Chapter 4 – Business Services – Class 11 CBSE Business Studies Notes, Solved Questions

Class 11 Business Studies Notes for Chapter 4: Business Services

Get Class 11 Business Studies Notes, Questions and Practice Papers for Chapter 4: Business Services. Candidates who want to pass Class 11 with a good grade can use this article for Notes, Questions, and Practice Papers. 

We have provided access to the Class 11 Business Studies Notes, Important Questions and Practice Paper on Chapter 4: Business Services. You can practise the questions and check your answers using the solutions provided after each question.

Chapter Definitions and Short Notes

Chapter 4: Business Services – Short Notes and Definitions

Business Services – An Overview

Business services refer to those essential activities utilised by companies to support the production or sale of goods and services.
These services, integral in today’s competitive business environment, ensure smooth operations within enterprises.
Unlike goods, which are tangible and involve a transfer of ownership, services are intangible and cannot be owned or taken home. However, the benefits or effects of services, such as satisfaction or improvement, can be experienced by the consumer.


  • A store sells ice cream, while a restaurant serves it.
  • Cinemas offer a different experience than movie CDs, emphasising the difference between goods and services.

Short Pointers:

  1. Business services are essential activities that support the functioning of businesses.
  2. Goods are tangible products with ownership transfer, e.g., a toy, a movie CD.
  3. Services are intangible, offering satisfaction or improvement without transfer of ownership, e.g., doctor’s consultation, beauty treatments.
  4. Business services are crucial for smooth enterprise operations in a competitive environment.
  5. The distinction between goods and services is evident in everyday transactions, such as purchasing versus experiencing.

The Five Fundamental Features of Services

Services are characterised by five key features, collectively known as the five: Intangibility, Inconsistency, Inseparability, Inventory (Less), and Involvement. These features distinguish services from tangible goods and are critical for understanding how services operate within the business world.

  • Intangibility: Services are not physical objects and cannot be seen, touched, or felt before they are received. This means that the quality of a service can often not be determined before it is consumed, making the experience of the service critical.
  • Inconsistency: Services vary each time they are delivered because they are tailored to the specific needs, demands, and expectations of individual customers. This variability requires service providers to be flexible and adaptable.
  • Inseparability: Services are produced and consumed simultaneously; they cannot be separated from their providers. This characteristic highlights the direct interaction between the service provider and the consumer during the service delivery process.
  • Inventory (Less): Services cannot be stored or inventoried for future use. They are perishable and must be consumed at the time they are produced. This makes the management of demand and supply for services challenging.
  • Involvement: Customers often participate in the service delivery process, influencing the outcome of the service. This customer involvement allows for personalisation of the service to meet individual needs.

Example: ATMs symbolise service inseparability and inventory. ATMs can replace certain banking services, such as cash withdrawals, but the withdrawal cannot happen without the customer’s direct interaction with the machine, demonstrating the inseparability of production and consumption and the perishability of the service.

Short Pointers:

  • Intangibility: Services cannot be touched or seen before consumption.
  • Inconsistency: Each service delivery can vary based on customer needs.
  • Inseparability: Services are produced and consumed at the same time.
  • Inventory (Less): Services cannot be stored for future use; they are perishable.
  • Involvement: Customers often play a role in the outcome of the service delivery.

Understanding the Differences between Services and Goods

The main distinctions between services and goods lie in their inherent characteristics. Services are intangible acts performed at the point of consumption without the transfer of ownership, emphasising the simultaneous presence of the provider and consumer. In contrast, goods are tangible objects that can be owned, stored, and used over time. Services are characterised by their heterogeneity, intangibility, inconsistency, inseparability, lack of inventory, and the requirement for customer involvement in the service delivery. Goods, however, are homogeneous, tangible, consistent, and can be produced and consumed separately, with the possibility of being inventoried for future use.

Example: Cinemas provide a service that cannot be taken home. However, buying a movie video cassette is a tangible good that can be used again.

Short Pointers:

  • Nature: Services are processes (e.g., cinema experience); Goods are physical objects (e.g., video cassette).
  • Type: Services are heterogeneous; Goods are homogeneous.
  • Intangibility: Services cannot be touched (e.g., doctor’s treatment); Goods are tangible (e.g., medicine).
  • Inconsistency: Services vary based on customer demands (e.g., mobile services); Goods offer standardised experiences (e.g., mobile phones).
  • Inseparability: Services require simultaneous production and consumption (e.g., dining in a restaurant); Goods allow for separation of production and consumption (e.g., buying ice cream from a store).
  • Inventory: Services cannot be stored (e.g., train journey experience); Goods can be inventoried (e.g., train ticket).
  • Involvement: Services often require customer participation in delivery (e.g., self-service in fast food); Goods do not involve customers in production (e.g., manufacturing a vehicle).

Types of Services in the Business World

In the context of the service sector, services are broadly categorised into three main types: Business Services, Social Services, and Personal Services. Business Services are those utilised by enterprises to support their operations, including banking, insurance, communication, transport, and warehousing. Social Services aim at achieving social goals, such as improving living standards for the underprivileged, and are often provided by NGOs and government bodies. Personal Services are tailored to individual preferences and demands, varying significantly from one customer to another, including services like beauty, fitness training, tourism, and dining.

Short Pointers:

  • Business Services: Essential for business operations. Examples include banking (managing funds), insurance (protecting assets), communication (connecting with stakeholders), transport (moving goods), and warehousing (storing products).
  • Social Services: Aimed at social welfare goals, often voluntary but may include some costs to cover expenses. Examples include healthcare and education services provided to underprivileged sections by NGOs and government agencies.
  • Personal Services: Highly individualised based on customer preferences and demands. Examples include the services of beauticians, gym trainers, restaurants, and recreational activities.


  • Business services include logistics companies transporting products.
  • Social services include free education for slum children by an NGO.
  • Personal services include a personal trainer’s customised fitness programme based on an individual’s health goals and preferences.

