Class XI commerce

Q. Discuss the importance of Commerce in the present time?

Ans – Commercial activities consist of all such activities that are required for bringing goods to the hands of the ultimate consumer. The basic aim of commerce is to ensure the supply of goods at the right place, in proper quantities and at the time when they are demanded.

In light of the above statement the importance of commerce in the present time can be enumerated as follows –

1.       Transport – Transport refers to the conveyance of goods and passengers from one place to another. It facilitates trade by assembling and distributing goods. Goods are produced and consumed at another place. Transport brings the goods from the place of production to all the far and distant places of consumption. It helps the consumers in getting a wide variety of goods at reasonable prices. Trade overcomes the barrier of distance and hence creates place utility. Transport widens the market and helps to equalize prices at different places. Thus, transport has become the lifeline of modern industry and trade.

2.       Warehousing – Now-a-days goods are produced in anticipation of demand. It is, therefore, necessary to store the goods until they are sold. Many products such as wheat, sugar, rice, etc. are produced in a particular season but they are needed throughout the year. Besides, it is necessary to store goods like woolen garments and umbrellas to meet the desired seasonal demand. Warehousing removes the hindrance of time and thereby creates time utility. It helps to stabilize prices through equal distribution of surpluses over different time periods.

3.       Insurance – Business involves several types of risk, e.g. risks arising from price fluctuations, dishonesty of employees, bad debts, loss of goods in transit, natural calamities, etc.  Insurance removes the hindrance of risk. With the help of insurance, businessman can protect himself from several types of risk. A large number of people who are subject to a particular type of risk contribute to common fund, out of which compensation is paid to those few who actually suffer the loss. In this way the amount of risk borne by an individual businessman is reduced by distributing the burden of loss over a large number of persons. There are various types of insurances covering specific losses, e.g. fire insurance, marine insurance, theft insurance, life insurance, workmen’s compensation insurance, etc.

4.       Banking and finance – There is usually a time gap between production or purchase of and sale of goods. It takes time to collect money after sale of goods on credit. During this period, businessman needs finance to carry on their business activities. Banks and other financial institutions provide funds and credit to businessman. Production and distribution of goods and services on a large scale requires a huge amount of money at low rates of interest. Banks facilitates large scale and efficient business operations by providing loans.

5.       Advertising and Publicity – Advertising brings goods and services to the knowledge of prospective buyers. It helps to highlight the distinctive features and utility of different products. With the help of such knowledge, consumers can obtain better value for their money. Publicity helps to boost the sales of the product and services through seasonal sale, discounts, celebrity endorsements, etc.

6.       Communication – Quick and reliable means of communication are essential for efficient operation of commercial activities – Postage, courier service, telephone, internet, etc. provide vital means of communication for commerce and industry.