What is Business
Business is any activity undertaken with a motive to earn profit.
Though it is a narrow definition of business activity and is focusing just on profitability. However, if we study businesses all around the world and the way they are run, everything is done with a reason to earn profit or maximize profits ultimately.
Understanding the relationship of business activity and profits – How it all started and how it works
No human can live alone as they cannot fulfill every need themselves. No one can be completely self-dependent. That is why humans interact.
But talking in strict business perspective, humans interact so that they can exchange goods and services with an objective that their personal needs can be met. And this exactly is business activity.
Businesses all around the world understood this concept and they learnt that by fulfilling other needs they can earn money, or in a deeper perspective, profits.
So what actually started as a need is now a subject of our daily life and is also a tool to survive. Let’s understand why business is that important. As said earlier, that it all started as a need, still today this is the case. Business identify the requirements, needs and wants of households (those who want to fulfill their needs) and offer (sell) goods and services to them in return of something (e.g. money) that is capable of fulfilling the needs of businesses in return. But before they can offer something to customer they have to acquire (purchase) resources which are also known as factors of production which are provided by households.
This is how very simplistic economy runs and almost every economic event that happens inside that economy is business activity