COMMERCE AS AN ECONOMIC ACTIVITY

COMMERCE AS AN ECONOMIC ACTIVITY

-Crude exchange is the earliest form of exchange which involved the exchange of goods for goods. This exchange is also known as barter system.

-It was not until peaceful contact between different groups of people became possible that the first commercial transaction took place.

-AS societies improved their means of production and with existence of simple exchange; it was possible to produce SURPLUS. This surplus could therefore be exchanged for other goods not produced by the society e.g. cattle for wheat

-Such an exchange at this stage was further propelled by the DIFFERENCES in geographical conditions, human skills etc which automatically necessitated people to specialize hence exchange of goods in different areas. The system of barter had shortcomings or limitations.

2) HUMAN SATISFACTION IN MODERN SOCIETIES

-These days commerce play the fundamental role in the satisfaction of human needs and wants due to existence of advanced specialization and exchange i.e. developed specialization and exchange.

-Today, few people produce all the commodities they require entirely by their own efforts. The majority of us engage in communities where INDIRECT PRODUCTION is the normal pattern of commercial and business activity.

-Indirect production means specialization in one particular occupation and the EXCHANGE (Through the medium of money) of those goods and services produced.

-Indirect production may also involve the production of goods for export or the provision of services (e.g. transport, insurance) for foreign countries and importing for exchange

-We are currently engaged in indirect production by specializing in occupations receiving income rather than goods but using the incomes so received to buy goods produced by other members.

-Through advanced specialization, exchange processes have been improved resulting to potential growth of commercial services like transport, communication, warehousing, banking etc which to high extent enable effective exchange and distribution of goods and services in the modern communities.

-COMMERCIAL SERVICES in the modern production sector are an essential part since there is little point in the making of goods if they cannot be exchanged and as a result reaches the FINAL CONSUMERS. Production process is said to be complete if goods and services reaches final consumers for CONSUMPTION.

THE NEED OF COMMERCE

Therefore, the need of commerce arise due to the following factors;

-The diversity of natural resources

Commerce helps nations and regions to overcome difficulties caused by geographical differences by exchanging their surplus products. Nations and regions sell what they are physically capable of producing and buy from others what they either do not have at all or have only insufficient quantities.

-The difference in human skills and productivity

In some nations and regions, there are people with lower skills hence low productivity, in this case they have to acquire advanced products from nations and regions where people have high skills and productivity in exchange of their’s which almost are not processed i.e. raw materials.

-The difference in human tastes

Also different individuals and countries possess different skills and taste; they cannot produce all that they need by themselves. The increasing population growth encourages great demand for varied goods and services to meet increasing different human tastes and desires, hence a need to exchange of goods and services among individuals and countries arise to earn the highest degree of satisfaction.

The division of labour

Different groups of people in regions and countries, engage in the production of different goods and services, due to them to engage in division of labour, commerce makes all these available to all who need them through exchange

COMMERCE AS AN ECONOMIC ACTIVITY

The process of living involves three principal ECONOMIC ACTIVITIES which are;

1) PRODUCTION OF GOODS AND SERVICES.

2) EXCHANGE AND DISTRIBUTION FO GOPODS AND SERVICES.

3) CONSUMPTION OF GOODS AND SERVICES.

These economic activities take place in THE FRAMEWORK OF AN ECONOMIC SYSTEM i.e. the planned economy and mixed economy.

ECONOMIC ACTIVITY has its origin in the wants of a community; its main purpose is the satisfaction of those NEEDS AND WANTS.

1) PRODUCTION AND CONSUMPTION

-Basically, The FIRST economic activity is PRODUCTION, for unless such commodities as food, clothes, houses and other goods are produced there can be NO CONSUMPTION, which is the SECOND basic activity. Therefore the basic economic activities are PRODUCTION AND CONSUMPTION.

-Production and consumption are highly practiced in a very primitive society where individuals produce only that he himself requires i.e. one is producing and consuming the products by himself.

-Such kind of production i.e. direct production resulted to low standard of living as no one could himself all the needs by himself.

-At last, people realized the benefits to be gained from specialization by individuals in the type of work they are best suited. The SURPLUS of any one person could then be exchanged or sold for some of the other things the individual requires as a result of specialization.

-In this case EXCHANGE AND DISTIBUTION became the third principal economic activity.

2) EXCHANGE AND DISTRIBUTION

– COMMERCE consists of the INTERMEDIARY ACTIVITIES OF EXCHANGE AND DISTRIBUTION which take place after the INITIAL PRODUCTION of goods and services and before their CONSUMPTION.

-COMMERCE is concerned, in general terms, with the organization of the WORLD’S PRODUCTIVE RESOURCES, but not with the technical problem of production, which are more the concern of engineers, technicians and agriculturalists

-COMMERCE is also concerned fundamentally with the DISTRIBUTION of goods of all types to those who need them most, and with the nature and function of all the various people and firms involved.

-COMMERCE includes not only people engage in TRADE AND DISTRIBUTION directly, but also those who provide ANCILLARY SERVICES such as banking, insurance, transport, communication, advertising and warehousing. Such then is the general field of study with which commerce is concerned.