NCERT Solutions for Class 12 Business Studies chapter 13 – Entrepreneurship Development


Multiple Choice Questions

1. Entrepreneurs undertake

  1. calculated risks
  2. high risks
  3. low risks
  4. moderate and calculated risks

Answer (2) It is generally believed that entrepreneurs take high risks as there is no assured career in that and secondly for a higher return the person takes higher risk.

2. In Economics, which of the following is not a function of the entrepreneur?

  1. Risk-taking
  2. Provision of capital and organisation of production
  3. Innovation
  4. Day-to-day conduct of business

Answer (4) Day-to-day conduct of business is not the function of the entrepreneur.

3. Which of the following statements does not clearly distinguish between entrepreneurship and management?

  1. Entrepreneurs found the business; managers operate it
  2. Entrepreneurs are the owners of their business; managers are employees
  3. Entrepreneurs earn profits; managers earn salaries
  4. Entrepreneurship is once for all activity; management is a continuous activity

Answer  (4) Entrepreneurship is once for all activity. The concept behind it is not cleared. Through this point, it is typical to understand the difference between entrepreneurship and management.

4. In the roles and functions of the entrepreneur identified by Kilby, which of the following is not an aspect of ‘political administration’?

  1. Dealing with public bureaucracy
  2. Managing human relations within the firm
  3. Introducing new production techniques and products
  4. Managing customer and supplier relations

Answer (3) Introducing new production techniques and products is not an aspect of ‘political administration’. It is come under the ‘Technology’ identified by Kilby.

5. Which of the following attitudes is not generally associated with successful entrepreneurship?

  1. Investing in R & D
  2. Live your business day-by-day
  3. Innovate and improvise continually
  4. Produce as per customers’ requirements

Answer (2) Live your business day-by-day is not the attitude associated with successful entrepreneurship.

Short Answer Type Questions

Question 1. Clarify the meaning of the terms ‘entrepreneur’, ‘entrepreneurship’ and ‘enterprise’.

Answer Entrepreneur The owner of a business is known as Entrepreneur or we can say that the person who set-up his business. He is the co-ordinator, organiser of resources and gives shape to the business.

Entrepreneurship It is the dynamic process of interaction between the person and the environment. It means starting up one’s own business, concerned with strategic decisions of resource allocation and involves huge risk to create value and earn profit.

Enterprise The output of the entrepreneurship process is known as the Enterprise. It is something attempted to be performe. It provides employment opportunities, professional opportunities and business opportunities which helps in building up the economy of a nation.

Question 2. Why is entrepreneurship regarded as a creative activity?

Answer Entrepreneurship is a creative activity as an entrepreneur converts raw materials into useful goods and services, it involves creation of value, introduction of new products, discovery of new markets and technologies. Successful entrepreneurs keep focusing on innovative ideas and skills to produce efficient and effective results. Thus, an entrepreneur is innovator and this process is creative.

Question 3. ‘‘Entrepreneurs undertake moderate risk’’. Elaborate this statement.

Answer ‘‘Entrepreneurs undertake moderate risks’’. It implies that an entrepreneur assures various supply of the projects, he agreed to pay salaries, wages, rent whether the venture succeed or not. Secondly, the person who opted a career in entrepreneurship takes a bigger risk as there is no assured pay off. It is said that it is a 50 : 50 situation means loss and profit both are unpredictable. Success depends upon the observations, calculations of risk, skills and confidence. Risk is not centred to one problem it involves many issues like fluctuation in price, taste and preference fashion, risk of strikes, lock outs etc. It becomes the essential feature of the entrepreneurship which is to be focused more and more.

Question 4. How entrepreneurship result in increasing the spectrum and scope of economic activities?

Answer  Development does not mean only the betterment of existing but it means the overall betterment across the geographical, sectoral and

technological scope. Entrepreneurship results in diversification of economic activities by creating employment, business opportunities, stabilising the demand and supply factors as underdeveloped countries caught in the vicious cycle on the demand as well as supply side. Thus, it helps in overcome from this situation. GDP originates from industry and services increases. Entrepreneurs through their decisions to direct from the stale sectors and invest in green field sectors brings a virtual transformation of the economy from underdeveloped to developed status. Thus, we can say entrepreneurship result in increasing the spectrum and scope of economic activities.

Question 5. Describe briefly the role of achievement motivation in entrepreneurship.

