Chapter business-services: Business Services Application Questions | business studies Class 11 CBSE

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Chapter business-services: Business Services Application Questions | business studies Class 11 CBSE | ByteNotes.in

Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 1

Applied Concept

Ravi consults a doctor for treatment. His friend Priya buys a bottle of medicine from a pharmacy. With reference to the nature of services and goods, explain the key differences in their transactions.

Ravi's doctor consultation is a service — intangible, experienced rather than owned, consumed simultaneously with its production, and non-storable. Priya's medicine purchase involves a tangible good with transferable ownership that can be stored and used later.
The doctor's treatment involves inseparability (Ravi must be present during treatment), inconsistency (treatment varies per patient), and involvement (Ravi participates actively by describing symptoms). The medicine, being a good, is homogeneous, can be manufactured and stored before purchase, and requires no customer involvement in production.
This illustrates that while both transactions satisfy a want (healthcare), the economic nature is fundamentally different: services are performed and experienced while goods are produced and owned.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 2

Applied Concept

A restaurateur notices that on weekday evenings her restaurant is nearly empty but over weekends it is overflowing. She cannot 'store' seats for weekends. With reference to characteristics of services, explain this operational challenge and suggest a way to manage it.

This challenge arises from the 'Inventory (Less)' characteristic of services — restaurant seats and staff capacity cannot be stored or accumulated for future use. The service (dining experience) must be consumed as and when it is produced and cannot be pre-prepared to meet weekend demand.
The 'Inconsistency' characteristic also applies — different customer groups have different demands and timing preferences, making it impossible to standardise capacity utilisation across the week.
A practical management approach is demand-side management: offering weekday discounts, special promotional meals, or loyalty rewards to shift some demand from weekends to weekdays, thereby optimising capacity utilisation — which is the essence of managing the supply-demand mismatch inherent in services.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 3

Applied Concept

Mr. Singh, a small manufacturer, needs to store his goods but cannot afford to build his own warehouse. He also needs flexibility to expand or reduce storage as demand changes. Which type of warehouse is most suitable and why?

Mr. Singh should use a public warehouse. Public warehouses can be used by any trader, manufacturer, or member of the public for storing goods after payment of a storage fee, without requiring ownership or construction of any facility.
Public warehouses offer exactly the flexibility Mr. Singh needs: there is no fixed cost, they offer flexibility in the number of locations, and they can provide value-added services like packaging and labelling that small manufacturers require but cannot set up independently.
Additionally, public warehouses are responsible for the safety of goods, the government regulates them through licensing, and they provide transportation facilities by rail and road — making them a comprehensive, cost-effective logistics solution for small manufacturers.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 4

Applied Concept

An exporter imports raw materials from Germany. The goods arrive at the port but the importer does not require all of them immediately and is not ready to pay the full customs duty. Which warehousing option is available and what are its specific advantages in this scenario?

The importer should use a bonded warehouse — government-licensed warehouses that accept imported goods before payment of customs duty. Since the importer cannot remove goods from the port until duty is paid, bonded warehouses hold them in custody on behalf of customs authorities.
The key advantages here are: the importer can remove goods in parts as and when required, paying import duty in instalments. This prevents blocking of large funds for upfront duty payment before the goods are sold or used.
Additionally, bonded warehouses provide facilities for branding, packaging, grading, and blending. The importer can bring buyers for inspection and repackage goods according to buyer requirements, facilitating marketing before finalising transactions.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 5

Applied Concept

Seema has her home insured for Rs. 5 lakh. Due to a fire, the actual damage to the house is Rs. 3 lakh. The insurance company pays Rs. 3 lakh. Seema is disappointed expecting Rs. 5 lakh. Which principle of insurance is at work here and how does it protect against misuse?

The principle of indemnity is at work here. Indemnity states that the insurer's obligation is to restore the insured to the same financial position as immediately before the loss — not to allow profit from insurance.
The insurer is liable to pay only the actual loss (Rs. 3 lakh), not the face value of the policy (Rs. 5 lakh). The insured amount of Rs. 5 lakh is the maximum ceiling, not a guaranteed payout irrespective of actual damage.
This protects against moral hazard: if insureds could profit from insurance, they might have incentives to intentionally cause or exaggerate damage. Indemnity ensures insurance is a compensation mechanism, not a wealth-creation tool, thereby maintaining the integrity of the insurance system.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 6

Applied Concept

Ajay's car is damaged in an accident. His car is insured with Company A for Rs. 2 lakh and with Company B for Rs. 2 lakh. The actual loss is Rs. 2 lakh. He claims the full amount from Company A. Explain which principle of insurance applies and what Company A can do.

The principle of contribution applies here. This principle governs cases of double insurance, where the same property is insured with more than one insurer. Ajay cannot recover more than his actual loss of Rs. 2 lakh in total.
After paying the full Rs. 2 lakh claim, Company A can invoke the contribution principle to call upon Company B — the other liable insurer — to contribute proportionately to the loss payment (i.e., Rs. 1 lakh each in this case).
The principle prevents the insured from profiting from insurance. Once the actual loss is fully recovered from one insurer, the right to obtain further payment from another insurer ceases. This ensures that losses are shared equitably among co-insurers.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 7

Applied Concept

A fire breaks out in a textile factory. The owner, knowing that the factory is fully insured, decides not to take any steps to control the fire and waits for the insurance company to pay. Explain which principle of insurance the owner has violated and what consequence may follow.

