Home › Free notes › Class 11 Business Studies › Small Business and Entrepreneurship

Small Business and Entrepreneurship – Class 11 Business Studies notes, important questions and MCQs

NCERT Class 11 Business Studies, chapter 8. Notes, key terms, important questions with answers and MCQs.

Chapter overview

Small businesses, now called micro, small and medium enterprises (MSMEs), play a vital role in India's economy by creating employment, producing a wide range of goods, supporting balanced regional development and contributing to exports. Entrepreneurship is the process of setting up a new business by taking risks, and it drives innovation and growth. Government institutions and schemes support small businesses and start-ups.

Small business in India

Since 2020 MSMEs are classified using a composite criterion of investment in plant and machinery (or equipment) and annual turnover; the limits are revised from time to time.
Village and cottage industries use simple tools and family labour, often in rural areas.
Role: large employment generation, use of local resources, balanced regional development, exports and support to large industries as suppliers.

Problems and support

Problems: lack of finance, raw materials, modern technology, marketing and skilled management, along with competition from large firms.
Support: National Small Industries Corporation (NSIC, 1955), Khadi and Village Industries Commission (KVIC), District Industries Centres (DICs, 1978) and Small Industries Development Bank of India (SIDBI, 1990).
Schemes such as credit guarantees and Startup India (2016) help new enterprises.

Entrepreneurship

An entrepreneur identifies opportunities, takes risks, brings together resources and innovates to start a business.
Characteristics: systematic activity, lawful and purposeful, innovation, organisation of production and risk-taking.
Entrepreneurship creates jobs, uses resources efficiently, promotes innovation and drives economic development.

Key terms

MSME: micro, small and medium enterprises defined by limits on investment and turnover
Cottage industry: a small industry run at home with family labour and simple tools
Entrepreneur: a person who starts a business by identifying an opportunity, organising resources and taking risks
Start-up: a newly formed enterprise working on an innovative product or service with growth potential
District Industries Centre: a district-level government agency that supports small and village industries

Important questions with answers

Who is an entrepreneur?2 marks

An entrepreneur is a person who identifies a business opportunity, brings together resources such as land, labour and capital, takes the risk of starting and running the business, and introduces new ideas and innovation.

What problems do small businesses face?3 marks

Small businesses face lack of adequate and timely finance, difficulty in getting raw materials, outdated technology, poor marketing and limited reach, lack of skilled managers, delays in payments from large buyers and competition from large and foreign firms.

Discuss the role of small business in India and the support provided by the government.5 marks

Small businesses, classified as micro, small and medium enterprises, play a vital role in India. They generate large-scale employment because they are labour-intensive, second only to agriculture. They use local resources and skills and can be set up in rural and backward areas, promoting balanced regional development. They produce a wide variety of goods, from food products to engineering items, and contribute significantly to industrial output and exports. They support large industries by supplying components and services, encourage entrepreneurship and allow quick decision-making and personal contact with customers. However, they face problems such as lack of finance, raw materials, technology and marketing. The government supports them through several institutions: the National Small Industries Corporation (1955), which provides machinery on hire purchase and marketing support; the Khadi and Village Industries Commission, which promotes village industries; District Industries Centres (1978), which provide services at district level; and the Small Industries Development Bank of India (1990), which provides finance. Credit guarantee schemes, priority sector lending and schemes such as Startup India (2016) also help new and small enterprises to grow.

Quick revision

MSMEs: composite investment + turnover criterion (2020).
Role: jobs, local resources, regional balance, exports.
NSIC, KVIC, DIC, SIDBI, Startup India.
Entrepreneur: opportunity, risk, innovation.

Exam tips

Learn the support institutions with their roles and years.
Explain the role of small business with numbered points: employment, regional balance, exports, supply to large firms.

Practice MCQs

A person who starts a business by taking risks is an
1. employee
2. investor only
3. consumer
4. entrepreneur
Show answer
Answer: (d) entrepreneur. He organises resources.
Small industries run at home with family members are
1. large industries
2. cottage industries
3. public enterprises
4. MNCs
Show answer
Answer: (b) cottage industries. They use simple tools.
Small businesses are important mainly because they
1. employ few people
2. need huge capital
3. generate large employment
4. only serve exports
Show answer
Answer: (c) generate large employment. They are labour-intensive.
The Small Industries Development Bank of India was set up in
1. 1955
2. 1978
3. 1990
4. 2016
Show answer
Answer: (c) 1990. It finances small units.
District Industries Centres were started in
1. 1955
2. 1978
3. 1991
4. 2020
Show answer
Answer: (b) 1978. They work at district level.
Since 2020, MSMEs are classified on the basis of
1. number of workers only
2. location only
3. investment and turnover
4. profit only
Show answer
Answer: (c) investment and turnover. It is a composite criterion.
Which is a common problem faced by small businesses
1. lack of finance and marketing support
2. excess capital
3. too many skilled managers
4. no competition
Show answer
Answer: (a) lack of finance and marketing support. They have limited resources.
How do small industries promote balanced regional development
1. by setting up in rural and backward areas using local resources
2. by locating only in metros
3. by importing raw materials
4. by reducing employment
Show answer
Answer: (a) by setting up in rural and backward areas using local resources. They spread industry widely.

All chapters of Class 11 Business Studies

Written by Kundali IQ from standard, well-established facts to help with revision. This is not an official NCERT publication; always read your textbook too.