Banking Overview

Banking is the financial activity that involves the depositing of money, its management, and withdrawal by individuals and businesses, primarily through commercial banks. This sector plays a pivotal role in the economy by providing institutional credit, mobilising savings, and facilitating investments. Banks operate by accepting deposits from the public, which they then use for lending and investment purposes, generating profits through the interest, commissions, and other fees charged. The banking sector includes both public sector banks, where the government holds a significant stake and often prioritises social objectives over profitability, and private sector banks that focus more on profitability.

Short Pointers:

  • Banking Activity: Involves depositing money for management and withdrawing it as needed.
  • Role of Banks: Mobilise savings, provide credit, and facilitate investments to stimulate economic activity.
  • Operation: Accept deposits, use them for lending/investment, and generate profit through various fees.
  • Types of Banks:
    • Public Sector Banks: Major government stake, focusing on social objectives.
    • Private Sector Banks: Focus more on profitability.

Example: Basic banking activities include opening a commercial bank savings account, depositing monthly savings, and occasionally borrowing for personal needs. Banks operate and earn interest by lending or investing deposits.

Types of Banks and Their Functions

The banking sector is diverse, with different types of banks serving various needs within the economy. These include:

  • Commercial Banks: These banks deal primarily in money, accepting deposits from the public for the purpose of lending or investment. Governed by the Indian Banking Regulation Act of 1949, commercial banks are divided into public sector banks, controlled by the government, and private sector banks, owned by private entities.
  • Cooperative Banks: Operated under the State Cooperative Societies Act, these banks provide affordable credit to their members, mainly supporting agricultural and rural financing.
  • Specialised Banks: Established for specific sectors like foreign exchange, industrial development, and export-import, specialised banks cater to the unique financial needs of these areas, aiding in significant projects and foreign trade.
  • Central Bank: The apex monetary authority of a country, which oversees and regulates the banking sector, maintains monetary stability, and provides financial services to the government. In India, the Reserve Bank of India serves as the central bank.

Short Pointers:

  • Commercial Banks: Offer deposits and loans; divided into public and private sectors.
  • Cooperative Banks: Focus on affordable rural and agricultural credit.
  • Specialised Banks: Cater to specific sectors like foreign exchange and industrial development.
  • Central Bank: The apex monetary institution controlling and supervising the banking sector.


  • A farmer obtaining a short-term loan from a cooperative bank for sowing season expenses illustrates the role of cooperative banks in providing sector-specific support.
  • The Reserve Bank of India adjusting policy rates to control inflation demonstrates the central bank’s role in regulating the economy’s monetary policy.

Commercial Banks and Their Types

A commercial bank is a type of financial institution that engages in activities such as accepting deposits from the general public and providing loans for consumption and investment purposes. The operation of these banks generates profits by paying interest on deposits at a lower rate and charging higher interest on loans. They operate under the regulatory framework of the Indian Banking Regulation Act, 1949. Commercial banks in India are categorised into two main types: Public Sector Banks and Private Sector Banks. Public Sector Banks are government-owned and aim primarily at social welfare, whereas Private Sector Banks are owned and managed by private entities, focusing on profitability.

Short Pointers:

  • Function: Accepts deposits and offers loans.
  • Revenue Generation: Earns profits by the difference in interest rates for deposits and loans.
  • Regulation: Governed by the Indian Banking Regulation Act, 1949.
  • Types of Commercial Banks:
    • Public Sector Banks: Government-owned, aim at social welfare.
    • Private Sector Banks: Owned by private entities, focus on earning profits.


  • State Bank of India (SBI) serving as a Public Sector Bank, providing affordable banking services to promote financial inclusion.
  • HDFC Bank, a Private Sector Bank, aiming to maximise shareholder value through various banking services.

Functions of Commercial Banks

Commercial banks play a crucial role in the financial system by performing a variety of functions, which can be broadly categorised into primary functions and allied (secondary) services. The primary functions include the acceptance of deposits from the public, lending of funds to individuals and businesses, and facilitating transactions through cheque facilities. Additionally, they offer remittance services for fund transfers across different locations. Allied services encompass a range of financial and non-financial services such as bill payments, locker facilities, underwriting services, and the buying and selling of shares and debentures, among others. These functions enable commercial banks to act as both borrowers and lenders within the economy, contributing significantly to its growth and stability.

Short Pointers:

  • Acceptance of Deposits: Banks accept deposits through current accounts, savings accounts, and fixed deposits, paying interest to depositors.
  • Lending of Funds: Major activity involving overdrafts, cash credits, term loans, and consumer credits, among others, which finance various economic activities.
  • Cheque Facility: Enables withdrawal and transfer of funds using bearer cheques and crossed cheques, enhancing transaction convenience.
  • Remittance of Funds: Facilitates fund transfers across locations using bank drafts, pay orders, or mail transfers, often for a nominal fee.
  • Allied Services: Includes a variety of financial services like bill payments, locker facilities, and buying/selling of securities, along with personal services such as insurance premium payments and dividend collections.


  • Opening a savings account to securely deposit money, earn interest, and use a bank-provided chequebook to make payments illustrates commercial banks’ deposit and cheque facility functions.
  • A business getting a term loan to expand shows how banks lend, which boosts the economy.

e-Banking Essentials

e-banking, also known as electronic banking, is a modern banking service that allows customers to conduct financial transactions over the Internet. This digital mode of banking uses various electronic devices like personal computers, mobile phones, or handheld computers (PDAs). The core services under e-banking include Electronic Funds Transfer (EFT), Automated Teller Machines (ATM), Point of Sale transactions (PoS), Electronic Data Interchange (EDI), and the use of Credit Cards and Electronic or Digital Cash. E-banking facilitates a wide range of banking activities such as managing accounts, applying for loans, and paying bills, all without the need for a physical banking operator. It leverages a centralised, web-enabled database that provides customers with a menu of services, enabling transactions at lower costs, adding value to banking relationships, and empowering users with convenience and control over their financial dealings.