The factory owner has violated the principle of mitigation, which states that it is the duty of the insured to take all reasonable steps to minimise the loss or damage to insured property.
The insured must behave with great prudence and cannot be careless just because insurance cover exists. By deliberately choosing not to act, the owner has behaved with negligence that a prudent person would not.
As a consequence, the owner's claim from the insurance company may be reduced or even lost entirely. The insurance company is not obligated to compensate for losses that could have been prevented through reasonable care by the insured.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 8

Applied Concept

Meena applied for a life insurance policy but did not disclose her pre-existing heart condition. Two years later, when she made a claim after a heart attack, the insurance company refused to pay. Which principle of insurance justifies this refusal?

The principle of utmost good faith (uberrimae fidei) justifies the insurance company's refusal. This principle requires the insured to voluntarily and accurately disclose all material facts about the subject matter of insurance.
Meena's heart condition is a material fact — it is a fact that would significantly affect a prudent insurer's decision to accept the proposal or to fix the rate of premium. By failing to disclose it, Meena breached her fundamental duty under this principle.
As a result, the insurance contract is voidable at the discretion of the insurer. The insurance company is therefore legally justified in refusing to honour the claim, as the contract was entered into on the basis of incomplete and misleading information.

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Application Question

Hard difficulty • Concept in a practical situation

Hard

Question 9

Applied Concept

Ramesh's car was damaged in a flood. He was compensated Rs. 80,000 by his insurance company. Later, the government announced compensation of Rs. 80,000 for flood-affected vehicles. Can Ramesh claim this government money too? Explain with reference to the relevant insurance principle.

Ramesh cannot claim the government compensation in addition to his insurance payout. The principle of subrogation applies here — after the insurer settles the claim, it stands in place of the insured in respect of any right of recovery from an alternative source.
Since the insurance company has already fully compensated Ramesh, the right to claim the government's flood compensation effectively passes to the insurance company (insurer) and not to Ramesh.
Subrogation prevents the insured from making a profit from insurance. Allowing Ramesh to collect both the insurance amount and government compensation would amount to receiving double benefit for the same loss, which contradicts the principle that insurance is purely a compensatory device.

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Application Question

Medium difficulty • Concept in a practical situation

Medium

Question 10

Applied Concept

A technology firm in Bengaluru wants its employees working from home to be able to check company accounts, process payroll, and pay vendor invoices without visiting the office. Which banking service should the company adopt and what specific features make it suitable?

The company should adopt e-banking services. e-Banking allows customers to conduct banking transactions — managing accounts, applying for loans, and paying bills — over the internet using a PC, mobile phone, or handheld device, without visiting the bank or office.
Specifically, the firm can use NEFT (National Electronic Fund Transfer) and RTGS (Real Time Gross Settlement) for vendor payments, Electronic Data Interchange (EDI) for procurement transactions, and online account management for payroll and fund monitoring.
e-Banking provides 24x7 access throughout the year, enables transactions from anywhere, and reduces the risk of carrying or handling cash. The bank's centralised database and web-enabled services ensure that all permitted transactions are accessible from home.

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Chapter sections

Chapter business-services: Business Services | Application Questions

Ravi consults a doctor for treatment. His friend Priya buys a bottle of medicine from a pharmacy. With reference to the nature of services and goods, explain the key differences in their transactions.

A restaurateur notices that on weekday evenings her restaurant is nearly empty but over weekends it is overflowing. She cannot 'store' seats for weekends. With reference to characteristics of services, explain this operational challenge and suggest a way to manage it.

Mr. Singh, a small manufacturer, needs to store his goods but cannot afford to build his own warehouse. He also needs flexibility to expand or reduce storage as demand changes. Which type of warehouse is most suitable and why?

An exporter imports raw materials from Germany. The goods arrive at the port but the importer does not require all of them immediately and is not ready to pay the full customs duty. Which warehousing option is available and what are its specific advantages in this scenario?

Seema has her home insured for Rs. 5 lakh. Due to a fire, the actual damage to the house is Rs. 3 lakh. The insurance company pays Rs. 3 lakh. Seema is disappointed expecting Rs. 5 lakh. Which principle of insurance is at work here and how does it protect against misuse?

Ajay's car is damaged in an accident. His car is insured with Company A for Rs. 2 lakh and with Company B for Rs. 2 lakh. The actual loss is Rs. 2 lakh. He claims the full amount from Company A. Explain which principle of insurance applies and what Company A can do.

A fire breaks out in a textile factory. The owner, knowing that the factory is fully insured, decides not to take any steps to control the fire and waits for the insurance company to pay. Explain which principle of insurance the owner has violated and what consequence may follow.

Meena applied for a life insurance policy but did not disclose her pre-existing heart condition. Two years later, when she made a claim after a heart attack, the insurance company refused to pay. Which principle of insurance justifies this refusal?

Ramesh's car was damaged in a flood. He was compensated Rs. 80,000 by his insurance company. Later, the government announced compensation of Rs. 80,000 for flood-affected vehicles. Can Ramesh claim this government money too? Explain with reference to the relevant insurance principle.

A technology firm in Bengaluru wants its employees working from home to be able to check company accounts, process payroll, and pay vendor invoices without visiting the office. Which banking service should the company adopt and what specific features make it suitable?

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