Classification of Economic Activities: Discussions in Commerce for Competitive Exams

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(I) Profession:

Any activity, which requires special knowledge and skill to be applied by an individual to earn a living, is known as Profession.

Example: Engineers, Film-stars, Architects, Dancers, Artists etc.

Features:

  • Occupation for which individual has to acquire a special knowledge and skill.

  • To provide service though they may charge fee.

  • Individual get money for providing such a service is usually known as ‘fee’.

(Ii) Employment

When a person works regularly for others and gets wages/salary in return, he is said to be in Employment.

Features:

  • It is an occupation where a person (called employee) is to work for employer.

  • There are certain terms and conditions of work like, hours of work, duration of work, leave facility etc.

  • The employees get salary or in return of their work.

  • Legally employer-employee relationship is based on a contract.

  • Main purpose behind employment is to secure assured income through wages and salaries.

(Iii) Business

Business is defined as an activity involving regular production or purchase of goods and services for sale, transfer and exchange with an object of earning profit. Example: Mill owners, transporters, bankers, traders, tailors, taxi operators etc. are doing business.

Features:

  • Person is engaged in manufacturing or buying and selling of goods and services.

  • Activities must be carried on regularly.

  • Sole objective of business is to earn profit.

  • Every business requires some investment in cash or kind or both.

  • Every business involves an element of risk.

Comparison of Business, Profession and Employment

Comparison between Business, Profession and Employment
Comparison between business, profession and employment on several basis

Basis

Business

Profession

Employment

Establishment

Decision to start business and compliance of legal formalities required.

Membership of a professional body is essential.

Enter into service contract with employer.

Qualification

Specific qualification not required.

Professional knowledge and training in same field is essential.

As per needs of employer and job involved.

Capital

Capital investment is required.

Some amount of capital investment is required for establishment.

No capital investment is required.

Nature of work

Production or purchase

and sale of goods

Expert service

Performance of job

Return or reward

Profit

Professional fee

Wage or Salary

Risk

There is risk of loss.

Risk of not getting sufficient fee.

No risk

Motive

Profit motive

Service motive though fee is charged.

Motive is to earn a livelihood.