade.
Answer:
(a) Transportation or interstate movement of goods: The Chambers of Commerce and Industry help in many activities concerning the interstate movement of goods which includes registration of vehicles, surface transport policies, construction of highways and roads.

(b) Marketing of agro products and related issues: The associations of agriculturists and other federations play an important role in the marketing of agro products. Streamlining of local subsidies and marketing policies of organizations selling agro products are some of the areas where the Chambers of Commerce and Industry can really intervene and interact with concerned agencies like farming cooperatives.

(c) Weights and measures and prevention of duplication brands: Laws relating to weights and Measures and protection of brands are necessary to protect the interest of the consumers as well as the traders. They need to be enforced strictly. The Chambers of Commerce and Industry interact with the government to formulate such laws and take action against those who violate rules and regulations.

(d) Promoting sound infrastructure: A sound infrastructure like road, port, electricity, railways, etc. plays a catalytic role in promoting trade. The Chambers of Commerce and Industry in collaboration with the government needs to take up heavy investment projects.

(e) Labour legislation: A simple and flexible labor legislation is helpful in running industries, maximizing production and. generating employment. The Chambers of Commerce and Industry and the government are constantly interacting on issues like labor laws, retrenchment, etc.

(f) Octroi and other local levies: Octroi and local taxes are the important sources of revenue of the local government. These are collected on the goods and from people entering the state or the municipal limits. The government and Chambers of Commerce should ensure that their imposition is not at the cost of smooth transportation and local trade.

(g) Harmonisation of sales tax structure and value-added tax: The Chambers of Commerce and Industry play an important role in interacting with the government to harmonize the sales tax structure in different states.

(h) Excise duty: Central excise is the chief source of the government revenue levied across states by the central government. The excise policy plays an important role in the pricing mechanism and hence the associations need to interact with the government to ensure streamlining of excise duties.

1st PUC Business Studies Internal Trade Textbook Questions and Answers

Short Answer Questions

Question 1.
What is internal trade?
Answer:
Internal trade means the exchange of goods and services within the geographical boundaries of one country. This is also termed as home trade or domestic trade.

Question 2.
What purpose is served by wholesalers providing warehousing facilities?
Answer:
Two-way purposes are served by wholesalers providing warehousing facilities in the following manner:
(a) Wholesalers take delivery of goods when these are produced in a factory and keep them in their godowns/warehouses which reduces the burden of manufacturers of providing storage facilities for the finished products.

(b) Warehousing by wholesalers relieves the retailers of the work of collecting goods from several producers and keeping big inventory of the same for maintaining adequate stock of varied commodities for the customers.

Question 3.
How docs market information provided by the wholesalers benefit the manufacturers?
Answer:
Wholesalers provide useful market information to the manufacturers about various aspects like customer’s tastes and preferences, market conditions, competitive activities, and the features preferred by the buyers. This information proves extremely beneficial to the manufacturers as it helps them in taking effective decisions regarding their production and marketing strategies.

Question 4.
How does the wholesaler help the manufacturer in availing the economies of scale?
Answer:
Wholesalers serve as a link between retailers and manufacturers. They collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale and thus take advantage of the economies of scale.

Question 5.
Distinguish between single-line stores and specialty stores Can you identify such stores line your locality?
Answer:

Single Line Stores	Specialty Stores
1. The store which is dealing in general category product lines are called the single-line store, e.g. garments, medical stores, etc.	1. The stores which are dealing in a particular type of product under one product line e.g Jeans shop have all brands of jeans only.
2. There is no such advantage of specialization.	2. They take advantage of specialization in a particular segment of the market.
3. They are situated in marketplaces.	3. They are located in a central place of the market.

Question 6.
How would you differentiate between street traders and street shops?
Answer:

Street Traders	Street Shops
1. The traders who are generally selling their goods on busy street comers bus stands, etc.	1. These are the platforms used to display the goods for sale.
2. They deal in a cheap variety of goods.	2. They deal in low-priced articles but not that cheap.

Question 7.
Explain any four services of wholesalers to the manufacturer.
Answer:
Wholesalers services to the producer are:
(a) Facilitating large-scale production: Wholesalers collect small orders from a number of retailers and pass on the pool of such orders to manufacturers and make purchases in bulk quantities. This enables the producers to undertake production on a large scale.