Short Pointers:

  • Definition: e-Banking allows banking transactions over the internet using electronic devices.
  • Core Services: Includes EFT, ATM, PoS, EDI, Credit Cards, and Digital Cash.
  • Advantages: Reduces transaction costs, enhances convenience, and provides control to customers.
  • Access: Requires a PC or mobile device with internet access to connect to the bank’s website for services.
  • Transaction Types: Features services like NEFT (National Electronic Fund Transfer) and RTGS (Real Time Gross Settlement) for EFTs.

Example: Using a mobile banking app to check account balances, paying monthly bills online and transferring money via NEFT to a family member’s account all from home shows how convenient and efficient e-Banking is.

Advantages of e-Banking

e-Banking offers significant benefits to both customers and banks by leveraging the power of digital technology. For customers, it ensures round-the-clock banking services throughout the year, reduces transaction costs, promotes financial discipline and transparency, and offers the convenience of conducting transactions from anywhere—be it home, office, or while travelling. For banks, e-Banking provides a competitive edge, expands their network beyond physical branches through an unlimited digital presence, and reduces operational burdens by centralising the database, which, in turn, optimises the banking processes and improves customer service efficiency.

Short Pointers:

  • For Customers:
      • 24/7/365 access to banking services.
      • Reduced transaction costs and enhanced access.
      • Promotes financial discipline and transparency.
      • Convenience of transacting from any location.
      • Increases satisfaction through unrestricted banking access; safer as it minimises the need to carry cash.
  • For Banks:
    • Offers a competitive advantage in the banking sector.
    • Allows for an expansive network beyond physical branches.
    • Centralised database management reduces branch workload, streamlining accounting and other functions.


  • A person using their smartphone app to transfer money to a friend, pay utility bills, and check account balances while on a business trip abroad demonstrates the convenience and flexibility offered to customers by e-Banking.
  • A bank using e-Banking to attract more customers with the ease of online account opening, loan applications, and digital customer service, thereby reducing the footfall in physical branches and focusing on improving online service quality, illustrates the operational and competitive benefits to banks.

Fundamentals of Insurance

Insurance is a protective financial tool designed to minimise the financial impact of unforeseen events or risks. It is essentially a contract between two parties: the insurer (insurance company), who provides the insurance, and the insured (policyholder), who receives the protection. In exchange for a consideration (premium), the insurer agrees to compensate the insured for loss, damage, or injury to something of value in which the insured has a financial interest, as a result of certain specified uncertain events. This arrangement helps to spread the financial impact of losses over a larger group of individuals or entities who share similar risks, thereby making it manageable for the insured. The contract detailing the terms of this agreement is known as the ‘policy’.

Short Pointers:

  • Insurance Mechanism: A financial tool to mitigate unforeseen losses.
  • Contractual Nature: Agreement between insurer and insured.
  • Premium: Consideration paid by the insured to the insurer.
  • Compensation: Payment by the insurer for specified losses.
  • Policy: Written contract detailing the insurance agreement.
  • Risk Sharing: Spreads the financial impact of losses among many.
  • Uncertain Events: Covers losses from specified risks which are unpredictable.

Example: An individual purchasing health insurance pays a regular premium to the insurance company. In the event of a medical emergency, the insurance company compensates the individual for the medical expenses incurred, as per the terms outlined in the insurance policy. This example illustrates the basic principle of insurance, where the risk of financial loss due to health issues is shared and mitigated through a contractual agreement.

Fundamental Principle of Insurance

The fundamental principle of insurance is based on the concept of risk management through the substitution of a small, certain cost (the premium) for protection against a potentially large, uncertain loss in the future. This principle involves the collective pooling of risks by a group of individuals or entities (the insured) who pay premiums into a common fund. The insurer (an insurance company or underwriter), having analysed past data to understand probable losses for each type of risk, uses this fund to compensate policyholders who suffer losses. Essentially, insurance spreads the financial impact of individual risks across many policyholders, thereby reducing the burden of loss on any single entity. It operates on the equitable transfer of risk, from the insured to the insurer, in return for a premium, with the insurer providing compensation for legitimate claims arising from covered risks.

Short Pointers:

  • Risk Substitution: Swapping a small known expense (premium) for coverage against a large, uncertain loss.
  • Risk Pooling: Collectively sharing the risk among many policyholders to reduce the impact on any single participant.
  • Premiums: Periodic payments made by the insured to the insurer for risk coverage.
  • Compensation: Payment made by the insurer to the insured in the event of a loss.
  • Risk Analysis: The insurer’s use of historical data to estimate potential future losses.
  • Equitable Transfer: The fair exchange of risk from one entity to another against a fee (premium).
  • Social Device: Insurance as a mechanism where a community shares the burden of losses.

Example: Imagine a group of 1000 homeowners each paying a premium to insure their homes against fire. While it is unlikely that all homes will experience a fire, those few who do will receive compensation for their losses from the collective premiums, demonstrating how insurance spreads risk and provides financial security against uncertain events.

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NCERT Solutions

NCERT Solutions for Class 11 Business Studies – Chapter 4: Business Services

Short Answer Questions

  1. Define services and goods.

Answer: Services and goods are two fundamental concepts in business and economics. Services refer to intangible activities that are identifiable and meet the wants or needs of consumers. For instance, when you visit a doctor or a teacher, you are receiving a service. These services are characterised by their inability to be stored or owned physically. They require an interaction between the provider and the consumer to be realised.

On the other hand, goods are tangible items that are physically delivered to a purchaser. Ownership of these items is transferred from the seller to the buyer. Examples of goods include books and toys. These items can be stored and kept in inventory, unlike services.

In summary, while services are intangible activities that involve an interaction and provide satisfaction by fulfilling needs or wants, goods are tangible items that can be stored and owned.

Mindmap to remember this answer:

  • Services: Intangible, No physical ownership, Interaction required (e.g., doctor, teacher), Cannot be stored
  • Goods: Tangible, Physical ownership transferred, Can be stored and kept in stock, Examples: books, toys
  1. What is e-banking? What are the advantages of e-banking?

