(a) Define commerce. (b) Explain six functions of commerce in an economy.

Answer Details

(a) Definition of commerce

Commerce is the branch of production that deals with the buying and selling of goods and services, together with all the aids and services that make trade possible, such as transport, banking, insurance, warehousing, advertising and communication. In short, commerce is trade and the aids to trade.

(b) Six functions of commerce in an economy

1. Distribution of goods and services: Commerce moves goods from producers to consumers through wholesalers and retailers, ensuring that goods reach the people who need them.
2. Bridging the gap between producers and consumers: Through trade and its aids, commerce removes the place, time, knowledge and finance gaps that separate producers from consumers.
3. Creation of employment: Commercial activities such as transport, banking, insurance and retailing provide jobs for many people, thereby raising incomes.
4. Provision of finance: Through banks and other financial institutions, commerce provides the capital and credit needed to run and expand business.
5. Facilitating specialization and large-scale production: By guaranteeing a market and moving output to distant buyers, commerce enables producers to specialize and produce on a large scale.
6. Raising the standard of living and promoting international trade: Commerce makes a wide variety of home and foreign goods available to consumers, satisfying wants and encouraging trade between nations.