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Chapter: 11th Commerce : Classification of Business Activities

Commerce as an Economic Activity

Commerce refers to all those activities which are necessary for bringing goods from the place of production to the place of their consumption.

Commerce as an Economic Activity

 

Commerce refers to all those activities which are necessary for bringing goods from the place of production to the place  of their consumption. According to Evelyn Thomas, “Commercial operations deal with the buying and selling of goods, the exchange of commodities and the contribution of finished products”. Commerce includes not only trade but also services such as transport, warehousing, packaging, insurance, banking and sales promotion which are incidental  or auxiliaries to trade. Commerce includes the following activities as briefly explained below

 

i) Trade

Trade is an essential part of commerce. The term ‘trade’ is used to denote buying and selling. It helps in making the goods produced available to ultimate consumers or users. Therefore, one who buys and sells is a trader. A trader is a middleman between the producer and the consumer. Trade may be classified into internal trade and external trade, wholesale trade or retail trade.

 

ii) Transportation

Selling all the goods produced at or near the production place is not possible. Hence, goods are to be sent to different places where they are demanded. The medium which moves men and materials from one place to another is called transport.

 

iii) Banking

Now-a days we cannot think of business without bank. To start the business or to run it smoothly we require money. Banks supply money. Business activities cannot be undertaken unless funds are available for acquiring assets, purchasing raw materials and meeting other expenses. Necessary funds can be obtained from bank. Thus, banking helps business activities to overcome the problem of finance.

 

iv) Insurance

Business involves various types of risks. Factory building,  machinery, furniture etc, must be protected against fire, theft and other risks. Materials and goods held in stock or in transit are subject to the risk of loss or damage.  Employees are also required to be protected against the risks of accident and occupational hazards. Insurance provides protection in all such cases. On payment of a nominal premium, the amount of loss or damage and compensation for injury if any, can be recovered from the insurance company.



v. Warehousing

Usually, goods are not sold or consumed immediately after production. They are held in stock to make them available as and when required. Special arrangement must be made for storage of goods to prevent loss or damage. Warehousing helps business firms to overcome the problem of storage and facilities the availability of goods when needed.   Prices are thereby  maintained at a reasonable level through continuous supply of goods.

 

Comparison between Industry, Commerce and Trade


 

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11th Commerce : Classification of Business Activities : Commerce as an Economic Activity |


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