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SECTION: A
CHAPTER: 1
What is commerce?
Commerce is concerned with the distribution and exchange of goods and services
and thus includes all those activities that in some way or another help movement of
goods from the producer to the consumer.
THE GROWTH OF COMMERCE:
The following are the factors that have contributed to the growth of commerce
BRANCHES OF COMMERCE
There are two braches of commerce namely; trade and aids to trade.
A. TRADE
Trade involves the buying and selling of goods and services. A trader is a person
who buys goods with the intention of re-selling them at a profit. There are two types
of trade i.e. home trade (between traders with in the same country) and
international trade (between traders of different countries).
Home trade is carried out at two levels: retail and whole sale.
Retail trade
This involves selling of goods and services direct to the final consumers in small
quantities.
Wholesale trade
It involves selling of goods by manufactures or middlemen in large quantities.
International trade involves export and import trade
Export trade
Selling of goods and services to another country
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Import trade
Purchasing of goods and services from another country
B. AIDS TO TRADE (AUXILIARY SERVICES)
This branch helps the main branch of commerce and facilitates trade with the
following activities:
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Transport
Communication
Banking
Insurance
Advertising
Warehousing
Commerce is therefore the study of trade and aids to trade and how best the two
can be organised so as to satisfy the needs of the consumer in the most efficient
manner.
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profit out of their activities. It thus applies to activities related to trade and aids to
trade.
For instance economics covers the activities a manufacturer but commerce does not
because his/her activities are not commercial though he/she is a business man.
DISTINCTION BETWEEN COMMERCE AND BUSINESS
It is always difficult to distinguish between the two. Business is a wide term that
refers to any activity carried out with the intention of making a profit while standing
the risk of loss. A person may be in business as a trader, manufacturer, farmer,
transporter e.t.c. however commerce relates to trade and aids to trade only. All
those engaged in commerce are business men but not all those engaged in
business are necessarily commercial people e.g. a manufacturer is a businessman
but is not engaged in commerce. A retailer is both in commerce and business.
WH WE STUDY COMMERCE?
1. It helps in acquiring basic commercial knowledge for the purpose of
employment after school as effective traders, insurance brokers, transporters,
and bankers e.t.c.
2. Helps to know how businesses in the world function
3. Helps to acquire commercial language used in making business
communications
4. It provides a good introduction to the study of other business subject e.g.
economics, law, accounting e.t.c.
5. Provides awareness and knowledge of the various facilities provided by
institutions like banks, insurance companies, post offices and courier
companies, advertising agencies and accordingly make use of such facilities.
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Land
Labour
Organisation
Capital
Enterprise
Land
Land means all those factors which have been provided free of cost by nature. They
include soil, sunshine, rainfall, rivers, lakes, forests, e.t.c. Land has the following
main features.
-
Human beings can increase the productivity of land by using greater units of
labour and capital. The price of land is rent or royalty.
Labour
It means any physical or mental effort of human beings meant for material benefit.
Mental labour involves a lot of brain-work and less of physical effort. Any human
effort which is not meant for a material benefit cannot be regarded as labour.
Labour must be rewarded.
Labour is an important factor of production without which land and capital cannot
produce anything. The price of labour is wages and salaries.
Labour may sub-divided as manual which is further subdivided as either skilled,
semi-skilled, or unskilled, and again subdivided as mental labour which is subdivided as managerial/professional and clerical.
Capital
Capital involves all those goods which are manmade and are helpful for further
production e.g. machinery, tools, roads, buildings e.t.c. It also includes money
which is used to purchase goods for further production and it is of fundamental
importance these days. It also determines the productivity of land and labour.
Organisation
Organisation means to combined the others factors of production. The person who
organises a business is known as the Organiser. He is rewarded with salaries. He is
responsible for organising other factors of production, monitors them, ensure they
are sold, and other factors are rewarded.
ATC I JUNE 2012 DIET
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Enterprise
An entrepreneur is a person who introduces the capital, and is responsible for profits
or losses. He is a risk bearer. He employs managers to organise their business. In
small business however, the two roles may be played one person.
Primary Production
It is also known as extractive industries. It is the first stage of production and it
includes the following activities: fishing, farming, hunting, forestry, mining, e.t.c.
The output of this stage is used as inputs to the second stage of production for
manufactured industrial goods.
Secondary Production
It is the second stage of production. The output of primary production is used as
input to this stage. E.g. cotton to produce cloth, timber from forestry, e.t.c. It
includes Manufacturing, Food processing and Construction which use material
obtained from primary production firms, construction includes roads, buildings
bridges, piers, e.t.c
Tertiary Production
It completes the final stage of production and includes all those processes which
increase the value or the utility of commodities. It is further subdivided into two:
Commercial services which relates to all services related to distribution of goods
and services from producers to consumers by wholesalers and retailers. They
include banks insurance companies, transport, and e.t.c.
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Tutorial question
Discuss the significance of the distinction between the different levels of production
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Question
Discuss the importance and roles played by commerce.
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