Question 8.
Explain any four services of retailers to wholesalers and manufacturers.
Answer:
Retailers services towards manufacture are:
(a) Help in the distribution of goods: A retailer’s most important service to the wholesalers and manufacturers is to provide help in the distribution of their products by making these available to the final consumers.

(b) Enabling large-scale operations: On account of the retailer’s services, the manufacturers and wholesalers are freed from the botheration of making individual sales to consumers in small quantities. This enables them to operate at a relatively large scale, and thereby fully concentrate on their other activities.

(c) Collecting market information: As retailers remain in direct and constant touch with the buyers, they serve as an important source of collecting market information about the tastes, preferences, and attitudes of customers. Such information is considered very useful in making important marketing decisions in an organization.

(d) Help In promotion: From time to time, manufacturers and distributors have to canyon various promotional activities in order to increase the sale of their products. For example, they have to advertise their products and offer short-term incentives in the form of coupons, free gifts, sales contests, and so on. Retailers participate in these activities in various ways and, thereby, help in promoting the sale of the products.

Long Answer Questions

Question 1.
Itinerant traders have been an integral part of internal trade in India. Analyze the reasons for their survival in spite of competition from large-scale retailers.
Answer:
Itinerant retailers are traders who do not have a fixed place of business to operate from. They keep on moving with their wares from street to street or place to place, in search of customers.

Following are the reasons for their survival in spite of competition from large scale retailers:
(a) They are small traders and hence rural customers and consumers from backward areas find themselves more comfortable dealing with them.

(b) They normally deal in consumer products of daily use such as toiletry products, fruits, and vegetables, etc. demand for which does not fall much with time.

(c) The emphasis of such traders is on providing greater customer service by making the products available at the very doorstep of the customers. This makes it convenient for the consumers and helps in the survival of itinerant sellers.

(d) Their cost of operation is very low as compared to large-scale retailers as they do not have to incur the expense of fixed shops and inventory costs. Therefore, they are in a position to offer lower prices to consumers.

Question 2.
Discuss the features of a departmental store. How are they different from multiple shops or chain stores?
Answer:
A departmental store is a large establishment offering a wide variety Of products, classified into well-defined departments, aimed at satisfying practically every customer’s need under one roof. It has a number of departments, each one confining its activities to one kind of product, e.g., there may be separate departments for toiletries, medicines, furniture, groceries, electronics, clothing, and dress material.

Some of the important features of a departmental store are as follows:
(a) A modem departmental store may provide all facilities such as restaurants, restrooms, etc. In this way, they try to provide maximum service to a higher class of customers for whom price is of secondary importance.

(b) These stores are generally located at a central place in the city, which caters to a large number of customers.

(c) They are generally formed as a joint-stock company managed by a Board of Directors as the size of these stores is very large.

(d) A departmental store combines both the functions of retailing as well as warehousing. They purchase directly from manufacturers and operate separate warehouses thereby eliminating undesirable middlemen between the producers and the customers.

(e) All the purchases in a department store are made centrally by the purchasing department of the store, whereas sales are decentralized in different departments.

Departmental stores are different from multiple shops or chain stores for the following reason:
(a) Location: A departmental store is located in a central place, where a large number of customers can be attracted to it. However, the multiple stores are located at a number of places for approaching a large number of customers. Thus, a central location is not necessary for multiple shops.

(c) Services offered: The departmental stores lay great emphasis on providing maximum service to their customers. Some of the services, provided by them include a post office, restaurant, and so on. As against this, the multiple shops provide very limited service con-fined to guarantees and repairs if the sold-out goods turn out to be defective.

(e) Class of customers: The departmental stores cater to the needs of a relatively high-income group of customers who care more for the services provided rather than the prices of the product. The multiple shops, on the other hand, cater to different types of customers, including those belonging to the lower-income groups, who are interested in buying quality goods at reasonable prices.

(f) Credit facilities: All sales in the multiple shops are made strictly on a cash basis. In contrast, the departmental stores may provide credit facilities to some of their regular customers.

Question 3.
Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large-scale retailers?
Answer:
A consumer co-operative store is an organization owned, managed, and controlled by consumers themselves. The cooperative stores generally buy in large quantity, directly from manufacturers or wholesalers, and sell them to the consumers at reasonable prices. Members get products of good quality at cheaper rates since the middlemen are eliminated or reduced.

