Business is regarded as an economic activity due to the following reasons.
1. The object of business is to sell goods or services for Profit. Economic activities are those activities which are undertaken to generate an income. Business is an economic activity because it is carried on as a means of earning money.
Businessmen make money by producing and selling commodities which help to satisfy human wants. For example, a farmer who grows vegetables for the consumption of his family is not engaged in business.
But a farmer who grows vegetables for the purpose of selling them in the market is undertaking a business. His object is to earn income in excess of the cost of growing vegetables. This excess of income over expenditure is called profit. The chief end of any business enterprise is generation of profit and wealth.
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2. Business Activities Involve Use of Scarce Resources. Business activities require use of scarce resources such as raw materials, labour, capital and other factors of production. A businessman provides the necessary funds from his personal and other sources to meet the capital requirements of his business.
He arranges for the raw materials from the suppliers required to produce the goods. He employs labour to assist the production. Thus, a businessman has to produce goods utilising various scare resources.
3. Business Activities Satisfy Needs of the Public and of Businessmen. Business activities satisfy the needs of the public by making available goods and services.
Public can buy these goods and services and satisfy their needs. Business is a source of income for the businessman. With the help of this income he can satisfy his needs as well as the needs of his family members.
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Thus, business may be regarded as an economic activity both as a means of generating an income and also as a means of satisfying the wants of society.