Home COMMERCE COMMERCE FORM 1 TOPIC 1: THE SCOPE OF COMMERCE | COMMERCE FORM 1

TOPIC 1: THE SCOPE OF COMMERCE | COMMERCE FORM 1

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The Nature and the Subject Matter of Commerce
Explain the nature and the subject matter of commerce
THE MEANING OF COMMERCE
The scope of commerce means areas of study covered in commerce. It comprises the study of all activities in the transfer (distribution) of goods and services from the producers to consumers. Example of those activities include trade, transportation, banking, insurance etc
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.
COMMERCE
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
Commerce is divided into two branches, which are:
  1. Trade
  2. Aids to trade
Commerce Flow Chart
Draw the commerce flow chart
COMMERCE FLOW CHART.
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1).TRADE:
Refers
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
This
is the buying and selling of goods and services within in a country.
Home trade is divided into two main branches;- Retail trade and
Wholesale trade
Retail
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.
Wholesale
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)
International
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.
International trade is divided into two types:
  • export trade
  • import trade
Export trade is the process of selling goods and services to other countries. For example, selling of Tanzania gold to China.
Import
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
Aids
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
television.

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.

f)
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

IMPORTANCE OF STUDYING COMMERCE IN EVERYDAY LIFE.
  • It
    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.
  • Commerce
    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.
  • The
    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.
Difference between Commerce and Economics
Distinguish between commerce and economics
The
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
the consumers.
Commerce
is therefore a branch of economics that deals with the exchange of
goods and services, and the activities that facilitate it.
This
means that all the subject matter of commerce are studied in economics,
but not all the subject matters of economics are studied in Commerce.
Development of Commerce in Tanzania
Discuss the development of commerce in Tanzania
THE DEVELOPMENT OF COMMERCE IN TANZANIA.
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
demerits:
  • 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
    anywhere.
MERITS OF BARTER SYSTEM
  • The
    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
    value.
  • 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
    of money.
BARTER SYSTEM IN MODERN TIMES.
Due to invention of money, barter system is not so much practiced, however it is still applied in some situation as:
  • 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.
HOW MONEY SOLVE HAS SOLVED THE PROBLEMS OF BARTER SYSTEM
Double Coincidence of Wants:
Money
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.
A
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.
Exercise 1
Quiz.
  1. What is the usefulness of studying commerce?
  2. Mention and explain any two economic activities which are non commercial.
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