NCERT Solutions for Class 11 Business Studies Chapter 10: Internal Trade
These Class 11 Business Studies Chapter 10 solutions cover Internal Trade from the NCERT Business Studies textbook (continued for the 2026–27 session). The chapter explains the meaning and types of internal trade, the valuable services of wholesalers to manufacturers and retailers, the services of retailers, the classification of retailers into itinerant and fixed-shop types (including departmental stores, chain stores, mail-order houses, consumer cooperative stores, super markets and vending machines), the role of Chambers of Commerce and Industry in promoting internal trade, and the impact of GST. Below you get exam-ready answers to every Short Answer and Long Answer question, plus key terms, extra practice, MCQs, Assertion–Reason and FAQs.
Class: 11Subject: Business StudiesChapter: 10Chapter Name: Internal TradePart: Unit / Foundation of BusinessSession: 2026–27
Chapter 10, Internal Trade, deals with the buying and selling of goods and services within the boundaries of a nation. Trade is classified by the geographical location of buyers and sellers into internal (home) trade and external (foreign) trade. Internal trade is further divided into wholesale trade (buying and selling in large quantities for resale or intermediate use) and retail trade (selling in small quantities directly to ultimate consumers). The chapter details the services wholesalers render to manufacturers (facilitating large-scale production, bearing risk, financial assistance, expert advice, marketing help, production continuity, storage) and to retailers, and the services retailers render to manufacturers, wholesalers and consumers. It classifies retailers into itinerant retailers (hawkers, market traders, street traders, cheap jacks) and fixed-shop retailers (small retailers such as general and speciality stores, and large stores such as departmental stores, chain/multiple shops, mail-order houses, consumer cooperative stores, super markets and vending machines). It closes with the role of Chambers of Commerce and Industry (ASSOCHAM, CII, FICCI) in promoting internal trade and an explanation of the destination-based Goods and Services Tax (GST) implemented from 1 July 2017.
Key Terms & Concepts
Internal trade: buying and selling of goods and services within the boundaries of a nation; no custom or import duty is levied as goods are part of domestic production for domestic consumption.
Wholesale trade: purchase and sale of goods and services in large quantities for the purpose of resale or intermediate use; the trader is a wholesaler.
Retail trade: purchase and sale of goods in relatively small quantities, generally to ultimate consumers for personal, non-business use; the trader is a retailer.
Itinerant retailers: traders who have no fixed place of business and move from street to street or place to place — peddlers and hawkers, market traders, street traders (pavement vendors) and cheap jacks.
Fixed-shop retailers: retailers who maintain a permanent establishment; classified as small retailers (general stores, speciality shops, street stall holders, second-hand goods shops, single-line stores) and large stores.
Departmental store: a large establishment offering a wide variety of products classified into well-defined departments to satisfy every customer’s need under one roof.
Chain stores / multiple shops: networks of identical retail shops owned and operated by a manufacturer or intermediary, dealing in standardised, branded products with rapid turnover, centrally procured and sold on cash basis.
Mail-order house: a retail outlet that sells merchandise through the mail with no direct personal contact between buyer and seller.
Consumer cooperative store: an organisation owned, managed and controlled by consumers themselves to reduce middlemen and supply goods to members at reasonable prices; registered under the Cooperative Societies Act with limited liability and one-member-one-vote.
Super market: a large self-service retailing unit selling a wide variety of consumer goods on the basis of low-price appeal, wide assortment and merchandising appeal, on cash basis.
Vending machine & trade terms: coin-operated machines that sell pre-packed, low-priced, uniform products; common trade terms include COD (cash on delivery), FOB/FOR (free on board/rail), CIF (cost, insurance and freight) and E&OE (errors and omissions excepted).
GST (Goods and Services Tax): a destination-based single tax on the supply of goods and services from manufacturer to consumer, implemented from 1 July 2017, comprising CGST + SGST (intra-state) and IGST (inter-state), with four slabs of 5%, 12%, 18% and 28%, avoiding the cascading ‘tax-on-tax’ effect.
NCERT Exercise — Full Solutions
All questions below are reproduced verbatim from the NCERT textbook’s end-of-chapter Exercises. Answers are original, written in CBSE exam-ready style.
