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The Scope Of Commerce
Commerce Form 1

The Scope Of Commerce

Commerce Form 1
   Study Notes

 
   Syllabus

 
  Teachers Notes

 
   D

iscuss
The Scope of Commerce
The Nature and the Subject Matter of Commerce
Explain the nature and the subject matter of commerce
THE MEANING OF COMMERCE.
The scope of commerce implies the coverage of commerce, modern commerce has
become so wide. It comprises of the study of all activities in the transfer
(distribution) of goods and services from the producers to consumers. Activities
like transportation, communication, insurance, banking and advertisement have
played a huge role in development of commerce. Trade within the boundaries and
across the nation's boundaries makes commerce to acquire international status.
Example, a farmer as a producer needs to find people to buy his/her produce.
Those buyers are called consumers. For those products to reach the final
buyer( consumer), means of transport like roads, railways and airways need to be
better.
Example of those activities include trade, transportation, banking, insurance and
advertising.
The study of commerce can help you to get the knowledge on three basic areas. In
its broad sense commerce covers the following areas:-
 The study of trade, which is the main activities in the distribution of
goods and services
 The study of auxiliary services(aids to trade) that make trade
possible
 The study of how trade and aids to trade could be organized so as to
satisfy the needs of a consumer in the most efficient way.
COMMERCE is a branch of production which deals with the exchange of goods and
services and all activities that facilitate the transfer of such goods and services
from producer to final consumers. Exchange is an act of buying and selling. It is a
major part of commerce.
DIVISION OF COMMERCE
Commerce is divided into two branches, which are:
1. Trade
2. Aids to trade
 Test Yourself
Commerce Flow Chart
Draw the commerce flow chart
Example 1
A commerce flow chart is used to show exactly what is covered in its scope. The
study of commerce involves trade and aids to trade. That means, or a product to
reach to the final buyer, a trader has to arrange on advertisement, transport and
sometimes insurance. We can see in our chart that, trade can be done inside a
country(home trade) or among countries(foreign trade).

1).TRADE:
Refers to the process of buying and selling of goods and services, with the
intention of generating profit. A person who engages in trading activities is known
as a trader. The video below shows how students from one school were trying to
figure out on why nations trade. They further explore on how countries specialize
to produce the goods.
Trade is sub divided into two main branches, which are: a) Home trade and b)
Foreign trade.
 A. HOME TRADE
This is the buying and selling of goods and services within a country. Home trade is
divided into two main branches;- Retail trade and Wholesale trade. The video
below shows some of goods which were shown in International Trade Exhibition
that took place in Diamond Jubilee. It is very important for a country to trade its
own produce. This helps to reduce number of people who are jobless and to satisfy
people's wants.
Retail trade: This is the buying of goods from producer or wholesalers and selling
them to the final consumers. Retailer is a person who buys in small quantities from
the wholesaler or producer and then sells it to the final consumer. Example in
Tanzania, particular in Dar-es-Salaam, you can find more wholesalers in Kariakoo
market. The retailers buys from Kariakoo and sell the goods in the streets.
Wholesale trade: This is the buying of goods in large quantity from manufacturer
or producers and selling them to other business men in smaller quantity at lower
price. Wholesaler is a trader who buys in bulky (large quantities) from the
producers and sells it in small quantities to the retailers or straight to the
consumers.
I have summarized for you the differences between a wholesaler and a retailer
below.
1. Wholesalers are connecting links between the manufacturers and
the retailers while retailers are connecting links between the wholesalers
and the customers.
2. Wholesaler purchase goods in large quantities from the
manufacturers while retailers purchase goods in small quantities from the
wholesalers.
3. Wholesalers deal in limited number of products, retailers deal in
variety of products for meeting the varied needs of consumers.
4. Wholesalers need more capital to start their business but being a
retailer is simple, they can start business with limited(small) capital.
5. In wholesaling process, the display of goods and decoration of
premises is not necessary for them as for retailers they lay more
emphasis on window display and proper decoration of business premises
in order to attract the customers.

B.INTERNATIONAL TRADE (FOREIGN TRADE)

International trade-is a trade between one nation and other nations. It is the
exchange of goods and services across the national borders. For example,
exchanging the goods and services between Tanzania and China. In Tanzania, as a
country we sell minerals and farm produce such as coffee abroad. In Tanzania, we
do not produce cars, machinery and other equipment which require high
technology, then we have to buy them from other countries. this is what is called
an international trade. A trade between one nation and the other nation.With the
improvement of transport and communication, countries are able to trade very
 efficiently. This is of very crucial value to countries economies because every
nation benefit from it.