Answer: E-banking, or electronic banking, refers to the process where customers can perform banking transactions using electronic means, such as the internet, via personal computers, mobile phones, or other handheld devices. The essence of e-banking is to provide convenience and efficiency in managing financial transactions without physically visiting a bank branch.

There are several advantages to e-banking which include:

  • Accessibility: E-banking provides services 24/7, all year round, allowing customers to perform banking activities anytime and anywhere.
  • Cost-Effectiveness: It reduces the transaction costs for both banks and customers due to the automated nature of the services.
  • Efficiency: E-banking promotes financial discipline and transparency as all transactions are recorded electronically.
  • Reduced Workload: It helps in decreasing the congestion in bank branches by centralising the database, making it easier and faster to handle customer needs.

These benefits not only enhance customer satisfaction but also streamline banking operations, making them more user-friendly and accessible to everyone.

Mindmap to remember this answer:

  • Definition of E-banking: Electronic banking, Uses internet, PCs, mobile phones
  • Advantages of E-banking: 24/7 Access, Anytime, anywhere banking, Cost-effective, Lowers transaction costs, Efficiency, Financial discipline, Promotes transparency, Reduces Workload, Less crowded bank branches, Centralised database
  • Key Words: Accessibility, Efficiency, Cost-effectiveness, Reduced Workload

  1. Write a note on various telecom services available for enhancing business.

Answer: Various telecommunications services play a crucial role in enhancing business by facilitating better communication and efficient information dissemination. These services include:

  • Cellular Mobile Services: These services cover all forms of mobile telecommunications, such as voice and data services, and Public Call Office (PCO) services, using any network equipment within the service area.
  • Radio Paging Services: This service provides a one-way transmission of information through tones, numeric, or alphanumeric messages to individuals, even while they are moving.
  • Fixed Line Services: These encompass all types of fixed telecommunication services including voice and data communication, typically through a network connected by fibre optic cables.
  • Cable Services: Focused mainly on media services within a licensed area, cable services primarily offer one-way entertainment-related broadcasts.
  • VSAT Services: Very Small Aperture Terminal services are satellite-based and provide flexible, reliable communication for various applications like online newspapers and tele-education, across both urban and rural areas.
  • DTH Services: Direct to Home services are also satellite-based and allow consumers to receive media services directly through a satellite with the aid of a small dish antenna and a set-top box.

These telecom services not only enhance the operational capabilities of businesses but also ensure reliable and efficient communication necessary for modern business operations.

Mindmap to remember this answer:

  • Cellular Mobile Services: Mobile voice and data, PCO services, Network equipment
  • Radio Paging Services: One-way information, Tone, numeric, alpha/numeric
  • Fixed Line Services: Voice and data, Fibre optic network
  • Cable Services: Media services, One-way entertainment
  • VSAT Services: Satellite communication, Flexible and reliable, Online newspapers, tele-education
  • DTH Services: Satellite media, Dish antenna and set-top box
  1. Explain briefly the principles of insurance with suitable examples.

Answer: The principles of insurance are fundamental rules that govern the relationship between the insurer and the insured, ensuring that the insurance contract is valid and reliable. These principles include:

(i) Utmost Good Faith: Both parties in an insurance contract must uphold utmost good faith, meaning that the insured must disclose all relevant facts truthfully, and the insurer must clearly explain the terms and conditions of the policy.

(ii) Insurable Interest: The insured must have a financial interest in the object of the insurance, ensuring they suffer a financial loss if the insured event occurs. For example, a homeowner has an insurable interest in their home and would face financial loss if it were damaged.

(iii) Indemnity: This principle states that insurance policies should restore the financial position of the insured to where it was before the loss occurred, applicable mainly in property and casualty insurances but not in life insurance.

(iv) Contribution: If multiple policies cover the same risk, this principle allows insurers who pay a claim to seek a proportional contribution from other insurers.

By adhering to these principles, insurance contracts protect against financial losses by sharing risks among people with similar exposure to loss.

Mindmap to remember this answer:

  • Utmost Good Faith: Full disclosure by insured, Clear terms by insurer
  • Insurable Interest: Financial interest in insured item, Examples: homeowners, car owners
  • Indemnity: Compensation to pre-loss condition, Not applicable to life insurance
  • Contribution: Shared risk in multiple policies, Proportional payment by insurers

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MCQ Questions

Chapter 4: Business Services – MCQ Questions

  1. Which of the following is not a feature of services as discussed in the textbook?
A) IntangibilityB) Inconsistency
C) InventoryD) Inheritance

Answer: D) Inheritance

  1. What distinguishes a good from a service?
A) Goods are always less expensive than services.B) Goods can be stored for future use, unlike services.
C) Services are always provided by governmental agencies.D) Services are not quantifiable.

Answer: B) Goods can be stored for future use, unlike services.

  1. What type of services are typically provided to assist businesses in their operations?
A) Personal servicesB) Business services
C) Social servicesD) Governmental services

Answer: B) Business services

  1. Which of the following services is classified as a social service?
A) BankingB) Insurance
C) Education services provided by NGOsD) Tourism

Answer: C) Education services provided by NGOs

  1. What is the primary function of commercial banks?
A) To provide employment to the publicB) To manage national defence funds
C) To transact the business of banking including lending and depositsD) To act solely as government advisors

Answer: C) To transact the business of banking including lending and deposits

  1. Which type of bank is primarily formed to provide cheap credit to its members?
A) Commercial banksB) Central banks
C) Cooperative banksD) Specialised banks

Answer: C) Cooperative banks

  1. What principle of insurance asserts that the insured should not profit from the insurance policy?
A) Principle of IndemnityB) Insurable Interest
C) ContributionD) Subrogation