Short Answer Questions
1. What is meant by internal trade?
ANSWERInternal trade, also called home or domestic trade, refers to the buying and selling of goods and services within the boundaries of a nation. Whether the goods are bought from a neighbourhood shop, a central market, a departmental store, a mall, a door-to-door salesperson or an exhibition, all are examples of internal trade so long as the buyer and seller are both within the country.Since the goods are part of domestic production meant for domestic consumption, no custom duty or import duty is levied on such trade, and payment is generally made in the legal tender of the country. Internal trade is broadly classified into wholesale trade and retail trade.
2. Specify the characteristics of fixed shop retailers.
ANSWERFixed-shop retailers maintain a permanent establishment to sell their merchandise and do not move from place to place. Their main characteristics are:(i) Compared with itinerant traders, they normally have greater resources and operate on a relatively larger scale, though they range from very small to very large.(ii) They may deal in different types of products, including consumer durables as well as non-durables.(iii) They enjoy greater credibility in the minds of customers and are able to provide more services such as home delivery, guarantees, repairs, credit facilities and availability of spare parts.
3. What purpose is served by wholesalers providing warehousing facilities?
ANSWERWholesalers take delivery of goods as soon as they are produced and keep them in their godowns/warehouses until they are demanded by retailers or consumers. This serves several purposes:It relieves the manufacturer of the burden of storage and the cost of providing storage facilities for finished products, so the manufacturer can concentrate on production.It ensures continuity of production throughout the year, because the wholesaler keeps buying and storing goods as they are produced. By holding goods until they are needed, the wholesaler creates time utility — making goods available at the time they are required — and also bears the risks of storage such as spoilage, theft and price fall.
4. How does market information provided by the wholesalers benefit the manufacturers?
ANSWERAs wholesalers are in direct contact with retailers and, through them, with the final market, they gather first-hand knowledge of the market. They advise manufacturers about customers’ tastes and preferences, prevailing market conditions, competitors’ activities and the product features preferred by buyers.This expert advice and market information helps manufacturers take better decisions about what to produce, in what quantity, at what price and with what features — reducing the risk of producing unwanted goods and helping them plan production and marketing more effectively.
5. How does the wholesaler help the manufacturer in availing the economies of scale?
ANSWERA wholesaler collects small orders from a large number of retailers and pools them into bulk orders, which are then placed with the manufacturer. Because the manufacturer receives large, consolidated orders, it can undertake production on a large scale.Large-scale production lowers the per-unit cost of manufacturing — the manufacturer gains the economies of scale in the purchase of raw materials, use of machinery and division of labour. Thus, by facilitating large-scale production, the wholesaler enables the manufacturer to reduce costs and increase efficiency.
6. Distinguish between single line stores and speciality stores. Can you identify such stores in your locality?
ANSWERSingle line stores deal in a single product line but keep a variety of items within that line — for example, a store selling only ready-made garments, or only watches, or only shoes, usually located at a central place. They focus on one broad category but offer many varieties of it.Speciality stores go a step further and specialise in the sale of a specific, narrower line of products within a category — for example, a shop selling only children’s garments, or only men’s wear, or only ladies’ shoes, or only school uniforms or college books. They are located at central places and give customers a wide choice within that specialised line.Examples in a locality: a shoe showroom selling all kinds of shoes is a single line store, while a shop selling only sports shoes, or only school shoes, is a speciality store. (Students may name actual stores they see in their own area.)
7. How would you differentiate between street traders and street shops?
ANSWERStreet traders (pavement vendors) are itinerant small retailers who are commonly found where a large floating population gathers, such as near railway stations and bus stands. They sell consumer items of common use like stationery, eatables, ready-made garments, newspapers and magazines, and they do not maintain a permanent establishment, though they do not change place as frequently as market traders.Street stall holders (street shops) are fixed-shop small retailers found at street crossings or busy traffic points. They occupy a small, limited stall area, deal in cheap-variety goods like hosiery, toys, cigarettes and soft drinks, and get supplies from local suppliers and wholesalers. The key difference is that a street stall holder has a more or less fixed stall/place, whereas a street trader is essentially mobile with no fixed shop.