Answer Entrepreneurial motivation is important to learn as different individual motivated differently and for the success of an enterprise following needs are to be focused to motivate an entrepreneur

  1. Need for Achievement It implies a desire to accomplish something. In order to accomplish the task one can use the creativity, talent, organise physical resources, explore and use opportunities, overcome from the obstacles and attain a high standard.
  2. Need for Power It is concern with influencing people or the behaviour of others moving in the same direction to attain the objectives. Need for power means authority required to control the activities of an enterprise.
  3. Need for Affiliation It implies among other things a tendency of the people to conform to the wishes and norms of those whom they value. Entrepreneurs are believed to be low on affiliation buy they should focus and trace the elements of affiliation for the successful career and for the development of standardised goods and services for others.
  4. Need for Autonomy It means a desire for independence and being responsible and accountable to oneself rather than some external authority for performance. Every body needs freedom to some extent as it is very difficult to take orders and work all the time as per the boss.

Long Answer Type Questions

Question 1. Describe briefly the steps involved in starting a new business.

Answer Setting up and running of business unit is a very crucial decision which is taken by an entrepreneur. He performs several functions like assembling inputs, market analysis, sales strategy, risk factors, financial analysis and many more. But in order to start a new business following steps are to be taken

  1. Scanning the Environment The complete awareness and understanding of business environment is known as Environment scanning. An entrepreneur scan business opportunities and risks involved. After the analysis, he use these opportunities and market them in much better way.
  2. Development of Product It is second step after scanning the environment an entrepreneur starts assessing scarce resources, assembling inputs and starts the production of goods and services.
  3. Feasibility Analysis It refers to the analysis which helps in knowing the practical possibility. An entrepreneur starts looking the feasibility like technical feasibility helps in knowing that the idea should be converted into reality using available technology, similarly economic feasibility helps in knowing the cost involved in production and after selling it will earn profit or not. The business plan starts after the feasibility report.
  4. Funding Agencies Finance is the back bone for the business activity. An entrepreneur needs finance to carry on the business that’s why they prepare business plan which is to be submitted before the financial institutions and if they satisfy they fund the project.
  5. Establishing of an Enterprise After getting the fund, an entrepreneur have to take legal permission and clearance from various agencies in order to establish an enterprise.

Process of Setting up a Business

Question 2. Examine the nature of relationship between entrepreneurship and economic development.

Answer There is a mutual relationship between economic development and entrepreneurship. Entrepreneurship development leads to economic development of the country by contributing in GDP and process of economic development gives an opportunity for expansion and growth. Following points explain the relationship between economic development and entrepreneurship

  1. Contributing to Gross Domestic Product (GDP) Income is generated in the process of production. Entrepreneurs generate income via organisation of production, it results in increasing the value of GDP directly.
  2. Capital Formation Entrepreneurs use their own funds and encourage various investment opportunities to invest in companies. This leads to capital formation.
  3. Generation of Employment Every new business gives the opportunity of employment to the people with different abilities, skills and qualifications. It becomes a source of livelihood to those who do neither have capital to earn interest or nor have the land to earn rent.
  4. Improves Economic Efficiency Entrepreneurs improve economic efficiency by improving the process, reducing waste, increasing yield and bring technical progress. In this way, entrepreneurship results in economic development. On the other hand, economic development provides following opportunities for the growth and expansion of enterprise.
    • Well developed financial in the economy.
    • Opportunities to raise and avail funds from various financial institutions.
    • Lower rate of interest and moderate inflation.
    • Availability of factors of production.

Both are inter-related

Question 3. Clarify how motivation and abilities impact on individuals decision to choose entrepreneurship as a career.

Answer Motivation and ability can positively reinforce each other. Persons having abilities search for the exposure and focus to start a new business. They take decisions logically with the personal courage and strive hard to acquire the necessary competencies to realise their dreams. Following competencies contribute towards effective performance and success

  1. Entrepreneur must take initiative to set up an enterprise.
  2. Recognise the opportunities and grab them as early as possible.
  3. Must strive for success.
  4. He must collect important informations.
  5. Entrepreneurs must set up quality standards.
  6. Must be committed towards the completion of task.
  7. Concern for conservation of time, money and effort.
  8. Entrepreneurs must have ability to do product planning.
  9. Must have ability to diagnose the problem and take required steps to solve it.
  10. Entrepreneur must be confident.
  11. Conveying one’s vision and convincing others of its values.
  12. He must seek the support of others.
  13. Providing leadership.
  14. Ensuring the progress of venture.
  15. Concern for employee’s welfare.

