INTER-DEPENDENCE BETWEEN TRADE AND AIDS TO TRADE
Trade and and Aids to trade are inter-dependent on the following ways:
(i) Trade involves buying and selling of goods and services.The process of buying involves buying from producer and selling them to the final consumer.These goods cannot react final consumer without services of one or some of Aids to trade such as transposition and communication.
(ii) Aids to trade likewise depend on trade. A demand for aids to trade is derived demand. Business men require Aids to trade such as warehousing banking and transportation when they buy and selling goods.
E.g A retail trade buys from the manufacturer or wholesaler, needs the services of transportation, communication, banking, adverting etc.
(iii) Development of trade depends on the development of Aids to trade. likewise, development of Aids trade depends on the level of development of trade. when trading activities flourish, they call for the establishment of aids to trade such as banking, insurance warehousing, advertising, transport and communication on the other hand good services from aids to trade enable smooth running of trade.
COMMERCE AND ECONOMICS
The relationship between commerce and economics
· Economics is concerned with how man can satisfy his unlimited wants with the limited resources. Since the wants are unlimited, choice must be exercised and should be based on the most immediate necessities of man.
· Commerce is a branch of production which deals with exchange of goods and services and all activities that facilitate the transfer of goods from producers to the final consumers.
· Commerce therefore facilitates satisfaction of ends (wants). Commerce is also known as business economics that is a part of economic activity which is mainly concerned with exchange and all activities which facilitate exchange.
· Since resources are scarce business/persons who are engaged in trade and aids to trade, must make economic decisions involving choices of what goods to be exchanged in order to maximize profit.
· Like economics, commerce is faced with the main economic problem of choosing few alternatives as a result of scarcity of resources and unlimited wants of consumers.
· Economics is concerned with the problem arising from the production and nglish-swahili/distribution” target=”_blank”>distribution of goods and services.
· Both the study of commerce and economics are interested in the nglish-swahili/distribution” target=”_blank”>distribution of goods.
DISTINCTION BETWEEN COMMERCE AND ECONOMICS.
– Economics is concerned with all activities involving production, nglish-swahili/distribution” target=”_blank”>distribution exchange and consumption
while Commerce is concerned with one section of economic activity that is exchange and nglish-swahili/distribution” target=”_blank”>distribution.
– Economics is very wide which comprises of all activities of economy while Commerce deals with commercial occupation only.
COMMERCE AND BUSINESS
The relationship between commerce and business can be described as follows:
Business is any activity carried out with an intention of making profits. some business incur losses but their man aim is to make profit.
Business includes both commercial and non commerce profit making activities such as direct services and manufacturing while Commerce applies only to activities that involve trade and aids to trade.
– Commerce does not include business activities which are not related to either trade or aids trade.
e.g Manufacturing is a business activity but is not activity of commerce.
CONCLUSION
i) All commerce activities are business activities e.g retailing and wholesaling are both commercial and business activities.
BUT
ii) Not all business activities are commercial activities e.g manufacturing as a business activity but not a commerce activity.
IMPORTANCE OF STUDYING COMMERCE
The study of commerce is important in the following ways.
i) It helps in development of the country’s economic, trade and aids to trade. enable goods produced to reach final consumer and therefore increase in production and national income.
ii) Commerce enable producers to get information about the availability of goods and services in the market. Availability of goods to increase in production and information about availability of goods stimulates consumption and therefore reduce more production.
iii) The knowledge of commerce enables learners to understand other field of knowledge like economics.
iv) It enables business men and women to conduct trade by simply knowing means of exchange and source of supply briefly commerce should be studied because.
o Everyone is involved in commerce either buying or selling
o Modern communication method can be difficult to understand e.g E- commerce.
o Consumer has to understand the marketing techniques
o Everyone can make contracts and commercial knowledge therefore may be important.
o He is necessary to understand changes in the commercial world as they affect us.
v) He is useful introduction of these who to specialized later is any components of commerce e.g insurance, Banking clearing and forwarding agents.
HISTORICAL DEVELOPMENT OF COMMERCE
The development of commerce can be looked at through the following stages
A.A :PRODUCTION WITHOUT EXCHANGE
In primitive societies the producer himself was the consumer. he was compelled to provide himself with food, shelter and clothing under such circumstances, the question of commerce transactions or exchange of goods did not arise but slowly his wants started to increase in size and in number. He was no longer able to satisfy all his want by the goods produced with his labour alone with the development of division of labour it was realized that different members of the group had diffident talents. With division of labour each person is assigned to a job in which he could do it best.
