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Commerce is a link between producers, distributors and consumers. It includes all those activities which are concerned with the transfer of goods from the place of their production to the place of their consumption. Commerce removes the hindrances of person, place, time and risk.

Commerce represents the exchange of goods and services and the activities which facilitate exchange. It covers the functions of buying and selling and the services which must be provided to finance, insure, store and transport goods in the course of their exchange. Thus, commerce includes: (i) Trade, and (ii) Services which facilitate exchange like transport, banking, warehousing and insurance. Both trade as well as services which facilitate trade bridges the gap between the producers and consumers which is the aim of all business operations.

Role of Commerce

According to Stephenson, “Commerce involves those functions which are engaged in the removal of hindrances of persons, place and time in the exchange of goods. “The role of commerce arises from the fact that it facilitates flow of goods and services by removing various obstacles as follows:

1.    Removing Hindrance of Persons (Distribution).The producers of goods may not be able to contact the consumers directly. A chain of middlemen acts between the producers and consumers. The middlemen purchase goods from the producers and take them to the consumers. Both sides are relived of their worries. The chain of wholesalers, retailers, brokers, etc., operates between the producers and the consumers and removes the hindrance of persons.

2.    Solving Distance Problem or Hindrance of Place. Goods may be produced in factories whereas the buyers of such goods may be situated at far off places. The barrier of distance between the place of production and the market where these products can be sold is removed by different means of transport. Besides transport, the services of insurance to cover the risk of loss during transit and storage and packaging to protect goods against damage and pilferage are also aimed at removing hindrance of places.

3.    Removing Hindrance of Time through Storage. Many goods, such as cotton, jute, foodgrains, sugar, etc. are produced in particular seasons of the year. But they are needed throughout the year. To make these goods available the whole year round, arrangements must be made for their proper storage. Similarly, certain goods are needed in particular seasons, e.g., woolen cloth is required during winter; raincoats and umbrellas are essential during rainy season. These goods must be ready in stock in sufficient quantity before the beginning of the seasons. This is done with the help of warehousing.

4.    Provision of Finance. There is always time gap between the time of production or purchase of goods and the day on which the price of these goods is realized after their sale. During this period, traders need funds to carry on their trade. These funds are made available by the banks.

5.    Coverage of Risks through Insurance. There is risk involved in transporting goods form one place to another. There can be a risk due to fire or theft. The fear of loss of goods due to any cause acts as an obstacle in the development of trade. The insurance companies provide a coverage for all types of losses of goods. The insurance coverage has given a fill up to the national and international trade.

6.    Spreading Information or Tackling Hindrance of Knowledge. Consumers must be aware of the goods available in the market before marking their purchases. It is, therefore, necessary that information relating to the goods and services produced must reach the public. One of the common methods of providing information about goods on sale is advertising. As a branch of commerce, advertising helps in communication with eh customers.

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