(a) What is Commerce? (b) State and explain the importance of any five ancillary services to trade.

Answer Details

(a) What is Commerce?

Commerce is the branch of business (production) concerned with the buying and selling (trade) of goods and services and all the ancillary or aid-to-trade activities that make trade possible, such as transport, warehousing, banking, insurance, advertising and communication. In short, commerce is trade together with the aids to trade that remove the obstacles between the producer and the final consumer.

(b) Importance of five ancillary (aids to) services to trade

• Transportation: it moves raw materials to factories and finished goods from producers to consumers, thereby overcoming the barrier of place (distance) and creating place utility.
• Warehousing (storage): it keeps goods safely from the time of production until they are needed, overcoming the barrier of time and ensuring a steady supply, especially of seasonal goods.
• Banking: it provides safe keeping of money, a means of payment such as cheques, and credit and loans to finance trade, thus overcoming the problem of finance.
• Insurance: it provides cover against risks such as fire, theft and accident, giving traders the confidence to invest by overcoming the barrier of risk.
• Advertising: it informs and persuades customers about the existence, features and prices of goods, overcoming the barrier of ignorance and widening the market.

(Communication is a further aid, linking buyers and sellers who are far apart.)