The Nature and the Subject Matter of Commerce
THE MEANING OF COMMERCE
The scope of commerce covers the following:
- The study of trade, which is the main activities in the distribution of goods and services
- The study of auxiliary services(aids to trade) that make trade possible
- The study of how trade and aids to trade could be organized so as to satisfy the needs of a consumer in the most efficient way.
is a branch of production which deals with the exchange of goods and
services and all activities that facilitate the transfer of such goods
and services from producer to final consumers.
DIVISION OF COMMERCE
- Aids to trade
COMMERCE FLOW CHART.
to the process of buying and selling of goods and services, with the
intention of generating profit. A person who engages in trading
activities is known as a trader.
Trade is sub divided into two main branches, which are: a) Home trade and b) Foreign trade.
A. HOME TRADE
is the buying and selling of goods and services within in a country.
Home trade is divided into two main branches;- Retail trade and
trade: This is the buying of goods from producer or wholesalers and
selling them to the final consumers. Retailer is a person who buys in
small quantities from the wholesaler or producer and then sells it to
the final consumer.
trade: This is the buying of goods in large quantity from manufacturer
or producers and selling them to other business men in smaller quantity
at lower price. Wholesaler is a trader who buys in bulky (large
quantities) from the producers and sells it in small quantities to the
retailers or straight to the consumers.
B.INTERNATIONAL TRADE (FOREIGN TRADE)
trade-is a trade between one nation and other nations. It is the
exchange of goods and services across the national borders. For example,
exchanging the goods and services between Tanzania and china.
- export trade
- import trade
trade: is the process of buying goods and services from other
countries. For example, buying of mobile phones from china and selling
them locally in Tanzania.
2. AIDS TO TRADE
to trade are all the activities which facilitate trade. Aids to trade
make trade less difficult to carry out. Examples of aids to trade
include the following:
a)Communication: is the transmission of information from one point or
person to another point or person. People can exchange information among
each other either orally or using telephone,internet,radio and
b) Transportation: This refers to the movement of
physical goods and people from one place to another. Moving of goods
from one place to another can be through land using motor vehicles, over
water using marines or air using planes.
c) Warehousing: Refers
to the storing of goods so that they are made available when and where
they are required. Goods which can be stored include crops, and
perishable foods like fish, meat and fruits.
d) Insurance: a
system of pooling risk together by contributing small sums of money to a
common pool which in the long run, compensate the people or a person
who suffers from actual loss. Examples of risks or losses are theft,
robbery, fire, floods and accidents.
e) Banking: Helps to
finance trade. It also provides a safe place to keep money, and provides
means of payments and lending money in a form of loan to businesses.
Advertising: Is a process of letting consumers know about what goods
and services are available in the market. Advertising of goods and
services to public can be done through newspapers, magazines, radio,
televisions, banners and cinema.
Importance of Commerce in Everyday Life
Explain the importance of commerce in everyday life
helps in the development of a country’s economy. Trade and aids to
trade enable the goods produced to reach the final consumers, and the
fore increase the production and the national income.
enables the producers to get enough information about the availability
of goods and services in the market availabilty of inputs leads to
increase in production and information about availability of goods
stimulates consumption, and therefore induces more production.
knowledge of commerce enables learners to understand other fields of
knowledge like economics. The knowledge of commerce also, enables
economists to get better understanding about the fields of studies in
economics, such as international economics.
- It enables
businessmen and women to conduct trade. The knowledge of commerce
enables businessmen and women to conduct trade by simply knowing the
means of exchange and sources of supply.
- It is necessary for
satisfying human wants through trade and aids to trade. Trade and aids
to trade involve changing the situation of a commodity from where it is
produced to the place where it is needed for consumption. In this
process, commerce creates utility.
main distinction between economics and commerce is that, the subject
matter of economics is wider than the subject matter of commerce.
