THE SUBJECT MATTER OF COMMERCE.

TOPIC OBJECTIVES

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.

1. Commerce involves the exchange of goods and services.

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.

i) 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;

a) Banking

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.

b) Insurance

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.

d) Warehousing-

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.

1. Through commerce, the country is able to earn foreign exchange currency.
2. It enhances international relations between countries through trade.
3. It bridges the gap between the producers and the consumers. This enables goods and services to reach the final consumers.
4. Commerce provides an opportunity for employment. Many people are employed in the trade industry.
5. The standards of living of people are greatly improved through commercial activities. This is because people can get variety of goods and services which improves their life.
6. Through trade international relations between countries is improved.
7. Commerce assists us to know the right channel which trade can be carried out smoothly.
8. It helps to understand the modern methods and terms of being used.

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

Barter trade.

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;

1. It involved the exchange of goods with other goods
2. People moved from one place to another looking for customers for goods
3. There is no medium of exchange used in this form of trade
4. Most things traded are farm produce and animals.

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.

iv) Indivisibility-

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;

1. It is easily used as a medium of exchange
2. It can be used as a store of value
3. It is used as a means of deferred payments
4. It is easy to carry as compared to other loads of goods.

Market places.

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;

1. It used money as a medium of exchange
2. There was specialization and division of labor
3. Entrepreneurship and specific forms of trade started
4. Middle men such as whole sellers and retailers emerged in the chain of distribution.
5. Production was aimed at the whole nation
6. Economic activities for example agriculture, manufacturing and commerce were clearly marked.

Nature of world economy and world market.

This trade is dominated by few nations which were first to industrialize

• The production of goods and services is aimed at the whole world market
• It has created a lot of commercial relations between nations
• All factors of production are extended, expanded and mechanized.