8. Explain the services offered by wholesalers to manufacturers.
ANSWERWholesalers provide the following important services to manufacturers:(i) Facilitating large-scale production: by pooling small retailer orders into bulk orders, they enable producers to manufacture on a large scale and enjoy economies of scale.(ii) Bearing risk: dealing in goods in their own name and storing them in bulk, wholesalers bear risks of price fall, theft, pilferage, spoilage and fire, relieving manufacturers of these risks.(iii) Financial assistance: they make cash payments for goods purchased and sometimes advance money for bulk orders, so manufacturers need not block their capital in stocks.(iv) Expert advice: being in direct contact with retailers, they advise manufacturers on customers’ tastes, market conditions, competition and preferred features.(v) Help in marketing function: they handle the distribution of goods to many retailers, freeing manufacturers to concentrate on production.(vi) Facilitating production continuity: by buying and storing goods as and when produced, they keep production going throughout the year.(vii) Storage: they take delivery of finished goods and keep them in their warehouses, reducing the manufacturer’s storage burden and providing time utility.
9. What are the services offered by retailers to wholesalers and consumers?
ANSWERServices to wholesalers and manufacturers: (i) Help in distribution of goods by making products available to scattered final consumers, providing place utility; (ii) Personal selling, relieving producers of the effort of selling to individual consumers; (iii) Enabling large-scale operations, as producers and wholesalers need not make small individual sales; (iv) Collecting market information about customers’ tastes and preferences; and (v) Help in promotion by participating in advertising and sales-promotion schemes.Services to consumers: (i) Regular availability of products of different manufacturers; (ii) New product information through display and personal selling; (iii) Convenience in buying — selling small quantities, located nearby and open long hours; (iv) Wide selection from many manufacturers’ goods; (v) After-sales services like home delivery and spare parts; and (vi) Credit facilities to regular buyers.
Long Answer Questions
1. Itinerant traders have been an integral part of internal trade in India. Analyse the reasons for their survival in spite of competition from large scale retailers.
ANSWERItinerant traders — peddlers and hawkers, market traders, street traders and cheap jacks — have no fixed place of business and move from place to place in search of customers. Despite competition from large-scale retailers such as departmental stores, super markets and chain stores, they continue to survive for several reasons:(i) Doorstep service and convenience: their greatest strength is providing goods at the very doorstep of customers, saving buyers the trouble of going to a market. This personal, convenient service is especially valued by housewives, the elderly and busy households.(ii) Low-value goods of daily use: they mainly deal in low-priced consumer items of daily use — vegetables, fruits, toiletries, toys, snacks — for which customers prefer quick, nearby purchase rather than visiting a big store.(iii) Small capital and low overheads: they operate with limited resources and very low fixed costs, so they can sell at competitive prices and survive on small margins where large retailers cannot operate profitably.(iv) Reach to lower-income groups and rural/semi-urban areas: they cater largely to lower-income customers and to localities and rural areas not served by big retail outlets.(v) Flexibility and personal contact: being mobile, they shift to wherever customers gather (fairs, exhibitions, outside schools, near stations) and build personal rapport, bargaining and credit relationships that large impersonal stores cannot match.For these reasons, itinerant traders fill a gap that large-scale retailers leave, and so they remain an integral and surviving part of India’s internal trade.
2. Discuss the features of a departmental store. How are they different from multiple shops or chain stores.
ANSWERFeatures of a departmental store: 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. Its main features are:(i) It provides maximum services — restaurant, travel and information bureau, telephone booth, rest rooms, home delivery, credit — to a higher class of customers for whom price is secondary.(ii) It is centrally located in the heart of the city to attract a large number of customers.(iii) Being very large, it is generally organised as a joint stock company managed by a board of directors, with a managing director, a general manager and several department managers.(iv) It combines retailing with warehousing, purchasing directly from manufacturers and operating its own warehouses, thus eliminating middlemen.(v) It has centralised purchasing but decentralised selling — all purchases are made centrally while sales are spread across departments.Difference between departmental stores and multiple shops (chain stores):
Basis
Departmental Store
Multiple Shops / Chain Stores
Location
Located at one central place to attract customers to it
Located at many places to reach customers near their homes
Range of products
Wide variety to meet all needs under one roof
Limited, specified range of products only
Services offered
Maximum services (alteration, restaurant, delivery, etc.)