International trade is divided into two types:

 Export trade
 Import trade
 Export trade is the process of selling goods and services to other countries. For
example, selling of gold from Tanzania to China.
Import trade: is the process of buying goods and services from other countries. For
example, buying of mobile phones from china and selling them locally in Tanzania.

2. AIDS TO TRADE
Aids to trade are all the activities which facilitate trade. Aids to trade make trade
less difficult to carry out. Examples of aids to trade include the following:
 a) Communication: is the transmission of information from one point
or person to another point or person. People can exchange information
among each other either orally or using telephone,internet,radio and
television.
 b) Transportation: This refers to the movement of physical goods
and people from one place to another. Moving of goods from one place to
another can be through land using motor vehicles, over water using
marines or air using planes.
 c) Warehousing: Refers to the storing of goods so that they are
made available when and where they are required. Goods which can be
stored include crops, and perishable foods like fish, meat and fruits.
 d) Insurance: a system of pooling risk together by contributing small
sums of money to a common pool which in the long run, compensate the
people or a person who suffers from actual loss. Examples of risks or
losses are theft, robbery, fire, floods and accidents.
 e) Banking: Helps to finance trade. It also provides a safe place to
keep money, and provides means of payments and lending money in a
form of loan to businesses.
 f) Advertising: Is a process of letting consumers know about what
goods and services are available in the market. Advertising of goods and
services to public can be done through newspapers, magazines, radio,
televisions, banners and cinema.
WE ARE AIDS TO TRADE!YES WE MAKE IT HAPPEN VERY SMOOTHLY.
 Test Yourself
Importance of Commerce in Everyday Life
Explain the importance of commerce in everyday life
COMMERCE......IS IT OF ANY HELP?. YES, IT IS VERY
IMPORTANT.
 IMPORTANCE OF STUDYING COMMERCE IN EVERYDAY LIFE.
 It helps in the development of a country’s economy. Trade and aids
to trade enable the goods produced to reach the final consumers, and
therefore increase the production and the national income.
 The study of commerce is crucial to producers. They are able to
study the behavior of their buyers in the market which is very important in
their choice of what to produce. Example, It is rarely to find a jacket sold
in store during summer time. This is how producers reacts, If a good is
available, they produce less and less but if the good is not available, they
produce more and more of it.
 The knowledge of commerce enables learners to understand other
fields of knowledge like economics. The knowledge of commerce also,
enables economists to get better understanding about the fields of studies
in economics, such as international economics.
 It enables businessmen and women to conduct trade. The
knowledge of commerce enables businessmen and women to conduct
trade by simply knowing the means of exchange and sources of supply.
 It is necessary for satisfying human wants through trade and aids to
trade. Trade and aids to trade involve changing the situation of a
commodity from where it is produced to the place where it is needed for
consumption. In this process, commerce creates utility.
 Test Yourself
Difference between Commerce and Economics
Distinguish between commerce and economics
The main distinction between economics and commerce is that, the subject matter
of economics is wider than the subject matter of commerce. Economics deals with
all the activities involving production, distribution, exchange and consumption.
Commerce is concerned with one section of economics activities.it is a system
through which raw materials are distributed to the producers and the finished
products to the consumers.Example commerce will study a good from a producer
to consumer. It will also study the means by which a good reaches a consumer. But
economics study it more deeper and wide, there is a branch called environmental
economics which studies the impact of a good or service production in the
environment. Economics explore more about the degree of consumer satisfaction.
Commerce is therefore a branch of economics that deals with the exchange of
goods and services, and the activities that facilitate it.
This means that all the subject matter of commerce are studied in economics, but
not all the subject matters of economics are studied in Commerce.
 Test Yourself
Development of Commerce in Tanzania
Discuss the development of commerce in Tanzania
THE DEVELOPMENT OF COMMERCE IN TANZANIA.
 Commerce plays a fundamental role in the satisfaction of human wants. In
Tanzania primitive societies, the producers themselves were the consumers.
Example, If someone wanted maize and he produced beans, he has to find a person
who has beans but he wanted maize. They then exchange them to satisfy their
wants. Hence; they were compelled to provide themselves with foods, shelter and
clothes. Under such circumstances, the question of commercial transactions or
exchange of goods and services did not arise. But slowly their wants started to
increase in size and in number. They were no longer able to satisfy all their wants,
so they began exchanging the commodities produced with those produced by
others. This exchange of goods for goods was known as barter system of
trade.However, barter trade could not persist for a long period of time due to the
following demerits:
 Lack of Double Coincidence of Wants:Barter transactions can be
possible only when two persons desiring exchange of commodities should
have such commodities which are mutually needed by each other. For
example, if Fatma wants cloth, which Tully has, then Fatma should have
such commodity which Tully wants. In the absence of such coincidence of
wants, there will be no exchange. However, it is very difficult to find such
persons where there is coincidence of wants. One had to face such
difficulties in barter economy because of which this system had to be
abandoned.
 Indivisibility of some commodities:The second difficulty of
barter exchange relates to the exchange of such commodities which
cannot be divided. For example, a person has a cow and he wants cloth,
food grains and other items of consumption. Under such a condition,
exchange can be possible only when he discovers a person, who is in need
of a cow and has all such commodities, but it is very difficult to get such a
person. Then how to affect the exchange.Similarly the second problem
relates to the exchange of such commodities which cannot be divided into
pieces, because in this kind of situation, a big commodity like cow cannot
be divided into small pieces for making payment of the goods of smaller
value.
 Lack of a Common Measure of Value:The biggest problem in the
barter exchange was the lack of common measure of value i.e., there was
no such commodity in lieu of which all commodities could be bought and
sold. In such a situation, while facilitating the exchange of a commodity its
value was to be expressed in all commodities, such as one yard cloth is
equal to ½ kilogram of potato etc. It was a very difficult proposition and
made exchange virtually impossible. Now, with the discovery of money,
this difficulty has been totally eliminated.
 Lack of Store of Value:In a barter economy, the store of value
could be done only in the form of commodities. However, we all know that
commodities are perishable and they cannot be kept for a long time in the
store. Because of this difficulty, the accumulation of capital or store of
value was very difficult and without the accumulation of capital, economic
progress could not be made. It is because of this reason that as long as
 barter system continued, significant progress was not made in the world
anywhere.
LETS MAKE A DEAL! YES THEY HAD NO MONEY BUT THEY DID SATISFY EACH
OTHERS WANTS.