Answer: A) Principle of Indemnity

  1. In which type of insurance is the insured amount paid upon death or after a certain period, whichever comes first?
A) Whole Life PolicyB) Endowment Life Assurance Policy
C) Term Life PolicyD) Annuity Policy

Answer: B) Endowment Life Assurance Policy

  1. Which of the following is a benefit of e-banking for customers?
A) 24/7 access to banking servicesB) Higher interest rates on savings
C) Personalised customer service interactionsD) Access to physical bank branches

Answer: A) 24/7 access to banking services

  1. What does NEFT stand for in e-banking?
A) Non-Electronic Fund TransferB) National Electronic Fund Transfer
C) New Electronic Finance TransitionD) None of the above

Answer: B) National Electronic Fund Transfer

  1. What type of insurance would cover losses due to burglary at a home?
A) Life InsuranceB) Fire Insurance
C) Burglary InsuranceD) Marine Insurance

Answer: C) Burglary Insurance

  1. Marine insurance typically insures which of the following?
A) Businesses against financial lossesB) Vehicles against road accidents
C) Ships and cargo against marine perilsD) Houses against natural disasters

Answer: C) Ships and cargo against marine perils

  1. What is the main purpose of telecom services in business?
A) To provide entertainment to employeesB) To enable efficient communication and connectivity
C) To serve as a backup for internet servicesD) To monitor employee activities

Answer: B) To enable efficient communication and connectivity

  1. Which service is a feature of modern postal services?
A) Speed PostB) Animal transport
C) Food deliveryD) Personal escort services

Answer: A) Speed Post

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Very Short Answer Type Questions

Chapter 4: Business Services – Very Short Answer Type Questions

  1. Define the term “services” in the context of economics.

Answer: Services are economic activities where nothing physical is transferred from seller to buyer.

  1. What are the five Is of services?

Answer: Five Is: Intangibility, Inconsistency, Inseparability, Inventory (less), and Involvement.

  1. List two examples of intangible business services.

Answer: Examples include financial advisory and online marketing services.

  1. What is the primary difference between goods and services in terms of ownership transfer?

Answer: Ownership of goods transfers, services’ effects transfer, not the service itself.

  1. Describe the term “inseparability” in service management.

Answer: Inseparability in services means simultaneous production and consumption.

  1. Why is the inconsistency a significant feature of services?

Answer: Inconsistency in services arises as they are human performance and vary each time.

  1. Explain the concept of inventory in services with an example.

Answer: Inventory in services is minimal.
Example: a live concert performance.

  1. How does customer involvement enhance service delivery?

Answer: Customer involvement modifies the service to meet their specific needs.

  1. What types of services are used by business enterprises?

Answer: Business enterprises use services like banking, insurance, and telecommunications.

  1. Identify two social services and their common goals.

Answer: Social services examples: education and healthcare, aiming to improve living standards.

  1. What are personal services, and how do they vary?

Answer: Personal services are experiential, differing by provider and customer’s demand.

  1. List three specialised types of banks.

Answer: Specialised banks: Commercial, Cooperative, and Central banks.

  1. What is the role of cooperative banks in India?

Answer: Cooperative banks in India provide credit at favourable terms to members.

  1. How do commercial banks contribute to the economy?

Answer: Commercial banks mobilise savings, provide loans, enhancing economic development.

  1. Describe the function of a central bank in a country.

Answer: A central bank regulates the country’s financial system and monetary policy.

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Short Answer Type Questions

Chapter 4: Business Services – Short Answer Type Questions

  1. Define services in the context of business.
    Answer: Services in business refer to activities that deliver value to customers without providing them with a physical product. These are intangible and often involve an interaction between the service provider and the consumer.
  2. List three types of services and provide a brief example of each.
    Answer: Business services include banking and insurance, helping businesses operate smoothly. Social services, such as education and healthcare, aim to improve societal welfare. Personal services like tourism offer individualised experiences.
  3. What percentage of GDP does the service sector account for in OECD countries?
    Answer: The service sector is a significant component of GDP in OECD countries, often accounting for around 70% to 80% of the total GDP, indicating its crucial role in economic development.
  4. Describe the primary functions of commercial banks.
    Answer: Commercial banks primarily accept deposits, offer loans, and provide other financial services like overdraft facilities and electronic fund transfers, facilitating monetary transactions in the economy.
  5. What is the difference between debit and credit cards in modern banking?
    Answer: Debit cards allow you to spend money by drawing on funds you have deposited at the bank. Credit cards, on the other hand, provide you with access to a line of credit issued by the bank.
  6. Explain the type of insurance where insurable interest is not required at the time the policy is taken.
    Answer: Life insurance is unique as it does not require the policyholder to have an insurable interest at the time of the policy’s issuance, unlike property insurance where insurable interest is needed both at the policy’s inception and at the time of the claim.
  7. List the economic functions of insurance.
    Answer: Insurance provides economic protection by pooling risks and providing financial compensation for losses. It stabilises the economy by managing the accumulation of funds and their redistribution during losses, thus facilitating economic growth.

  1. Describe what courier services are and name two courier companies.
    Answer: Courier services are specialised delivery services that transport documents and packages for individual and business clients. Examples include FedEx and DHL, which operate internationally.
  2. Why is a cellular phone also called a mobile phone?
    Answer: A cellular phone is called a mobile phone because it operates through a network of cell areas, allowing it to be used while moving across different regions, making it mobile.
  3. Explain the role of video conferencing in telecommunications.
    Answer: Video conferencing in telecommunications allows individuals in different locations to conduct meetings face-to-face through video and audio transmissions. This technology helps reduce travel costs and enhances collaboration.
  4. Discuss the economic importance of transport services.
    Answer: Transport services are vital for distributing goods and resources efficiently, which helps in reducing production costs and promoting trade by connecting various markets.
  5. What are the benefits of a warehouse?
    Answer: Warehouses facilitate effective storage, handling, and management of goods, which helps in stabilising prices by balancing market supply and demand. They also provide services like packaging and labelling.
  6. Differentiate between goods and services.
    Answer: Goods are tangible items that are produced, stored, and transferred in ownership, whereas services are intangible activities that involve an interaction between the provider and the consumer and cannot be stored.
  7. How do private and public warehouses differ in terms of investment and risk?
    Answer: Private warehouses require significant investment and involve higher risk due to ownership responsibilities. Public warehouses offer flexibility with less investment and risk, as costs are distributed among multiple users.
  8. What is the principle of indemnity and why is it not applicable to life insurance?
    Answer: The principle of indemnity ensures that insurance policies cover only the actual losses incurred, aiming to restore the insured to their previous financial position. It is not applicable to life insurance because a human life cannot be financially measured or replaced.