Very limited service, mainly guarantees and repairs
Pricing
No uniform pricing; offers occasional discounts
Fixed, uniform prices for all shops
Class of customers
Mainly high-income customers valuing service
All types, including lower-income, seeking quality at reasonable prices
Credit facilities
May grant credit to regular customers
Strictly cash sales only
Flexibility
Some flexibility due to wide product range
Little flexibility; deals in a limited line
3. Why are consumer cooperative stores considered to be less expensive? What are its relative advantages over other large scale retailers?
ANSWERWhy they are less expensive: A consumer cooperative store is owned, managed and controlled by consumers themselves. It buys goods in large quantities directly from manufacturers or wholesalers, eliminating or reducing the number of middlemen who would otherwise add to the cost. With middlemen removed, profit margins kept low and goods generally sold on cash basis (reducing working-capital needs and bad debts), the savings are passed on to members, so goods are available at cheaper, reasonable prices.Relative advantages over other large-scale retailers:(i) Ease of formation: any ten people can form a voluntary association and register it under the Cooperative Societies Act after simple formalities — far simpler than floating a joint stock company.(ii) Limited liability: members’ liability is limited to the capital they contribute, so personal assets are protected.(iii) Democratic management: it is run by an elected managing committee on the principle of one member, one vote, irrespective of shareholding.(iv) Lower prices: direct buying and elimination of middlemen give members goods at lower prices.(v) Cash sales: selling on cash basis reduces the need for working capital and avoids bad debts.(vi) Convenient location: stores are opened at convenient public places for the easy benefit of members. Above all, profits are used for members’ welfare rather than private gain, which distinguishes it from profit-driven large retailers.
4. Imagine life without your local market. What difficulties would a consumer face if there is no retail shop?
ANSWERRetailers form the final link between producers and consumers, and they perform many useful services. Without a local market or retail shop, a consumer would face serious difficulties:(i) No regular availability of goods: the consumer could not buy products of daily need as and when required, since there would be no one keeping ready stock of various manufacturers’ goods nearby.(ii) Inconvenience in buying: retailers sell in small quantities, are located close to homes and stay open long hours; without them, a consumer would have to approach distant wholesalers or manufacturers and buy in large quantities, which is impractical.(iii) Loss of wide selection: retailers stock varieties from many manufacturers, allowing choice. Without them, the consumer would get little or no choice.(iv) No product information or personal selling: the consumer would lose easy access to information about new products, their features, uses and prices, normally provided through displays and personal selling.(v) No after-sales service or credit: facilities like home delivery, supply of spare parts, attending to complaints and credit to regular buyers would disappear, lowering convenience and the standard of living.Thus, life without a local retail shop would mean great inconvenience, higher effort and cost, and a poorer quality of consumption for the consumer.
5. Explain the usefulness of mail orders houses. What type of products are generally handled by them? Specify.
ANSWERMail-order houses are retail outlets that sell merchandise through the mail, with no direct personal contact between buyer and seller; orders are obtained through advertisements, catalogues, circulars and price lists, and goods are delivered by post (often by VPP or through a bank).Usefulness / advantages of mail-order houses:(i) Limited capital requirement: no heavy expenditure on buildings or infrastructure is needed, so the business can be started with relatively low capital.(ii) Elimination of middlemen: unnecessary middlemen are removed, giving savings to both buyers and sellers.(iii) Absence of bad debts: as no credit is extended, there is no risk of bad debts.(iv) Wide reach: goods can be sent to any place served by post, allowing a large number of people across the country to be served.(v) Convenience: goods are delivered at the customer’s doorstep.Type of products handled: Mail-order trading is not suitable for all goods; perishable or bulky items that cannot be easily handled are unsuitable. Only goods that (i) can be graded and standardised, (ii) can be easily transported at low cost, (iii) have a ready demand in the market, (iv) are available in large quantity throughout the year, (v) involve least possible competition, and (vi) can be described through pictures are suitable for this type of trading. The business also needs widespread literacy, since only literate customers can be reached through written advertisements and catalogues.