The impact is that the total production of the whole group of people would be greater than if they each tried to be self supporting individual.
B. B: PRODUCTION WITH EXCHANGE
The number of such group increased and the exchange of surplus production began to take place, the basic patterns of commerce emerged as the people began exchanging commodities with those produced by others.
This exchange of goods for goods was knows as BARTER TRADE
Therefore the earliest kind of commerce took place inform of Barter.
1:BARTER TRADE
Barter trade involves the exchange of goods for goods. However the barter trade could not persist for a long period of time due to the following limitation (draw backs)
1. (i). Problem of double coincidence of wants in order for exchange to take place. It was very difficult for a trade with surplus of a certain commodity to look for a person who wants what a trader has and at the same time to posses what trader wants before transaction take place. For example if there was a farmer who had maize and wanted a shirt, the farmer had to find a person who had a shirt and wanted maize but if he could not find such a person who wanted maize and has a goat then barter trade could not take place.
2. (ii). Problem of measuring of value
In barter trade it was very difficult to decide how much quantity of one commodity could be exchanged for a certain amount of another commodity.
For example it is very difficult to decide how much quantity of maize must be exchange with cow.
(iii). Problem of store of value.Under barter system it was difficult to store perishable goods like vegetable, fruits, milk, meat, and fish and exchange them with other commodity in future.
(iv). Problem of measuring of value
In barter trade was very difficult to decide how much quantity of one commodity could be exchanged for certain amount of another commodity.
For example was very difficult to decide how much quantity of maize must be changed with cow.
(v). Problem of divisibility (indivisibility).It was not possible to divide some commodities into smaller units in order to exchange without units of other commodities. For example if a person has a certain units of cloth and wanted to exchange with some units of meat of cow the exchange was very difficult because a cow could not be divided into smaller units if the value of the units of cloth was not equal to the value of the whole cow.
(vi). Lack of standard of differed payments under barter system the borrowing and lending was made in term of goods. It was difficult to decide where the same value was returned latter or not.
(vii). Difficult in transport some commodities.Due to lack of modern means of transportation and due to immobility of some items, it was difficult to transport such items from one place to another for exchange. In view of the difficulties of the barter system different commodities were used as money in different period. The following commodities were used as money from time to time
(i) Hides and skins, stones, arrows agricultural products like wheat, maize rice.
(ii) Different metals like silver, copper, gold etc.
(iii) Paper.
At present current notes and coins issued by central bank acts as main form of money.
The introduction of money has solved all the problems of the barter system.
The issue of money has converted a batter economy of the into monetary economy of today. Money is known and used as a medium of exchange. The goods and services are known sold and purchased with the help of money.
Definition of money
Money is a commodity chooses by a common consent to be a measure of value and means of exchange between all other commodities.
Advantage of Barter system
Despite its drawbacks (limitations), barter system has the following advantages over the use of money.
(i) The risk of theft is lower in barter trade than the risk of using money. Almost all modern forms of money can easily be stolen and are more vulnerable to theft than commodities.
This is because money is easier to carry than commodities
(ii) The value of commodities tends to 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 pays little roles as a future store of value.
(iii) Barter trade is very useful in non-monetary economies where money is too scarce to be used as a medium of exchange e.g. in rural areas barter trade is widely applied due to scarcity of money.
(iv) The use of barter system makes the economy of the place less reliable to economic problems like inflation and deficit in the balance of payment.
FACTORS THAT HAVE CONTRIBUTED TO THE DEVELOPMENT OR GROWTH OF COMMERCE
1. The diversification is natural resources ennglish-swahili/courage” target=”_blank”>courage the exchange of goods between different countries or areas.
2. The different in human wants also introduce the exchange of goods.
3. Specialization or division of labour became another main cause of trade of exchange of goods.
4. Improvement in transport and communication system was also a great help in the expansion of commercial activities.
5. Development of money and banking system was another reason for great production and expansion of exchange activities.
6. Population increase
7. Different in skills and knowledge
8. Liberation of trade in industries
9. Advertisement in risk management
10. New consumers attitude towards debt