MERITS OF BARTER SYSTEM

 The risk of theft is lower in barter system than the risk of using
money. Almost all modern forms of money can easily be stolen and are
more vulnerable to theft than commodities.
 The value of commodities tend to be stable over a long period of
time, unlike the value of money which depreciates in value after a certain
period of time. Due to depreciation in value, money plays little role as a
future store of value.
 Barter trade is very useful in non-monetary economies, where
money is too scarce to be used as a medium of exchange. For example, in
rural areas barter trade is widely applied due to scarcity of money.
BARTER SYSTEM IN MODERN TIMES.
Due to invention of money, barter system is not so much practiced, however it is
still applied in some situation as:
 Sometimes in the rural areas people exchange crops for crops or
animals
 Countries can opt to exchange goods for goods when there is no
foreign currency e.g. cotton for oil.

HOW MONEY SOLUTION HAS SOLVED THE PROBLEMS OF

BARTER SYSTEM
Double Coincidence of Wants:
Money as medium of exchange has removed the double coincidence of wants.
Under monetary system money is exchanged for goods and services when people
buy things. Goods and services are exchanged for money when people sell things,
there is no necessity for a double coincidence of wants in the presence of money.
 A man with the wheat, who wants to purchase oil, need not to find a person having
oil and wants wheat. He can sell his wheat in the market for money and then
purchase oil with the money thus obtained.
 Common Measure of Value: Money has overcome the difficulty of
common measure of value by acting as a standard of value. In a money
economy the value of any commodity can easily be expressed in terms of
money.
 Store of Value: Money has removed the difficulty of store of value.
Money is used to store the value (wealth) of goods and services. One can
store one's earning in terms of money without any difficulty.
 Future Payments: Money has overcome the difficulty of future
payments. Debts and future payments are stated in terms of money.
There is no problem in receiving and making payments in future.
 Sub Division: Money has solved the problem of sub-division of
commodities as money is easily divisible. With the help of money one can
exchange individual commodity of great value for a commodity of less
value. Money has made it possible to buy goods of both high and low
value.
 Transfer of Value: Money has made easy the transfer of wealth
from one place to another place. A person can sell his immovable and
movable property or things at one place and transfer his wealth to
another place in terms of money.
Exercise 1
Quiz.
a. What is the usefulness of studying commerce?
b. Mention and explain any two economic activities which are non
commercial.
c. What is the difference between commerce and economics?
d. Write an explanatory text on the commerce flow chart.
 Test Yourself
Commerce Form 1 Topics
 The Scope Of Commerce
 Production