If an entrepreneur produces too much without estimating demand, what is the main risk?
Answer and explanation
Correct answer: Unsold stock and blocked money
Producing beyond likely demand can leave goods unsold. Money then remains tied up in inventory, storage costs may rise, products may become outdated or damaged, and cash may not be available for wages or new materials. Demand estimation through research, pilot sales, and records helps decide a more suitable production level. Excess production does not guarantee profit or customer trust.
Frequently asked questions
What is the correct answer to this question?
Unsold stock and blocked money
Why is this the correct answer?
Producing beyond likely demand can leave goods unsold. Money then remains tied up in inventory, storage costs may rise, products may become outdated or damaged, and cash may not be available for wages or new materials. Demand estimation through research, pilot sales, and records helps decide a more suitable production level. Excess production does not guarantee profit or customer trust.
Which subject and chapter does this question cover?
This is a Class 11 Business Studies question. Chapter: Business, Trade and Commerce. Topic: Business Risk.
