Grade 10 Commerce: An Intro to Commerce

AN INTRODUCTION TO COMMERCE GRADE 10 COMMERCE CHAPTER 1: BACKGROUND TO BUSINESS Objectives  By the end of this lesson, students will be able to:  Define Commerce, Production, Barter and Money  Explain the purpose of Commercial Activities. ...

AN INTRODUCTION TO COMMERCE GRADE 10 COMMERCE CHAPTER 1: BACKGROUND TO BUSINESS Objectives  By the end of this lesson, students will be able to:  Define Commerce, Production, Barter and Money  Explain the purpose of Commercial Activities.  Understand the Divisions of Commerce.  Distinguish what are Needs vs Wants.  Differentiate between Direct and Indirect Production.  Give details about the problems associated with Barter.  Describe the characteristics and functions of money.  What is Commerce?  Concerned with the change in ownership of goods OR  The system by which raw materials are distributed to industry and the finished products to consumers  Consumers and Industry CONSUMERS - people or organizations who have a need for goods/products and the money to pay for them INDUSTRY - refers to a group of independent businesses producing similar articles - groups of companies and organizations that make, sell or provide a particular type of good or service  Location & Purpose of Commerce  Situated between producers and consumers  Producers make the goods  Consumers buy the goods  The Purpose of Commercial Activities is  To facilitate the trading of goods, either between people and organizations within a country or on an international basis CO CONSUMER M M ER CE PRODUCER  Center of Commerce  TRADE is at the center of Commerce  I.E. the process of buying and selling to make a profit  Trade is divided into two groups  HOME TRADE  Trade within a country  FOREIGN/INTERNATIONAL TRADE  Trade with other countries  Trade cannot exist without AIDES TO TRADE  Aides/Services to Trade  The commercial activities which support trade. These include:  Banking  Finance  Warehousing  Insurance  Communications  Advertising  Postal Communications  Telecommunications  Transport Divisions of Commerce COMMERCE TRADE HOME FOREIGN BANKING AND FINANCE WHOLESALE IMPORT INSURANCE RETAIL EXPORT WAREHOUSING COMMUNICATIONS ADVERTISING TRANSPORT TELECOMMUNICATONS POSTAL COMMUNICATIONS PRODUCTION What is Production?  The process by which raw materials are transformed into finished goods to satisfy the requirements of consumers or other organizations OR  The process that takes place when resources, such as raw (natural, not yet processed) materials, human labour and energy are converted into goods or services that satisfy the needs and wants of consumers. Needs Vs. Wants Want Need s The s goods and The services good that we and do not service need to s that live, but we we still require want and them need to Eg. live Suitable Include clothing s is FOOD, needed CLOTH but ING designe r and clothing WATER is not necessa ry Direct Production  When man provides all his needs himself without the aid of others.  Subsistence economy – When people provide just sufficient to survive but not improve their way of life. Barter  The exchange of one type of good or service for another. Drawbacks of Barter D. E. D. S.  Double Coincidence of Wants  Exchange Rate  Divisibility of Goods  Storage of Wealth Money  Anything that is generally accepted in exchange for a good or service Qualities of Money  Durable  Hard wearing  Divisible  Easily divided into smaller units  Portable  Convenient to carry  Acceptable  People must agree to it’s use.  Easily recognizable  Limited in supply Functions of Money  Medium of Exchange  Makes exchange easier.  Measure of Value  Used to price the value of goods.  Store of Value  Can be saved.  A standard of Postponed Payment  Earned at one time and spent at another.  A Standard of Deferred Payment  Borrowed today and paid at a later date. Indirect Production/ Specialization  Work is divided among several people allowing them each to specialize in doing what they do best  Here, people satisfy their needs in co- operation with other people Results of Indirect Production  People’s basic need were more easily satisfied  Further improvement in their way of life  People could now obtain things they wanted which are not essential to life Advantages and Disadvantages of Specialization Advantages Disadvantages Workers become more expert Repeating a single tasks at their jobs. becomes boring. Jobs become simpler, easier, better and faster. Individual crafts and skills are lost by use of machinery/automation. Output per person increases. Use of machinery can lead to Machinery and automation can unemployment. be used. Slow workers may be unable You can easily change jobs. to keep pace with others. Unit costs are reduced if there is a high Smaller producers may be unable demand for the product. to compete with big producers. Divisions of Labor  BY PRODUCT  Where individuals concentrate on contributing to one commodity or service, using the money they earn to purchase the goods or services of others  BY PROCESS  Where each individual specialize in part of the production process  Making Choices  The process of exchange involves making choices because we have scarce resources i.e. money  People have unlimited wants but we have limited resources available  We have to form a scale of preference where we put what we want in order of priority.  The things we give up when we make choices is called Opportunity Cost.  Economic problem  How to use available resources in a community to the best benefit of the needs of society ECONOMIC SYSTEMS  How to solve the Economic Problem?  To solve the economic problem every society has to solve/ answer three basic problems/questions:  What should be produced?  How should production it be organized? (which method)  For whom should production take place? Types of Economic Systems  There are four types of economic systems that exist.  