An Introduction to Commerce

AN INTRODUCTION TO COMMERCE

Commerce refers to all those activities which are necessary for bringing goods from the place of production to the place of their consumption. According to Evelyn Thomas, “Com­mercial occupations deal with the buying and selling of goods, the exchange of commodi­ties and the distribution of finished products”.

Commerce includes not only trade but also services such as transport, warehousing, packaging, insurance, banking and sales promo­tion which are incidental or auxiliaries to trade. The main characteristics of commerce are as follows:

 (i) Economic activity:

Commerce is an economic activity because it consists of activities which are undertaken for earning profits. A trader buys goods with the aim of selling them at a profit

(ii) Exchange of goods and services:

Commerce involves exchange and distribution of goods and services. Goods may be purchased or produced for sale. Commerce com­prises both trade and aids to trade.

 (iii) Profit motive:

The motive of commercial activities is to earn profits. Any activity which does not have the aim of profit will not be a part of commerce. For example, if a trader offers some goods as a gift to his friend it is not commerce.

(iv) Regularity of transactions:

An isolated transaction does not imply commerce. For example, if a person sells his typewriter it is not commerce.

 (v) Creation of utilities:

Commerce creates several types of utilities. It creates place utility by carrying goods to the place where they are needed. It makes goods available as and when demanded thereby creating time utility. By creating these utilities commerce helps to increase the volume of trade.

(vi) Part of business:

Commerce is a part of business. It is also a branch of economics. Economics is the study of human beings as consumers and producers.

HOW INDUSTRY, COMMERCE AND TRADE ARE INTERRELATED TO EACH OTHER?

Industry, commerce and trade are closely related to one another due to the following rea­sons.

(i) Industry provides goods and services for distribution by commerce. No commercial ac­tivity is possible in the absence of production by industry. Thus, industry provides the base for commerce and services as the backbone of commerce.

(ii) Industrial production is meaningless without the distribution of goods and services by commerce. Commerce provides support to industry by maintaining a smooth flow of goods from producers to consumers. Industry cannot function without commerce and trade. Commerce serves as the life line of industry.

 (iii)Trade provides the necessary support to industry by serving as a link between producers and consumers. Trade provides the base for auxiliary activities such as transportation, warehousing, banking, insurance.

Economic Basis of Commerce

        Economics is the basis of all commercial activities. Economics is concerned with the satis­faction of human wants. In order to satisfy human wants goods and services are produced. Ex­change or transfer of goods and services becomes necessary once goods are produced. According to Evelyn Thomas, “Economics is the study of man’s behavior in earning his living. To earn this living, men enter into a wide variety of occupations concerned with the production of goods and services that are needed by community in which they live.” In economics all economic activities are studied. Human beings make efforts to earn their livelihood through production and distribution of goods and services.

    Economics is concerned with the creation and distribution of wealth which comprises goods and services, commerce involves exchange of these goods and services. All the factors and forces which add value to the existing goods help in producing wealth.

    Commerce creates wealth by making goods and services more useful to society. Therefore, economics provides a theoretical background for analyzing commercial and industrial activities. Commercial intercourse takes place due to the following reasons’

1. Differences in human wants:

        Human wants are unlimited, whereas resources available to satisfy them are limited. Every customer likes to make the best use of his resources so as to satisfy his wants as far as possible. Commerce makes goods and services available at reasonable prices. Things produced anywhere in the world are brought to the place where they are needed by consumers.

2. Division of labor:

    Everyone specializes in activities in which he is most efficient. Every country also produces only those products in which its costs are the lowest. In other words no individual or country is best fitted for the production of all the commodities it requires. This is called the Theory of Comparative Advantage or Costs. It is the basis of trade.

        According to this theory every individual or region or country should concentrate in pro­ducing those things which it can produce most efficiently. It should exchange its surplus output with the things it needs but does not produce. Thus, division of labour gives rise to trade and aids to trade.

3. Uneven geographical distribution of resources:

        Natural resources are unevenly distrib­uted in different regions and countries. A particular region or country cannot produce all its requirements due to non-availability of certain resources.

        For example, petrol is needed in all countries but every country does not have oil fields. Therefore, a region or country obtains those commodities, which it cannot produce itself, from other regions or countries. The foregoing description clearly proves that the commercial activities of mankind have originated from economics.

Conclusion

            The immediate end of trade is, of course, a purely selfish end that of making money. But if this were the sole purpose of trade, it would put the merchant on the same level with reckless gamblers. The commerce has always been a great civilizing force. “We exchange ideas when we exchange fabrics”. We make friends when we persuade buyers and sell our goods. We open up the gates of international association and that means as we carry on with trade and business a call for peace and goodwill.💞💞💞

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