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Case Based Questions

Chapter 4: Business Services – Case Based Questions

Case 1: Introduction to Services

Scenario: Imagine you are the manager of a multiplex cinema. It’s a busy weekend, and there are various issues related to service inconsistency due to new staff members and technical problems in a few screens.

  1. As per the five Is of services described in the textbook, which feature of services is primarily being affected here? Explain how.

Answer: As per the five Is of services described in the textbook, the feature of services primarily being affected here is “Inconsistency.” The presence of new staff members and technical problems in a few screens leads to variations in service quality, which is a characteristic challenge of inconsistency in service industries.

  1. Discuss how the principles of inconsistency and inseparability are relevant to the situation in the cinema.

Answer: The principles of inconsistency and inseparability are highly relevant in the cinema scenario. Inconsistency is evident as different customers might experience varying levels of service due to new staff and technical issues. Inseparability is seen as the production and consumption of the cinema experience occur simultaneously, affecting customer satisfaction directly during service delivery.

  1. Propose two strategies that could improve the service delivery in this scenario.

Answer: Two strategies to improve service delivery in this scenario could include: 1) Implementing a comprehensive training program for all staff to ensure consistent service standards are met. 2) Regular maintenance checks of technical equipment to prevent disruptions and ensure a smooth viewing experience for customers.

Case 2: Business Services

Scenario: You are a consultant for a mid-sized manufacturing company looking to expand its operations overseas. The company is evaluating different business services to support this expansion, such as banking, insurance, and transportation.

  1. How can banking services facilitate the company’s overseas expansion, based on the textbook’s discussion of business services?

Answer: Banking services can help the company expand overseas by managing foreign exchange transactions and providing funding for international operations. Banks also offer advice on foreign markets, helping the company make informed decisions.

  1. Identify and explain two insurance policies that would be critical for the company’s international operations.

Answer: Two critical insurance policies for the company’s international operations are marine insurance and political risk insurance. Marine insurance covers loss or damage of goods during shipping overseas. Political risk insurance protects against losses due to political instability or changes in government policy affecting operations.

  1. Considering the textbook’s insights, what transportation methods would you recommend for distributing products internationally and why?

Answer: Based on the textbook, I recommend using a combination of sea and air transportation for distributing products internationally. Sea transport is cost-effective for bulk items, while air transport is faster for high-value or perishable goods, ensuring timely delivery to global markets.

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Value Based Questions

Chapter 4: Business Services – Value Based Questions

  1. Integrity in Business Transactions: Given the scenario where a business service provider has to decide whether to report a small accidental overcharge in a client’s bill, discuss the importance of integrity in business transactions. What are the long-term benefits for the service provider in maintaining transparency and honesty?

Answer: In the scenario of an accidental overcharge in a client’s bill, it is crucial for a business service provider to exhibit integrity by reporting and correcting the error. Demonstrating such transparency and honesty not only builds trust with the client but also sets a standard of ethical behaviour within the organisation. This practice of integrity can lead to long-term benefits such as increased customer loyalty, a stronger reputation, and potentially more business opportunities through positive word-of-mouth. By consistently acting with honesty, the business not only adheres to ethical practices but also fosters a positive work environment, encouraging similar behaviour among employees.

  1. Responsibility in Handling Client Funds: Consider a situation where a financial manager must decide how to handle a surplus of client funds that were mistakenly sent to their account. Analyse the ethical responsibilities involved in managing client funds and the potential impacts of different choices on the business’s reputation.

Answer: When a financial manager discovers a surplus of client funds mistakenly sent to their account, the ethical responsibility to manage these funds with utmost integrity becomes paramount. Choosing to report and return the surplus funds reinforces the business’s commitment to ethical practices and trustworthiness. Such actions significantly enhance the business’s reputation, which can lead to sustained client relationships and attract new clients who value transparency and ethical behaviour. Moreover, handling client funds responsibly ensures compliance with legal standards and avoids potential legal consequences.

  1. Ethical Marketing: Reflect on a marketing campaign designed to overly exaggerate the benefits of a service, potentially misleading clients. Discuss the ethical considerations a business must take into account when advertising their services. What values should guide the marketing strategies of a responsible business?

Answer: In a marketing campaign that exaggerates the benefits of a service, it is vital to consider the ethical implications of potentially misleading clients. A responsible business must prioritise truthfulness in their advertising efforts, ensuring that all promotional materials accurately reflect the services offered. Adhering to ethical marketing practices not only aligns with legal advertising standards but also helps in building long-term customer relationships based on trust and reliability. Upholding these values in marketing strategies enhances the company’s credibility and can lead to a loyal customer base that values honesty and transparency.

  1. Sustainability in Service Delivery: Discuss the role of sustainability in the delivery of services like public transportation or waste management. What values should guide companies in making decisions that affect both the environment and their service quality?

Answer: Sustainability in services like public transportation and waste management is vital for protecting our environment and ensuring efficient service delivery. Companies should be guided by the values of responsibility and stewardship. By making decisions that reduce environmental impact and improve service quality, companies not only comply with regulations but also build trust with their communities. For instance, using energy-efficient vehicles in public transport and recycling waste materials demonstrates a commitment to sustainable practices that benefit both the environment and society.