Extra Practice Questions
Short Answer Type Questions
Q1. Differentiate between internal trade and external trade.
ANSWERInternal trade takes place within the boundaries of a country and attracts no custom or import duty, with payment in the local legal tender. External trade is conducted between two or more countries and involves customs/import duties and foreign exchange. Both are classified on the basis of the geographical location of buyers and sellers.
Q2. State any two services offered by wholesalers to retailers.
ANSWER(i) Availability of goods: wholesalers make products of various manufacturers readily available, sparing retailers from collecting goods from many producers; (ii) Grant of credit: wholesalers extend credit to regular retailers, enabling them to run their business with a small amount of working capital. (They also offer marketing support, specialised knowledge and risk sharing.)
Q3. What is a vending machine? Give two products suitable for it.
ANSWERA vending machine is a coin-operated machine that automatically sells pre-packed, low-priced products which are uniform in size and weight and have high turnover. Suitable products include hot beverages, soft drinks, milk, chocolates, platform tickets and newspapers; ATMs are a banking application of the same idea.
Q4. Expand and explain the trade terms FOB and CIF.
ANSWERFOB (Free on Board / Free on Rail): a contract in which the seller bears all expenses up to the point of delivery of goods to a carrier (ship, rail or lorry). CIF (Cost, Insurance and Freight): the quoted price includes not only the cost of goods but also the insurance and freight charges payable up to the destination port.
Q5. What is GST? State its main tax slabs.
ANSWERGST (Goods and Services Tax) is a destination-based single indirect tax on the supply of goods and services from manufacturer to consumer, implemented from 1 July 2017, which replaced multiple indirect taxes and avoids the cascading ‘tax-on-tax’ effect. It comprises CGST + SGST (intra-state) and IGST (inter-state), with four main tax slabs of 5%, 12%, 18% and 28%.
Long Answer Type Questions
Q1. Explain the features, advantages and limitations of a super market.
ANSWERA super market is a large self-service retailing unit selling a wide variety of consumer goods on the basis of low-price appeal, wide assortment and merchandising appeal, usually located at main shopping centres. Features: it carries a complete line of food items and groceries plus non-food convenience goods; allows purchase of many products under one roof; works on the principle of self-service, lowering distribution cost; offers lower prices due to bulk buying and low margins; and sells strictly on cash basis at central locations. Advantages: wide variety at low cost under one roof; central, accessible location; wide selection; no bad debts (cash sales); and the benefits of large-scale buying and selling. Limitations: no credit facilities (restricting purchasing power); no personal attention because of self-service; possible mishandling of goods on shelves; high overhead expenses; and a huge capital requirement that suits big towns rather than small ones.
Q2. Describe the features, advantages and limitations of chain stores (multiple shops).
ANSWERChain stores or multiple shops are networks of identical retail shops owned and operated by manufacturers or intermediaries, dealing in standardised, branded products of rapid turnover. Features: shops are located in populous localities near customers; manufacturing/procurement for all units is centralised at the head office and despatched as needed; each shop is under a branch manager who sends daily reports; branches are controlled by the head office, which frames policy; prices are fixed and sales are on cash basis with daily deposit to a local bank; and the head office appoints inspectors to supervise the shops. Advantages: economies of scale from central procurement; elimination of middlemen; no bad debts (cash sales); transfer of unsold goods between localities; diffusion of risk across shops; low cost; and flexibility to close or shift an unprofitable shop. Limitations: limited selection of goods (especially manufacturer-owned chains); lack of initiative among staff who must follow head-office instructions; lack of personal touch; and the risk of heavy losses if demand for the merchandise changes rapidly.
Q3. Discuss the role of Chambers of Commerce and Industry in the promotion of internal trade.
