By Harshvardhan, the Subject Matter Expert at Edumarz
Solution: Commerce includes both, buying and selling of goods i.e. trade as well as auxiliaries to trade such as transport, banking, etc. Commerce provides the necessary link between producers and consumers. It embraces all those activities, which are necessary for maintaining a free flow of goods and services. Thus, all activities involving the removal of hindrances in the process of exchange are included in commerce. The hindrances may be in respect of persons, place, time, risk, finance, etc.
Commerce includes two types of activities. They are:-
- Trade – Buying and selling goods is termed trade. The hindrance of persons is removed by trade thereby making goods available to consumers from the possession or ownership producers.
- Auxiliaries to trade – There are a lot of activities that are required to facilitate the purchase and sale of goods. These are called services or auxiliaries to trade and include transport, banking, insurance, communication, advertisement, packaging and warehousing. Transport removes the hindrances of place by moving goods from the place of production to the markets for sale. Storage and warehousing activities remove the hindrance of time by facilitating the holding of stocks of goods to be sold as and when required. Goods held in stock, as well as, goods in course of transport are subject to a risk of loss or damaged due to theft, fire, accidents, etc. Protection against these risks is provided by insurance of goods. The capital required to undertake the above activities is provided by banking and financing institutions. Advertising makes it possible for producers and traders to inform consumers about the goods and services available in the market.