  1. Customer Privacy and Data Protection: With the increase in digital services, consider the importance of protecting customer data. Discuss the ethical responsibilities businesses have towards their clients’ privacy and the potential consequences of neglecting these responsibilities.

Answer: In the era of digital services, protecting customer data is crucial. Ethical responsibilities include ensuring data security and respecting privacy. If a business neglects these responsibilities, it risks data breaches and loss of customer trust, which can lead to severe legal and financial consequences. Companies must implement strong data protection measures and transparent privacy policies to safeguard their clients’ information, thereby upholding the values of trust and integrity.

  1. Employee Rights and Fair Treatment: In a scenario where a service sector business faces economic difficulties, management must decide whether to reduce employee benefits or seek alternative solutions. Analyse the values involved in treating employees fairly and the long-term impacts of these decisions on the company culture.

Answer: When facing economic challenges, it’s important to consider employee rights and fair treatment. Reducing benefits may provide short-term savings but can harm company culture and employee morale in the long run. Companies should explore alternative solutions, like temporary salary adjustments or voluntary part-time work options. Prioritising fair treatment of employees reflects the values of respect and justice, which are crucial for maintaining a loyal and productive workforce.

  1. Corporate Social Responsibility (CSR): Evaluate the significance of CSR initiatives for a business service like banking or insurance. Discuss how actively engaging in social issues can reflect a company’s values and influence its public image.

Answer: CSR initiatives are significant for businesses in sectors like banking or insurance. Actively engaging in social issues, such as community projects or environmental sustainability, reflects a company’s commitment to societal well-being. This engagement enhances a company’s public image, attracts customers and employees who share similar values, and contributes to long-term success. Companies guided by values of community and sustainability are seen as more than just profit-driven entities.

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Long Answer Type Questions

Chapter 4: Business Services – Long Answer Type Questions

  1. Explain the concept of business services and their significance to modern enterprises. Discuss the role of these services in facilitating the operations of a business with examples such as banking, insurance, and warehousing.

Answer: Business services are essential support services that help modern enterprises operate efficiently. These services include banking, insurance, and warehousing, among others. For instance, banking services help businesses manage financial transactions, providing loans for growth or managing day-to-day monetary operations. Insurance services protect businesses from potential losses due to unforeseen circumstances, ensuring financial stability. Warehousing, on the other hand, supports businesses in storing and managing inventory, which is crucial for maintaining supply chains and meeting customer demands. The significance of business services lies in their ability to facilitate various operations within a business, making them indispensable in the modern economic landscape.

Mindmap to remember this answer:

  • Business Services: Supportive, essential
  • Examples: Banking: Financial transactions, loans, Insurance: Protection, financial stability, Warehousing: Inventory management, supply chain
  • Significance: Facilitate operations, indispensable
  1. Discuss the nature and types of services, distinguishing them from goods. Highlight the five basic characteristics of services known as the five Is and explain how these features impact service delivery and consumer experience.

Answer: Services are intangible activities that fulfil the needs of consumers, distinct from tangible goods. The nature of services can be described using five key characteristics known as the five Is: Intangibility, Inconsistency, Inseparability, Inventory, and Involvement. Intangibility means services cannot be touched or seen before the purchase, making it challenging to evaluate them beforehand. Inconsistency refers to the variation in performance from one service to the next. Inseparability indicates that services are often produced and consumed simultaneously. Inventory issues arise as services cannot be stored for future use. Lastly, involvement pertains to the level of customer participation in the service delivery, which can significantly influence their experience. These characteristics shape how services are delivered and experienced by consumers, impacting their overall satisfaction.

Mindmap to remember this answer:

  • Nature of Services: Intangible, varying
  • Five Is: Intangibility: Cannot touch/see, hard to evaluate, Inconsistency: Varies each time, Inseparability: Produced and consumed together, Inventory: Cannot store, Involvement: Customer participation
  • Impact: Delivery, consumer experience
  1. Elaborate on the different types of insurance and their fundamental principles. How do these principles ensure fairness and efficacy in the insurance business? Discuss with examples from life, fire, and marine insurance.

Answer: Insurance is a crucial financial service that includes various types, such as life, fire, and marine insurance, each serving different needs. The fundamental principles of insurance include utmost good faith, insurable interest, indemnity, contribution, and subrogation. These principles ensure that both the insurer and the insured adhere to fairness and efficacy. For example, the principle of utmost good faith requires both parties to be completely honest in disclosing all relevant facts. In life insurance, this means accurately reporting health conditions. The principle of indemnity ensures that policyholders receive compensation only up to the extent of their loss, as seen in fire insurance where the payout reflects the value of the lost property. Marine insurance uses the principle of contribution, where multiple insurers pay a portion of the claim if more than one policy covers the asset.

Mindmap to remember this answer:

  • Types of Insurance: Life, Fire, Marine
  • Principles: Utmost Good Faith: Honesty in facts, Insurable Interest: Financial interest in safety, Indemnity: Compensation equals loss, Contribution: Multiple insurers share cost, Subrogation: Claim rights after payout
  • Examples: Life (health conditions), Fire (property value), Marine (shared claims)

  1. Describe the various types of banks and their specific functions in the financial system. How do different banks like commercial banks, cooperative banks, and specialised banks cater to the diverse needs of the economy?

Answer: Banks play a pivotal role in the financial system with different types catering to specific needs. Commercial banks handle daily banking services such as deposits, loans, and other basic banking functions, primarily serving the general public and businesses. Cooperative banks, owned by their members, focus on providing credit at reasonable rates, especially benefiting the rural sector. Specialised banks, like industrial banks, are set up to support specific industries or sectors by providing targeted financial services. These banks collectively ensure a well-rounded financial system, enabling economic stability and growth by catering to a wide array of banking needs across different sectors of the economy.

Mindmap to remember this answer:

  • Types of Banks: Commercial, Cooperative, Specialized
  • Functions: Commercial Banks: Daily services, public and business, Cooperative Banks: Credit at reasonable rates, rural focus, Specialized Banks: Support industries
  • Economic Impact: Stability, growth
  1. Analyse the impact of e-banking on the traditional banking system. What are the advantages offered by e-banking to customers and banks, and how has it transformed the banking landscape?