ANSWERAssociations of business and industry such as ASSOCHAM, CII and FICCI act as national guardians of trade, commerce and industry and play a catalytic role in strengthening internal trade by interacting with the government to remove hindrances and improve infrastructure. Their main interventions are: (i) Interstate movement of goods — helping with vehicle registration, surface-transport policy and road/highway construction; (ii) Octroi and local levies — ensuring these do not obstruct smooth transport and local trade; (iii) Harmonisation of sales tax and VAT — pressing for a rational, uniform tax structure across states; (iv) Marketing of agro products — streamlining subsidies and marketing policies; (v) Weights and measures and prevention of duplicate brands — helping frame and enforce laws protecting consumers and traders; (vi) Excise duty — interacting with the government to streamline excise that affects pricing; (vii) Promoting sound infrastructure — roads, ports, electricity and railways; and (viii) Labour legislation — working for simple, flexible labour laws that help run industries and generate employment. Through these efforts they reduce bureaucratic hurdles, increase transparency and boost the smooth flow of internal trade.
MCQs & Assertion–Reason
1. Buying and selling of goods and services within the boundaries of a nation is called:
For each Assertion–Reason question, choose: (A) Both true and the Reason correctly explains the Assertion; (B) Both true but the Reason is not the correct explanation; (C) Assertion true, Reason false; (D) Assertion false, Reason true.
A-R 1. Assertion: No custom duty or import duty is levied on internal trade.
Reason: In internal trade, goods are part of domestic production meant for domestic consumption.
A-R 2. Assertion: Wholesalers help manufacturers avail economies of scale.
Reason: Wholesalers pool small orders from many retailers into bulk orders, enabling large-scale production.
A-R 3. Assertion: Super markets generally extend liberal credit facilities to their buyers.
Reason: Super markets work on the principle of self-service.
A-R 4. Assertion: Mail-order houses face no risk of bad debts.
Reason: Mail-order houses do not extend credit facilities to their customers.
A-R 5. Assertion: A departmental store is usually located at a central place in the city.
Reason: A central location helps attract a large number of customers to the store.
Answer key: 1-(A), 2-(A), 3-(D), 4-(A), 5-(A).
Exam Tips & Common Mistakes
How to score full marks in this chapter
Memorise the two-fold classification — internal trade into wholesale and retail, and retailers into itinerant and fixed-shop — and be able to name the sub-types under each. For service questions, list the seven services of wholesalers to manufacturers and the five to retailers with one-line explanations. The departmental store vs multiple shops difference and the advantages/limitations of super markets, chain stores, mail-order houses and cooperative stores are frequently asked — learn them in point form with a heading and a brief explanation each. Keep the GST facts ready: destination-based, single tax, w.e.f. 1 July 2017, CGST + SGST + IGST, four slabs (5/12/18/28%).
Common mistakes to avoid
Confusing internal trade (within a country) with external trade (between countries).
Mixing up wholesale trade (large quantity, for resale) with retail trade (small quantity, to consumers).
Treating street traders (mobile, no fixed shop) the same as street stall holders (fixed stall).
Writing that super markets and chain stores give credit — they sell strictly on cash basis.
Confusing single line stores (one product line, many varieties) with speciality shops (one narrow line within a category).
Forgetting that mail-order houses suit only graded, standardised, easily transportable goods with ready demand.
Frequently Asked Questions
What is Chapter 10 of Class 11 Business Studies about?
Chapter 10, Internal Trade, explains the meaning and types of internal trade, the services of wholesalers and retailers, the classification of retailers into itinerant and fixed-shop types (including departmental stores, chain stores, mail-order houses, consumer cooperative stores, super markets and vending machines), the role of Chambers of Commerce and Industry, and the Goods and Services Tax (GST).
What is the difference between a departmental store and a chain store?
A departmental store is one large, centrally located shop offering a wide variety of products with many services on a not-uniform price, mainly to high-income customers (credit allowed). Chain stores or multiple shops are many identical shops spread across localities, dealing in a limited, standardised range at fixed uniform prices, with very limited service and cash-only sales.
How many questions are there in the NCERT exercise for Class 11 Business Studies Chapter 10?
The end-of-chapter Exercises contain 9 Short Answer Questions and 5 Long Answer Questions (plus Projects/Assignments). All 14 Short and Long Answer questions are reproduced verbatim and answered step by step on this page.