They are:  Subsistence Economy  Free Market Economy  Controlled/Planned/Command Economy  Mixed Economy Subsistence Economy  Where the way of life remain virtually unchanged for centuries  There is no specialization or trade within this economy  Only the basic necessities to live are produced  This was the feature of life or early man  i.e Direct Production.  Free Market Economy  Where prices are determined by the strength of people’s demand for goods and services and the quantities which suppliers are prepared to offer for sale  That is the market forces of demand and supply Advantages and Disadvantages of a Free Market Economy ADVANTAGES DISADVANTAGES oFree competition stimulates oIt encourages inequalities of innovation and keeps prices wealth. down. oIndividuals are completely oAdvertising can be used to free to use their income and create an artificially high labour to their best demand for products. advantage. oConsumers decide what will oThe more powerful be produced by influencing businesses may buy out the market forces. smaller ones thus reducing competition. oCompanies may be tempted to restrict supply to keep prices artificially high. Controlled/Planned/Command Economy  All the economic decisions are made by the government.  The state decided what to produce, how it is to be produced and how it should be allocated to consumers.  Demand is not influenced by the consumer.  China and Cuba are examples of controlled economy. Advantages and Disadvantages of a Controlled Economy ADVANTAGES DISADVANTAGES  The needs of the whole  Free enterprise and community are met. competition are discouraged   Too many non-productive State control eliminates wasteful competition. government officials are  required to administer the State provides goods system. and services that private enterprise  Centralized production may would by unwilling to not respond quickly enough provide. to changing conditions and  needs. Private monopoly cannot develop.  Creativeness and efficiency are not encouraged. Mixed Economy  A combination of elements from a free economy and a controlled economy.  There is a public sector controlled by the government which provides goods and services that the state feels it can manage most efficiently.  There is a private sector in which individuals risk capital in producing goods and services for profit.  Most Caribbean countries are mixed economies. Globalization  Can be seen as the intensification an spread of world-wide social, economic, cultural, and political relationships among countries.  Began with the development on international trade.  Can be seen as the linking of distant localities in such a way that local activities are shaped by events occurring thousands of miles away. Globalizaton Disadvanta Benefits ges Provides high quality Large firms that can goods and services produce high quality at a cheaper price. goods and services Economies of scale at a cheaper cost set Provide employment a challenge to small for people who may firms that are have otherwise been producing similar unemployed. goods and services.  TYPES OF TYPES OF PRODUCTION PRODUCTION  Types/ Chain of Production  There are three stages or types of production Prim Seco Terti ary ndar ary y Prod Prod Prod uctio uctio ucti n n on  Each stage relies on the stage before hence the name CHAIN OF PRODUCTION  Each stage of production form separate parts of the chain  Primary Production  Concerned with getting or growing raw materials  This includes the Extractive Industries:  Fishing, Farming and Mining  Secondary Production  Are concerned with the purchase of raw materials grown or extracted by primary industries.  Then, using manufacturing and assembly processes, they will convert raw materials into parts or finished goods  This includes Manufacturing and Constructive Industries (Construction) Secondary Production  Manufacturers  Make the whole finished product or make a part or parts, which will be put together and made into a completed article  Constructive Workers  Takes raw material and partly finished products and changes them to an end product for example buildings, roads, bridges etc.  Tertiary Production  Concerned with the service industry  Provides the services that support the distribution of raw materials, parts and finished goods between organizations and then on to the final consumer  Consists of there two broad groups of workers:  Those providing commercial services  Those providing direct/personal services Commercial Services Vs. Direct Services COMMERCIAL SERVICES DIRECT/PERSONAL (COMMERCE) SERVICES Involved in getting the Does involve any of the finished goods to the final industries but is concerned consumer. with providing essential services which are required by everyone. Includes those in the Includes the following following industries: occupations: - Communications - Actors - Finance - Civil servants - Insurance (Government Workers) - Wholesaling - Policemen - Retailing - Lawyers - Banking etc. - Doctors -Teachers etc.  Tree of Production Production Primary Secondary Tertiary Production Production Production Far Direct Fish Min Manufa Constr Comme min Service ing ing cturing uction rce g s NOTE: COMMERCE THEN BRANCHES OUT TO THE DIVISIONS OF COMMERCE CHART SEEN EARLIER  Added Value  The extra value given to products and services as a result of production or manufacturing processes, transport or storage.  Value is added at each stage of the production process.  Example:  Apples on trees have little value  Primary Stage: Once they have been picked and taken to have juice extracted value is added  Secondary Stage: Putting the juice into bottles also adds more value  Tertiary Stage: The activities needed to get the juice on the shelf for the consumer to purchase all adds value