THE SUBJECT MATTER OF COMMERCE.
The student should be able to:
1 . Explain the nature and the subject matter of commerce.
2 . Draw the commerce flow chart.
3. Explain the importance of commerce in everyday life.
4. Distinguish between commerce and economics.
5. Discuss the development of commerce in Tanzania
KEY TERMS AND CONCEPTS
Barter trade- This is a type of trade which deals with exchange of goods for goods.
Utility- This is the ability of goods to satisfy human wants
Goods – are tangible things which can be used in the satisfaction of human wants
Direct services- Are services rendered by individuals for the purpose of satisfying human wants
Direct service- involves direct contact between the service provider and the customer.
Trade- this is the buying and selling of goods and services with an aim of making profit.
Home trade- this is a type of trade which is carried out within the bounderies of a country.
Foreign trade- is a type of trade carried out between two countries or more.
Commodity- This refers to goods or products that are produced for resale.
Aids to trade- these are things which facilitate trade
Meaning of commerce
Commerce is a branch of economics which deals with the study of distribution and exchange of goods and services from the producer to final consumer.
Characteristics of commerce.
The aim of commerce is to make profit. Thus there is exchange of goods and services in order to make profit.
2. An economic activity.
Because commerce deals with those activities done with an aim of making profit, then it means it is an economic activity. A non economic activity is not part of commerce because it is not aimed at making profit.
3. Profit motive.
The aim of undertaking trading activities is to earn profit. Profit is an incetive or reward for undertaking commercial activities. Any activity which does not have the incentive of profit will not be part of commerce.
4. Creation of Utility
Utility is the ability of goods and services to satisfy human wants. Commerce creates place and time utility. Transportation facilities help in creating place utility in goods. Storage facilities create the utility in goods.
Elements of Commerce.
The elements of commerce are of two types,
Trade and Aids to trade.
Trade is the buying and selling of goods and services. It is further divided into home trade and foreign trade.
a) Home trade or local trade.
This a type of trade which involves buying and selling of goods and services within a country. It is sub-divided into two branches.
i) Retail trade- This refers to selling of goods in small quantities to final consumers. It is carried by small scale retailers who buys goods in large quantities from wholesalers and manufacturers.
ii) Whole sale trade- This refers to the selling of goods in large quantities to retailers. Wholesalers usually buy goods in large quantities from producers and manufacturers and sell them to retailers.
b) International trade- This is also called foreign trade. It involves buying and selling of goods and services between two countries. It is divided into two categories;
i) Import trade- This is the purchases of goods and services from another country
ii) Export trade- This is the selling of goods and services to another country
Aids to trade
These are activities that facilitate trade and are also called facilitators of trade. They enable trade to take place smoothly. Examples of Aids to trade includes;
Banks provide financial services. They help in safe keeping of money, cheques, and other valuable substances. They avail money when needed to help in buying and selling of goods and services. In international trade, payment is made using cheques, bankers draft, bills of exchange, or documentary credit.
Banks also give advice to traders on various trading matters. They also provide financial assistance in terms of loans.
In case of loss, insurance companies are able to compensate traders so that they can continue trading smoothly. Such losses can arise from theft, fire, accidents etc.
c) Transport and Communications
Transport- This is the movement of goods, services and people from one place to another. Through transportation, goods can be made available when needed and at the right time. Transport can be road, railway or sea.
Communication- this is the passing of information from one person called the sender to another person called the receiver through a media such as radio, or phone, or word of mouth. Through communication, important information can flow from one trader to another thus ensuring that trade takes place smoothly.
This is the storage of goods in safe place or building, as the goods awaits clearance or purchase by customers. It enables production to take place in anticipation of demand by ensuring that the already produced goods are stored safely in a warehouse. It also ensures constant flow of goods services and raw materials in the market. For example in international trade, warehousing acts as a store for goods waiting shipment, customs clearance and sales.
e) Advertisement- This involves the creation of awareness of goods and services. This enables consumers to reach them. The intention of advertisement is to increase the volume of sales. Advertisement can take place through, radio, social media, email, You tube, posters and Bill Boards.
