THE SCOPE OF COMMERCE — Commerce FORM ONE NOTES
Definition of commerce;
Commerce is the study of exchange and distribution of goods and
services from the point of production to the point of consumption to
satisfy human wants.
AIM;
To bridge the gap between the producers and consumers.
TERMS;
1. Goods are thinps which we can see and touch. E xample; pen, books, tractor etc.
2. Services are things which we can’t see and touch but help in progress of life. Ex ample;
educatio n, hair dres sing, medical care etc.
3. Needs— are necessary things fOr man in order for man to live he need s food, shelter and
clothes.
Wants-are not essential things to man in order for man to be happy in life and enjoy the life
he want. TV, radio, car, mobile phone.
4. Distribution-The term distribution involves various ways of making goods and
services available to the final consumer.
5. Exchange
• The term exchange involves buying and selling of goods and services
• Exchange constitute TRADE
• This exchange can be through money as medium of exchange.
6. Producer or seller â Anyone who works for payment (money) â ExampIe;-Doctors, teachers,
farmers, shopkeepers
7. Consumer or buyer â Anyone who buys goods or services â We are all consumers
BASIC HUMAN WANTS (NEEDS)
i.)Food ii.)Clothes iii.)SheIter\
CHARACTERISTICS OF HUMAN WANTS
i.) Unlimited ii.)Satisfied iii.) Complementary iv.)Competitive v.) Alternative
i.) UNLIMITED
Our wants are unlimited. We will always want more E.g. Mr. Patel
wants to buy a shirt. He also wants a trouser. After he has brought
some trousers he will want a pair of shoes and so on.
ii.) SATISFIED
-We cannot satisfy all our wants, but we can satisfy some of wants
-If you don’t have enough money you can’t buy everything you want but you can satisfy a certain
want.
iii.) COMPLEMENTARY
-Things which go together that means if you want one thing you also want another thing.
Example; -Car Petrol
-Radio Batteries
-Tea Sugar
iv.) COMPETITIVE
-We want many things but we can’t buy them all now. So we choose
the one we want very much. Choice is among the thing we require
most against the other.
v.) ALTERNATIVE
-There are different ways in which we can achieve or get by plane train -Butter
what we want. Our wants have alternative. Example—;
cheese -Tea coffee
-Pen pencil
IMPORTANCE OF STUDYING COMMERCE OR WHY SHOULD COMMERCE BE
STUDIED
1.) The study of commerce exposes the business world to students.
It simplifies the understanding of modern commercial methods. E.g. export/import goods and
services to/from other countries using different units of currency.
2.) To know frequent changes which happen in commercial world and its effect to the
public.
3.) It enables both consumers and businessmen to know different marketing techniques i.e pricing,
discounting, promotions. Etc
4.) It is useful for future specialization vi.) Every individual is involved in commerce vii.) It
also enables students to understand pre- introduction of economic concept.
DIVISIONS OF COMMERCE/ BRANCHES OF COMMERCE
Commerce is divided into two main branches;
I. Trade
2. Aids to trade
i.)TRADE
-Trade refers to buying and selling of goods and services with the aim of generating profit.
-Trade is the basic commercial activity which deals with the exchange of goods with goods or
goods with money.
-A person who engages in trading activities is known as a Trader.
-Trade is subdivided into two main branches; a.) Home trade
b.)International trade (foreign trade)
HOME TRADE
Is the buying and selling of goods or services within a
country.
-Home trade is divided into two main branches; a.)RetaiI
trade
b.)WhoIesale trade
I.)RETAIL TRADE
-Is the buying of goods from producers or wholes alers and selling them in small quantities to
the final consumer.
11.) WHOLESALE TRADE
-Is the buying of goods in large quantities from producers or manufacturers and selling in
small quantities to the retailers.
INTERNATIONAL TRADE (FOREIGN TRADE)
-Is the trade between one nation and other nations. -International trade is divided into two types;
i.)Export trade ii.)Import trade
I.)EXPORT TRADE It is the selling of
goods and services to other countries.
11.)1MPORT TRADE
-It is the buying of goods from other countries.
2. AIDS To TRADE
— Are those services which help trade to take place smoothly.
-Aids to trade make trade less difficult to carry out.
Examples of aids to trade including the foIIowing;-
a.)Transportation
-This refers to the movement of physical
goods and people from one place to another
or Is the movement of goods from areas of
production to the area of Consumption.
b.)Communication
-Is the transmission of information from one point or person to another point or person.
c.)Warehousing
-This refers to the storing of goods so that they are made available when and where they are
required. d.)Banking/Finance
-This includes the provision and management of money and credit necessary to transfer goods to
the final consumer.
e.)insurance
-This refers to the protection against
risks like fire and theft.
f.)Advertising
-This is the art of making goods and services to be known to the public.
HISTORICAL DEVELOPMENT OF COMMERCE IN ZIMBABWE
-During the ancient time (Stone Age, primitive communalism) commerce did not exist in
Zimbabwe.