The major advantages of a consumer cooperative store are as follows:
(a) Limited liability: The liability of members of a cooperative society is limited to the extent of their capital contribution. The personal assets of the members are, therefore, safe from being used to repay business debts.

(b) Stable existence: Death or insanity of the members do not affect the continuity of a cooperative society. A society, therefore, operates unaffected by any change in membership.

(c) Economy in operations: The members generally offer honorary services to the society. As the focus is on the elimination of middlemen, this helps in reducing costs. The customers or producers themselves are members of the society, and hence the risk of bad debts is lower.

(d) Support from the government: The cooperative society exemplifies the idea of democracy and hence finds support from the government in the form of low taxes, subsidies, and low-interest rates on loans.

(e) Easy formation: The cooperative society can be started with a minimum of ten members. The registration procedure is simple involving a few legal formalities. Its formation is governed by the provisions of the Cooperative Societies Act 1912.

(f) Democratic management: Cooperative societies are democratically managed through management committees that are elected by the members. Each member has one vote, irrespective of the number of shares held by him/her.

(g) Lower prices: A cooperative store purchases goods directly from the manufacturers or wholesalers and sells them to members and others. Elimination of middlemen results in lower prices for the consumer goods to the members.

(h) Convenient location: The consumer cooperative stores are generally opened at convenient public places where the members and others can easily buy the products as per their requirements.

(i) Flexibility: As the departmental stores deal in a wide variety of products, they have a certain flexibility in respect of the line of goods marketed. However, there is not much scope for flexibility in the chain stores, which deal only in a limited line of products.

Question 4.
Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
Answer:
Life without a local market would be very difficult because of the following points:
(a) Non-availability of products: Without a local market, the regular availability of goods to the consumers would be hampered. There would not be a mechanism through which products could reach consumers from the manufacturers as and when required.

(b) Information about new products: Information about new products reaches the consumers through the local markets. The new products even after being advertised would not be available to consumers easily if there were no local markets.

(c) Inconvenience: Local markets provide consumers the convenience’ of place and time in buying products. In the absence of local markets and consumers will have to go long distances for buying products directly from the manufacture’s warehouse.

(d) Lack of variety of products: Local markets provide consumers with a wide variety of products for choice-based selection. This would not be available at one place in the absence of local markets.

(e) Lack of after-sales services: The retailers in the local market provide after-sales service to the consumers for goods purchased from the retail shops. This service would become difficult in case there are no local markets.

Question 5.
Explain the usefulness of mail-order houses. What types of products are generally handled by them? Specify.
Answer:
Mail order houses are the retail outlets that sell their merchandise through the mail. There is generally no direct personal contact between the buyers and the sellers in this type of trading. For obtaining orders, potential customers are approached through advertisements in newspapers or magazines, circulars, catalogs, samples and bills, and price lists sent to them by post. All the relevant information about the products such as the price, features, delivery terms, terms of payment, etc. are described in the advertisement. On receiving the orders, the items are carefully scrutinized with respect to the specifications asked for by the buyers and are complied with through the post office.

Advantages of Mail Order Houses:
(a) Limited capital requirement: Mail order business can be started with a relatively low amount of capital as it does not require heavy expenditure on building and other infrastructural facilities.
(b) Elimination of middlemen: The biggest advantage of mail-order business for consumers is that unnecessary middlemen between the buyers and sellers are eliminated which results in savings to the buyers as well as to the sellers.
(c) Absence of bad debt: Since the mail-order houses do not extend credit facilities to the customers, there are no chances of any bad debt on account of non-payment by the customers.
(d) Wide reach: This system has a wide reach as a large number of people throughout the country can be served through the mail and the goods can be sent to all the places having postal services.
(e) Convenience: This system is very convenient for the consumers as the goods are delivered to the doorstep of the customers.

Mail order houses usually deal only in the goods that can be:
(a) Graded and standardized.
(b) Easily transported at low cost.
(c) Have ready demand in the market.
(d) Are available in large quantity throughout the year.
(e) Involve least possible competition, in the market.
(f) Can be described through pictures etc.

1st PUC Business Studies Question Bank Chapter 10 Internal Trade

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1st PUC Business Studies Internal Trade Textbook Questions and Answers

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