Economics deals with all the activities involving production,
distribution, exchange and consumption. Commerce is concerned with one
section of economics activities.it is a system through which raw
materials are distributed to the producers and the finished products to
is therefore a branch of economics that deals with the exchange of
goods and services, and the activities that facilitate it.
means that all the subject matter of commerce are studied in economics,
but not all the subject matters of economics are studied in Commerce.
plays a fundamental role in the satisfaction of human wants. In
primitive societies, the producers themselves were the consumers.Hence;
they were compelled to provide themselves with foods, shelter and
clothes. Under such circumstances, the question of commercial
transactions or exchange of goods and services did not arise. But slowly
heir wants started to increase in size and in number. They were no
longer able to satisfy all their wants, so they began exchanging he
commodities produced with those produced by others. This exchange of
goods for goods was known as barter system of trade.However, barter
trade could not persist for a long period of time due to the following
- Lack of Double Coincidence of Wants:Barter
transactions can be possible only when two persons desiring exchange of
commodities should have such commodities which are mutually needed by
each other. For example, if Fatma wants cloth, which Tully has, then
Fatma should have such commodity which Tully wants. In the absence of
such coincidence of wants, there will be no exchange. However, it is
very difficult to find such persons where there is coincidence of wants.
One had to face such difficulties in barter economy because of which
this system had to be abandoned.
- Indivisibility of some commodities:The
second difficulty of barter exchange relates to the exchange of such
commodities which cannot be divided. For example, a person has a cow and
he wants cloth, food grains and other items of consumption. Under such a
condition, exchange can be possible only when he discovers a person,
who is in need of a cow and has all such commodities, but it is very
difficult to get such a person. Then how to affect the
exchange.Similarly the second problem relates to the exchange of such
commodities which cannot be divided into pieces, because in this kind of
situation, a big commodity like cow cannot be divided into small pieces
for making payment of the goods of smaller value.
- Lack of a Common Measure of Value:The
biggest problem in the barter exchange was the lack of common measure
of value i.e., there was no such commodity in lieu of which all
commodities could be bought and sold. In such a situation, while
facilitating the exchange of a commodity its value was to be expressed
in all commodities, such as one yard cloth is equal to ½ kilogram of
potato etc. It was a very difficult proposition and made exchange
virtually impossible. Now, with the discovery of money, this difficulty
has been totally eliminated.
- Lack of Store of Value:In
a barter economy, the store of value could be done only in the form of
commodities. However, we all know that commodities are perishable and
they cannot be kept for a long time in the store. Because of this
difficulty, the accumulation of capital or store of value was very
difficult and without the accumulation of capital, economic progress
could not be made. It is because of this reason that as long as barter
system continued, significant progress was not made in the world
risk of theft is lower in barter system than the risk of using money.
Almost all modern forms of money can easily be stolen and are more
vulnerable to theft than commodities.
- The value of commodities
tend to be stable over a long period of tme, unlike the value of money
which depreciates in value after a certain period of time. Due to
depreciation in value, money plays little role as a future store of
- Barter trade is very useful in non-monetary economies,
where money is too scarce to be used as a medium of exchange. For
example, in rural areas barter trade is widely applied due to scarcity
- Sometimes in the rural areas people exchange crops for crops or animals
- Countries can opt to exchange goods for goods when there is no foreign currency e.g. cotton for oil.
as medium of exchange has removed the double coincidence of wants.
Under monetary system money is exchanged for goods and services when
people buy things Goods and services are exchanged for money when people
self-things, there is no necessity for a double coincidence of wants in
the presence of money.
man with the wheat, who wants to purchase oil, need not to find a
person having oil and wants wheat. He can sell his wheat in the market
for money and then purchase oil with the money thus obtained.
- Common Measure of Value:
Money has overcome the difficulty of common measure of value by acting
as a standard of value. In a money economy the value of any commodity
can easily be expressed in terms of money.
- Store of Value:
Money has removed the difficulty of store of value. Money is used to
store the value (wealth) of goods and services. One can store one’s
earning in terms of money without any difficulty.
- Future Payments:
Money has overcome the difficulty of future payments. Debts and future
payments are stated in terms of money. There is no problem in receiving
and making payments in future.
- Sub Division:
Money has solved the problem of sub-division of commodities as money is
easily divisible. With the help of money one can exchange individual
commodity of great value for a commodity of less value. Money has made
it possible to buy goods of both high and low value.
- Transfer of Value:
Money has made easy the transfer of wealth from one place to another
place. A person can sell his immovable and movable property or things at
one place and transfer his wealth to another place in terms of money.
- What is the usefulness of studying commerce?
- Mention and explain any two economic activities which are non commercial.