Internal Trade - Solutions

 CBSE Class 11 Business Studies

NCERT Solutions
Internal Trade


1. What is meant by internal trade?

Ans. (1) Buying and selling of goods and services within the boundaries of a nation are referred to as internal trade.

(2) No custom duties or import duties are levied on such trade as goods are part of domestic production and are meant for domestic consumption.

(3) Internal trade can be categorised into two broad categories:

(i) Wholesale trade

(ii) Retail trade

2. Specify the characteristics of fixed shop retailers.

Ans. As the name suggests, fixed-shop retailers are retailers who have permanent establishments. It means that they sell goods and services from fixed shops and do not move from place to place to serve customers. For example, retailers functioning from fixed establishments in the local grocery market.

The following are some of the characteristics of fixed-shop retailers:

(a) Fixed-shop retailers operate on a large scale and have huge resources at their disposal compared with itinerant traders. However, among fixed-shop retailers, there are retailers who operate on a small scale or a large scale.

(b) They generally deal in more than one product-that is, their range of goods varies from consumer durable goods to non-durable goods.

(c) Fixed-shop retailers provide services such as free home delivery and supply of goods on credit to 'their customers.

(d) They have a greater credibility in the eyes of consumer as they can be traced if the product is found to be defective or there is any other problem.

3. What purpose is served by wholesalers providing warehousing facilities?

Ans. Wholesalers purchase goods in bulk from manufacturers, store them and distribute them to retailers in small quantities for further resale. This bulk purchase of goods enables manufacturers to undertake production on a large scale without worrying about storage facilities. By offering warehouses close to the centres of distribution, wholesalers provide what is known as 'place utility'. Wholesalers not only provide warehousing facilities such as collection, storage and protection of goods but also facilitate marketing and distribution, creating 'time utility'.

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

Ans.A wholesaler provides information regarding the preferences and expectations of the customers to the manufacturer. He also collects information regarding the products of the competitor price of his product etc. Wholesalers make suggestions about the type and quality of goods required by the consumers. Such information helps the producer to regulate production according to the changing requirement of the consumer.

5. How do the wholesalers help the manufacturer in availing the economies of scale?

Ans. Wholesalers often purchase goods in bulk quantities from manufacturers. Once a purchase is made, the wholesalers distribute the goods in small quantities to retailers for further resale. However, during this process, they provide manufacturers with a variety of warehousing facilities such as collection, storage, marketing and distribution of goods. These services reduce the burden on manufacturers by creating time and place utility, thus enabling them to produce goods on a large scale and benefit from the economies of scale.

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

Ans. Single line stores are those stores which deal in one line of product only, for example- sweet shop, chemist shop, garment shop, stationary shop etc.

Speciality stores are those stores which deal in particular product of one line of product. For example- sweet shops dealing in Bengali sweets only, garment shop selling jeans only.

On the basis of these features, we can identify the different types of stores in a locality-whether they are single-line stores or speciality stores.

Single line stores are more frequently found in local retail markets while speciality stores are found in wholesale markets.

7. How would you differentiate between street traders and street shops?


Basis of difference

Street traders

Street shops


Small retailers who generally sell low-priced consumer items on streets.

Shops situated on street sides or main roads.


Do not have permanent shops.

Have permanent establishments.


Bathroom items, eatables, newspapers, etc.

Clothes, shoes, grocery items, bakery items, etc.


These are taken as less reliable by customers.

These are taken relatively more reliable by customers.

8. Explain the services offered by the wholesalers to the manufacturers.

Ans. Wholesalers offer a wide variety of services to manufacturers. The following are examples of such services:

(a) They facilitate large-scale production: Wholesalers purchase goods in bulk from manufacturers and sell them to retailers in small quantities for further resale. This bulk purchase made by wholesalers enables manufacturers to undertake production on a large scale without worrying about storage facilities. Thus, wholesalers facilitate large-scale production.

(b) They provide storage facilities: When wholesalers purchase goods in bulk quantities from manufacturers, they store these goods in their godowns or warehouses, reducing manufacturers' burden of finding proper storage.

(c) They collect market information: Wholesalers provide different kinds of information to manufacturers, such as information about the tastes and preferences of customers, prevailing market conditions, level of competition in the market and type of goods demanded by consumers. This in turn helps manufacturers to produce goods according to the market needs.

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

Ans. Retailers offer a variety of services to wholesalers and customers. Some of these services are listed below.

Services to consumers:

1. Ready or quick supply: The most important service of a retailer to consumers is to maintain regular availability of various products so that the buyers can buy the products whenever they need.

2. Wide variety: Retailers generally keep stock of a variety of products and different manufactures. This enables the consumers to make their choice out of a wide selection of goods.

3. Home delivery: It is important part of after sale service and for buyer’s decision for repeat purchase of the products.

Services to the wholesalers:

1. Distribution of goods to distant places: Retailers helps in distribution of goods to the final consumers and thus provide place utility.

2. Risk bearing: Retailers participates in the promotional activities of the product so that the product becomes popular and then it is less risk for the wholesalers.

3. They provide information to wholesalers: Retailers provide information to wholesalers, such as the tastes and preferences of customers, prevailing market conditions and level of competition in the market. Wholesalers pass on this information to manufacturers.