Commerce flow chart.
Importance of commerce in our daily life;
Commerce is very important for the following reasons.
Commerce and Economics
Economics is the practical science of the production of wealth. It is the study of how man can use scarce resources to satisfy his needs and wants.
Commerce is the practical economics or business economics
Both commerce and economics deals with the same subject matter
The main concern of commerce is to show how business will work
The purpose of economics is to to show how and why it works and seeks out ways of improving its efficiency.
The Development of Commerce in Tanzania.
Trade and aids to trade in Tanzania has taken several stages before it become fully operational. Two phases of commerce developments can be identified, these are;
a) Non- Existent Commerce
This is a stage where no official commerce existed.
This stage is characterized by the following features;
i) Earlier stage of economics life
ii) Direct production where there is no surplus
iii) No division of labour and specialization
iv) Traditional system of communication
v) No commercial activities; no exchange nor distribution of goods
This is a form of trade which involved the exchange of goods for goods. It is one of the earliest forms of trade. The features of barter trade included the following;
Short-Coming of barter trade.
i) Lack of double coincidence of wants.
It became hard for one to find a customer who needs what he/she is offering and also has what one wants. For exchange a farmer who has maize, and wants to exchange with goats will have to look for a person who has goats and wants maize. This might not be easy.
ii) Lack of measure of value
It is difficult to know what quantity of one commodity will be exchanged for another commodity. Thus it was difficult to exchange in fairness.
iii) Lack of store of value
Under barter system, it was not possible to store the value of perishable goods, like milk, vegetables, fruits, and fish for a longer period of time.
This means that it was difficult to divide some commodities to meet the value of another commodity being exchanged. For example, if one wants one kilogram of maize and has one goat, it is difficult to divide the goat so as to have a piece with the same value as the kilogram of maize.
v) Lack of standard measure of deferred payments
Under barter system, the borrowing and lending was made in terms of goods. It was difficult to decide whether the same value was returned later or not.
Money As a medium of Exchange.
The use of money as a medium of exchange arose from the challenges of barter trade. By definition, money is anything that is easily accepted as a means of exchange in trade.
The following are characteristics of money;
With time people started meeting in various market places to carry out trade. Farmers could come over with their agricultural produce to sell to customers. Customers could also come over to purchase what they wanted.
Through this commercial interactions, some of these markets grew to become major towns.
National economy and growth of commerce.
The national economy and stage has many features; these included the following;
Nature of world economy and world market.
This trade is dominated by few nations which were first to industrialize
COMMERCE FORM ONE: TOPICAL EXAM.
MULTIPLE CHOICE QUESTIONS.
1. Choose the most correct answer.
(i) Which of the following is not a nature of commerce?
(ii) Which of the following is an indirect service?
(iii) Which is not a characteristic of good.
(iv) Service have simultaneity property, this means?
(v) Ability of economic resource to satisfy human need is called?
(vi) A foregone satisfaction as a result of making a choice is called?.
(vii) Occur when product is manufactured to a final and usable product.
(viii) The two features of commodities includes,
(ix) Activities that facilitate trade are called?
(x) Which of the following is not a drawback of barter trade?
2. Match the items from list A with those in list B.
(i) Tangible products.
(ii) Direct contact between service provider and customer.
(iii) Each service is unique.
(iv) Using goods or services by the final consumer.
(v) Resources provided freely by nature.
(vi) Foregoing satisfaction as a result of making choice between two equally competing goods or services.
(vii) Ability of good or service to satisfy human wants
(viii) Product is manufactured to a final and usable product.
(ix) Buying of goods and services within a country.
(x) Elements of commerce.
3. (a) Differentiate between a good and a service.
(b) Describe six characteristics of a service.
4. (a) Explain the meaning of the following.
(iv) Scale of preference
(b) Mention five characteristics of economic resources.
5. Write short notes on the following terms.
c) Opportunity cost
d) Form utility
e) Time utility
6. (a) Describe the Aids to trade.
(b) Outline importance of Commerce in our daily life.