PRINCIPAL ECONOMIC ACTIVITTIES DEFINED
PRODUCTION is the making of goods and services.
EXCHANGE is the sale and purchase of goods and services
DISTRIBUTION is the channeling of goods and services from their point of production to the final consumers usually through wholesalers and retailers OR Is the bringing of goods and services to the notice of consumers using a number of activities such as transport, communication, advertising etc
CONSUMPTION is the usage of goods and services by potential consumers.
HISTORICAL DEVELOPMENT OF COMMERCE
Recent development in commercial sector in the world
The formation and growth of commerce has been reflecting technological, political, social and economic development of human being as an individual and society at large in the struggle to have the maximum satisfaction of needs and wants. So far, we are now experiencing the magnitude progress in commercial sectors in national and international arenas due to its positive growth, which has been attained in many past years up to now, when the commercial word is like a very small village. It is currently a small village since it is highly connected commercially through international trade facilitated by commercial services available through out the word, leading to expanding distribution of goods and services globally, which also encourages international investments.
Growth of commerce
Growth of commerce is the development of commerce from low stage to advanced stage.
Growth of commerce has undergone the following phases:
1) Primitive phase
2) Advanced phase
Primitive phase
Trade is basically buying and selling of goods. Since man’s evolution millions years ago TRADE has been one of the commonest activities. Trade originally began as a way of satisfying certain essential needs especially food, shelter and clothes. Not all members of a community could produce all the needs they required. Climatic and environmental differences, for example mean that various localities are not similarly endowed. Hence in fertile areas crops are cultivated while in marginal areas livestock is reared. Therefore farmers and pastoralists exchange their produce for what they could not produce.
During this era goods were bartered or exchanged for other goods. For instance, a goat was bartered for a basket of grain or a number of hoes. Among ancient Egyptians, for example, a shoemaker offered a baker a pair of sandals in exchange of bread. The ancient Ghanaians similarly exchanged salt for the gold of wangara, their southerly neighbors. The king Solomon built the temple at Jerusalem around 950 B.C with timber from king Hiram of Tyre; in return the latter was supplied with wheat and oil. These and many other examples show how far barter system was common in those days.
In this phase;
-The people engaged in the CRUDE FORM OF COMMERCE in which exchange of goods for goods was done to satisfy themselves with goods of various nature.
-Such exchange was exercised due to the fact that the human needs and wants increased in size and in number and people couldn’t satisfy with all such demands by himself or themselves using their labour due to limitations they faced technologically and geographically, hence a need to exchange with other’s goods they failed to produce in exchange for those they could produce rose automatically. For instance, resources available in different areas are of diversified in nature. In some areas some products could be produced but not in other areas, therefore this necessitated the exchange of product between different localities
-Specialization among societies started to work vigorously to perform the economic tasks which they are best suited producing the products to be exchanged with the products they couldn’t produce with high degree from other societies. As s result of specialization, it was possible to produce surplus. This surplus could therefore exchange for other goods not produced by the society.
-Barter system had many shortcomings or limitations. It was because of these drawbacks that MONEY as invented. At first, money took various forms including cowrie shells and beds. Later some rare, portable, durable and valuable metals came to be accepted as convenient forms of money.
-EXCHANGE is aimed at enabling one to acquire goods for consumption.
-Low quality goods are produced due to low level of technology.
-There is non existence of commercial services,
-There is low level of production due to low level of technology.
Barter system
Barter system is the exchange of goods for goods.
Barter system, is earliest form of exchange. It had such drawbacks;
-Before a transaction can take place it is necessary not merely to find someone who can offer what the other person requires, but some who is at the same time willing to accept what is offered in exchange.
-The exchange of large for small commodities is difficult, since the person with the large commodity may not want a large amount of the smaller commodity.
-Even when these two difficulties have been overcome it remains to be decided how much of one thing is to be given in exchange for a quantity of the other.
-It is inconvenient to carry a heavy load seeking for some one in need of what someone had.
-lack of storage of value i.e. perishables can’t stay for long time to use for future transactions.
It was to overcome the drawbacks of barter that money came to be used as a medium of exchange and at beginning many different commodities have served this purpose-cattle, tea, tobacco, etc.
The use of money made possible even greater specialization of production, and as a consequence both a greater variety of goods and increasing quantities of them became available for exchange.
Advanced phase
Up to about 1870, Britain was the leading industrialized and trading nation in the world. Such industrial revolution was at apex in many European states with scientific inventions, resulted to big changes in the production techniques of Using machines and high level of specialization in many productive fields to such extent that these changes were popular and scattered all over the world. Different individuals and localities in many nations of Europe, Asia, and Africa etc specialized in the production of different commodities as, result extensive international commercial relations intensified and commodities were supplied to consumers accordingly around the world due to improved transport and communications.
Iron making was of great importance over many parts of the world. It held to increased food production, population growth and the rise of new civilizations in Asia and Europe as well. This in turn contributed to the growth of science and technology particularly in the Middle East during the early years of Islam.
Spain and Portugal were also strongest nations having commercial contacts with parts of America, Africa and India. They built better shops which sailed through diversified seas.
In general, from around the mid-nineteenth century the industrial revolution entered a second stage. It was marked by scientific influences and mass production techniques
In this phase;
-The people engage in the ADVANCED FORM OF COMMERCE in which the general mechanism of exchange, technology and specialization is so advanced.
-There is extensive commercial relations locally and internationally due to improved commercial services like transport and communication, banking, advertising etc.
-There is developed specialization nationally and internationally in terms of technology, capital utilization and geographical locations hence production of high quality products.
-EXCHANGE is done through the use of MONEY as a medium of exchange.
-EXC HANGE is aimed not only for consumption but also for PROFIT motive.
-There is high level of diversified commercial transactions including application of credit transactions.
-There is high degree of marketing techniques and organization e.g. wholesale or retail trade.
-There is high level of production for goods and services due to the profit motive.