Importance of Commerce Overview

Importance of Commerce

• Commerce helps improve the standard of living by providing consumers with access to goods and services at the right time, place, and price.
• Commerce links producers and consumers through retailers, wholesalers, and other aids to trade.
• Consumers are informed about goods through advertising and salesmanship, while manufacturers are informed about consumer preferences through market research.
• Commerce generates employment opportunities in various sectors like banking, transportation, warehousing, and advertising.
• Commerce increases national income and wealth by boosting production and ultimately leading to higher national income.
• Commerce increases national income and wealth through exports and duties levied on imports.
• Commerce helps in expanding aids to trade by increasing the need for modernization in banking, communication, advertising, transportation, and insurance.
• Commerce facilitates industrial growth by ensuring the smooth distribution of goods and services, and by providing industries with raw materials and other necessary services.
• Commerce encourages international trade by allowing countries to exchange surplus commodities and earn foreign exchange.
• Commerce benefits underdeveloped nations by allowing them to import skilled labor and technical know-how from developed nations while exporting raw materials.
• Commerce plays a crucial role during emergencies by distributing essential goods and services to affected areas.

Characteristics of Commerce

• Commerce acts as a link between producers and consumers of goods.
• It involves the exchange of goods and services for appropriate consideration.
• Commerce facilitates the free flow of goods and services by removing barriers related to person, place, time, risk, knowledge, finance, etc.
• Profit serves as an incentive for engaging in commercial activity.
• Commerce creates utility by making goods and services available to consumers.

Classification of Commerce

• Commerce is divided into two main categories: Trade and Auxiliaries to Trade.

Trade

• Trade involves the sale, transfer, or exchange of goods and services for mutual benefit.
• Individuals engaged in trade are known as traders and act as intermediaries between producers and consumers.
• Trade is further classified into Internal Trade and External Trade.

Internal Trade

• Internal Trade involves buying and selling goods and services within the geographical boundaries of a country.
• It is characterized by transactions using the country's legal currency, domestic banking systems, and national transportation networks.
• Internal trade is further divided into Wholesale and Retail.

Wholesale

• In wholesale trade, goods are bought in large quantities from producers and sold to retailers.

Retail

• In retail trade, retailers purchase goods from wholesalers and resell them to consumers in smaller quantities for profit.

External Trade

• External Trade involves the purchase and sale of goods and services across international borders.
• It is characterized by transactions involving multiple currencies, international banking, and global transportation systems.
• External trade can be categorized into Import, Export, and Entrepot.

Import

• Import refers to the purchase of goods from a foreign country.

Export

• Export refers to the sale of goods to a foreign country.

Entrepot

• Entrepot trade refers to the re-export of imported goods to another country.
• This type of trade involves acting as a middleman, rather than consuming the imported goods domestically.

Auxiliaries to Trade

• Auxiliaries to trade encompass activities that support and facilitate the smooth flow of commercial activities.
• They address various hindrances in trade, such as location, time, finance, information, and risk.
• Important auxiliaries to trade include Transportation, Warehousing, Banking, Advertising, and Insurance.

Transportation

• Transportation involves the movement of goods from their point of origin to their destination, overcoming the hindrance of location.

Warehousing

• Warehousing provides safe storage for goods, addressing the hindrance of time.
• It allows for the storage of seasonal goods and ensures their availability throughout the year.

Banking

• Banking provides financial assistance to businesses, overcoming the hindrance of finance.
• Banks provide funds to businesses during the time gap between production and consumption, enabling continued operations.

Advertising

• Advertising informs consumers about available goods and services, overcoming the hindrance of information or knowledge.
• It helps raise awareness of products and their benefits, making them more desirable to consumers.

Insurance

• Insurance protects against various risks associated with the transportation of goods and services, such as damage or loss.
• It provides financial coverage against unforeseen events, reducing the impact of potential losses.

This quiz covers the vital role of commerce in society, emphasizing its impact on living standards, employment, and national income. It explores how commerce links producers and consumers, enhances trade practices, and supports industrial growth. Test your understanding of how commerce influences economic factors and consumer access.