On the other hand, motivation is required to understand because entrepreneur’s objective is profit maximisation and it can only be achieved when employees are motivated in such a manner that fulfillment of enterprise’s objective may also lead to satisfy employees basic needs. In this way, entrepreneurship career proves to be a success for an individual motivation and ability both goes hand to hand.

Application Type Questions

Question. Anshuman was very industrious sales executive with a small herbal cosmetic manufacturer. He earned a good salary and commission on the business, he brought for the firm and had very good command over the Delhi market for which he had virtually become indispensable. He was aware of the enviable position he held in the firm and thought aloud

‘‘The key to success in any business is the sale of its products. The beginning and end of the business cycle is nothing but sale and ‘other’ people working in the factory to manufacture products are mere cogs in the business machine set in motion by sales people. So, why carry this burden and get only a tiny share of the prosperity of the firm? Instead others enjoying the fruits of my labour, why should I not start my own business?”

Should Anshuman take a leap? Give reasons for your answer.

Answer Anshuman was a good industrious sales executive with a small herbal cosmetics. As per my opinion, Yes, he should start his own business as he is experienced, had a very good command over the market, he had market the products very well, maintain good relations with customers. He is good in marketing management. Thus, he can produce goods as per the customers, use effective promotional techniques, take care of customer satisfaction and offer something different from competitions. Thus, we can say to start a new business will prove fruitful to him.

Case Problem

Inspiring Feat : Dailywage Labourer Turns Entrepreneur

A landless woman from Bihar has been nominated among the top 25 farmers in Asia by a Mexican website.

Forty five years old Lalmuni Devi was a daily wage labourer when she decided to take destiny into her own hands and transformed herself into a successful mushroom farmer. Today she manages to make ` 12,000 every year for an investment of only ` 600.

Her feat finds mention on a Mexican website that has grouped her as the top 25 inspirational farmers in its photo gallery.

“I am a poor woman. I thought that mushroom farming would profit henceforth I started it. Now, I can earn a living for my family”, said Lalmuni Devi.

Successful Enterprise

The success story has caught on with many women in the Azadpur village on the outskirts of Patna.

“It is effortless farming, which we can even do in our village. Working in the scorching heat is very tiring. Mushroom farming generates more profit”, said Urmila Devi.

Lalmuni and other landless women have been encouraged by the Indian Council for Agriculture Research to take up mushroom farming.

“It is to help the poorest of the poor through alternative livelihood support system. For that we have chosen a village where people have no land and they have to share croppers”, said Dr AR Khan, Principal Scientist, ICAR, Patna.

Lalmuni’s efforts have paved the way for many other landless women to take up mushroom farming and earn a livelihood for their family with little effort.

Question 1. What inspiring feat did Lalmuni Devi perform?

Answer A forty five years old woman Lalmuni Devi from Bihar was a dailywage labourer, then she decided to transform herself by starting mushroom farming. This step proved an inspirational feet and she was among the top 25 farmers in Asia by Mexican website.

Question 2. Do you feel that you can also become an entrepreneur?

Answer Lalmuni’s efforts have paved the way for others. Similarly, we can also become an entrepreneur and for that we should have following qualities

(i) Initiate the business                 (ii) Grab the opportunities

(iii) High quality work                    (iv) Efficiency

(v) Risk taking abilities                  (vi) Concern for employee’s welfare

Question 3. What qualities of entrepreneur did Lalmuni Devi exhibit?

Answer  In the given case, Lalmuni’s have following qualities

  1. She decided to transform herself into an entrepreneur.
  2. She recognised the opportunity and grab it.
  3. She managed efficiently and effectively.
  4. She was a chaser and faced the difficulty.
  5. She was self confident.
  6. She took required steps to solve the problems.

Question 4. What are the benefits and risks of becoming an entrepreneur? How can you guard against the risks?

(Teachers should highlight the qualities of entrepreneurs and motivate students to do so. Help that is available from the Government of India is listed on the website

Answer Benefits of an entrepreneur

  1. They are the owner of the business.
  2. No worries of job, compensation and reward.
  3. They earn profit.
  4. They have full authority to take decisions.

Risks of an Entrepreneur

  1. Market risk
  2. Financial risk
  3. Risk in product planning
  4. Risk of innovative technologies

In order to secure from the risk, an entrepreneur should analyse the market well, study about the innovative technologies, prepare the business plan so that financial institutions granted the fund, adopt the best ideas for product planning.