-People lived by collecting wild fruits, digging roots and hunting animals by the use of stones.
They didn‘t have any want to satisfy their needs which was beyond
the ability of a family or clan i.e. each family was self-sufficient and
self-reliant. In other words there was no social division of labour and
specialization.
-As time went on FIRE was discovered with the discovery of fire people started melting iron and
making spears, arrows and hoes.
-After that, the developed group of people who used spears, arrows and
bows for hunting wild animals, these were called HUNTERS while those
who used hoes for cultivating were called FARMERS. So it means
people performed different jobs. This was the development of
DIVISION OF LABOUR because each group performed different
jobs and also those were the early stages of SPECIALIZATION,
INTERDEPENDENCE and DIVISION OF LABOUR.
-Now people began exchanging commodities produced by others.
-This exchange of goods was known as BARTER TRADE. -
This was the early stage of Barter Trade in Zimbabwe.
BARTER TRADE
-Is the exchange of goods for goods.
Advantages of Barter trade
1. The risk of theft is low compared to the risk of using money.
-All forms of money can easily be stolen than commodities.
2. The value of commodities tends to be stolen over a long time than
the value of money which depreciates in value after a certain
period of time.
3. Barter trade is useful where money is too scarce to be used as medium of exchange
-Example in rural areas barter trade is widely used due to scarcity of money.
4. The use of barter system makes the economy of a place not to be easily affected by
economic problems like inflation.
Disadvantages of barter system
a.)Lacks of double coincidence of wants.
-Double coincidence of wants means that a person who has wheat and
wants salt has to find a person who has salt and wants wheat. If he
can’t find such a person who wants wheat and has salt then barter
trade cannot take place.
b.)Lack of measure of value.
-It is very difficult to decide how much quantity of one commodity to be exchanged for
another commodity.
For example, it is very difficult to decide how much
quantity of maize must be exchanged with units of cow
c.)Lack of store of value
-Under barter system it is very difficult to store perishable goods such
as(tomatoes, vegetables) and exchange for another commodities in future.
d.) IndivisibiIity of some items
-It is not possible to divide some commodities into smaller units in order to exchange with units of other
commodities.
-For example, if a person has certain units of cloth and wants to exchange
with some units of cow the exchange is very difficult because a cow cannot
be divided into smaller units if the value of the units of cloth is not equal
to the value of the whole cow.
e.)DifficuIt of transporting some commodities
-Due to lack of modern means of transportation and immobility of
some items it is difficult to transport some items from one place to
another for exchange.
COMMERCE IN THE MODERN WORLD
-With the coming of industrial revolution and introdumion of machinery the division of labour
or specialization became more popular.
Different individuals and localities (countries) specialized in the production of different
commodities.
-There was specialization in various aspects;-
.1n industry example a manufacturer could choose to produce a specific commodity
.1n commerce traders (retailers or wholesalers could specialize in only one line of commodity.
.Even individual's example a doctor could be a dentist a pharmacist or surgeon
Teachers could specialize in subjects such as Book-keeping, & jy¡gth.smg1tss, and Economics and
so on.
-Specialization leads to exchange. The products of one specialist need to be
exchanged with those of another in the satisfaction of wants.
-Thus, modem commerce is a
result of specialization
SPECIALIZATION AND
DIVISION OF LABOUR
-Is the separation of jobs, activities and processes so that each person or
group of persons concentrates on what he or they do best. Every person
concentrates on what the performance of a particular activity.
SPECIALIZATION
— Is the Proccess of Concentrating on what he or she can do the best.
DIVISION OF LABOUR
-Is the process of divide or arrangement of labour in a particular activity.
-Specialization is the arrangement of labour in such a way as to maximize the amount and
quality of the output.
ADVANTAGES OF SPECIALIZATION AND DIVISION OF LABOUR
I.)Time and energy saving;
-No one worker does the whole process alone. This saves energy and the time
that would be lost in switching from one job to another.
II.)Degree of choice;
-People have different natural abilities; Specialization enables individuals to choose those
occupations for which they are most suited
III.) Developing skills;
-Specialization and division of labour develops skills to individuals through a process of learning by
doing the same task repeatedly
IV.) Better standard of living
-Specialization leads to better standard of living because specialization leads to higher production,
creating a wider choice.
V.)PhysicaI toil is reduced through the use of machines.
VI.) It leads to efficiency because of the frequency of operation
VII.) Machinery is used more extensively and efficiently
DISADVANTAGES OF SPECIALIZATION AND DIVISION OF LABOR
i.) Boredom and monotony
-Have to do the same task over and over again becomes monotonous and can easily make a worker tired
and bored.
ii.) Greater risk of unemployment
-It may happen that too many people may opt to specialize in a certain
field of work and that field may not be able to absorb all of them, hence
unemployment.
iii.) Limited form of production
-Specialization leads to a limitation in production. If the specialized
community so on gets a better substitute the firm may decline.
iv.) Depersonalization
-Specialization reduces human labour because of the application of
complicated machinery.