Answer: E-banking has significantly transformed the traditional banking system by introducing greater convenience and efficiency. The advantages of e-banking include 24/7 access to banking services, reduced operational costs for banks, and quicker transaction processing, which enhances customer satisfaction. For instance, customers can perform transactions, manage accounts, and access financial services from anywhere without visiting a bank branch. This accessibility has not only improved the customer experience but also expanded the reach of banks to a broader audience. E-banking has also prompted traditional banks to innovate and integrate more digital services to meet customer expectations, thus reshaping the banking landscape.

Mindmap to remember this answer:

  • E-banking Impacts: Accessibility: 24/7 banking, Efficiency: Quick transactions, Cost Reduction: Lower bank costs
  • Benefits: Customers: Convenience, no branch visits, Banks: Broader reach, innovation
  • Transformation: Digital integration, customer expectations
  1. Discuss the role of communication services in business operations. How do postal and telecommunication services facilitate business activities and contribute to the effectiveness of business communication?

Answer: Communication services are vital in business operations as they ensure the effective exchange of information. Postal services facilitate the physical delivery of documents and packages, supporting businesses in maintaining smooth operational flows, such as sending contracts or products. Telecommunication services, including phone and internet, allow for instant communication and data sharing. These services help businesses reach out to customers, communicate within the company, and coordinate with partners globally. The integration of these services enhances the speed and accuracy of business communications, thus contributing to overall business effectiveness.

Mindmap to remember this answer:

  • Communication Services: Essential for information exchange
  • Types: Postal: Documents, packages, Telecommunications: Calls, internet
  • Contributions: Speed, accuracy in communication

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Sample Questions Paper

Chapter 4: Business Services – Sample Questions Paper

Sample Questions: 1

Time allowed: 2 hours Maximum Marks: 40

General Instructions:

  1. The question paper contains 14 questions.
  2. All questions are compulsory.
  3. Section A Questions 1 and 2 are 1 mark source-based questions. Answers should not exceed 10-15 words.
  4. Section B Questions 3 to 9 are 2 marks questions. Answers should not exceed 30 words.
  5. Section C Questions 10 to 12 are 4 marks questions. Answers should not exceed 80 words. Or Distinguish between services and goods on the basis of nature, type, intangibility and inseparability.
  6. Section D Questions 13 and 14 are 6 marks questions. Answers should not exceed 200 words. Or Discuss the fundamental principles of insurance.

Section A

  1. Define services.
  2. What are the two main differentiating characteristics of services and goods?

Section B

  1. What is meant by inconsistency as a characteristic of services?
  2. Mention two functions of commercial banks.
  3. State two benefits of e-banking to customers.
  4. Define insurance.
  5. What is life insurance?
  6. Name two types of marine insurance policies.
  7. Give two examples of social services.

Section C

  1. Explain the concept of insurable interest in life insurance and fire insurance contracts.


Distinguish between life insurance and fire insurance on the basis of the principle of indemnity and insurable interest.

  1. What is meant by the principle of ‘utmost good faith’ in insurance contracts?
  2. Briefly explain the nature and types of postal services provided in India.

Section D

  1. Discuss the principles governing a valid life insurance contract.


Explain the different types of life insurance policies in detail.

  1. Distinguish between life insurance, fire insurance and marine insurance on the basis of the given points: a) Subject matter b) Element c) Insurable interest d) Duration e) Indemnity

Sample Questions: 2

Time allowed: 2 hours Maximum Marks: 40

General Instructions:

  1. The question paper contains 14 questions.
  2. All questions are compulsory.
  3. Section A Questions 1 and 2 are 1 mark source-based questions. Answers should not exceed 10-15 words.
  4. Section B Questions 3 to 9 are 2 marks questions. These are very short answers. Answers should not exceed 30 words.
  5. Section C Questions 10 to 12 are 4 marks questions. These are short answer types. Answers should not exceed 80 words.
  6. Section D Questions 13 and 14 are 6 marks questions. These are long answer types. Answers should not exceed 200 words.

Section A

  1. Define services and distinguish them from goods. (1 mark)


Explain the concept of intangibility as a characteristic of services. (1 mark)

  1. State any one fundamental principle of insurance. (1 mark)


What is the principle of ‘insurable interest’ with respect to life insurance? (1 mark)

Section B

  1. What is the basic principle underlying insurance? (2 marks)
  2. Briefly explain the principle of ‘utmost good faith’ in insurance contracts. (2 marks)
  3. Differentiate between whole life and endowment life insurance policies. (2 marks)


What is an annuity policy? When is it useful? (2 marks)

  1. What are the two elements that make fire insurance a contract of strict indemnity? (2 marks)
  2. Give two points of distinction between life insurance and fire insurance. (2 marks)
  3. Mention any two types of business services. (2 marks)
  4. State any two benefits of e-banking services. (2 marks)

Section C

  1. Explain the following principles of insurance with examples: (i) Indemnity (ii) Proximate cause (4 marks)


Compare and contrast life insurance and marine insurance on the basis of: (i) Subject matter (ii) Insurable interest (4 marks)

  1. What is marine insurance? Briefly explain the three types of marine insurance policies. (4 marks)


Distinguish between private warehouses and public warehouses. State two functions of warehousing. (4 marks)

  1. State the role and importance of transportation services for business. How are transportation services classified? (4 marks)

Section D

  1. Discuss the meaning, nature and characteristics of services. Explain the basis for differentiation between goods and services. (6 marks)


Explain the meaning and types of postal services provided in India. What are the allied facilities offered by the postal department? (6 marks)

  1. Define insurance. Discuss the fundamental principles underlying a valid insurance contract. (6 marks)


What is e-banking? State its benefits from the customer’s perspective as well as the banker’s perspective. (6 marks)

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