commerce in the sum total of activities that remove hindrances in the free flow of goods from producers to consumers explain
Answers
"Commerce is the sum total of those activities which are engaged in the removal of the hindrances of persons, places, time and exchanges." In light of this statement, describe the nature and scope of commerce.
Commerce concerns itself with all those activities that ensure a free and smooth flow of goods and services from producers to consumers.
It consists of trade, and the activities which facilitate trade.
The process of exchange is full of hindrances. The principal function of commerce is to remove these hindrances so as to ensure a free and uninterrupted flow of goods and services from producers to consumers.
These hindrances have been described below :
1. Hindrance of place : Very often goods are produced at places far away from the points of consumption. Various means of transportation remove this barrier of distance and help to establish a link between the two. Packaging of goods to protect them from damage and pilferage in the course of transit, help remove the hindrance of place and thereby creates place utility.
2. Hindrance of person: The manufacturers and ultimate-consumers of goods are often unknown to each other. They are not always situated at the same place. Therefore, certain people, called traders, are required to bridge the gap between them.
3. Hindrance to Time : Goods are generally produced in anticipation of demand. Therefore, it becomes necessary to store them and make them available as and when the consumers demand them.
4. Hindrance of risk : During transportation and storage, goods are subject to several types of risk. Goods may be stolen or damaged. Insurance covers this risk.
5. Hindrance of exchange : Exchange or sale of goods requires safe and economic arrangement for the payment of price. Dealing in goods involve the problems of time and place of payment. Money serves as the medium of exchange and thereby removes the hindrance of exchange.
6. Hindrance of knowledge : Exchange of goods can take place only when the seller brings his products to the notice of prospective buyers. Advertising and publicity provide the necessary information to prospective buyers about the utility and features of various products. In this way, they help to remove the hindrance of knowledge.
Therefore, commerce plays a role in ensuring that the hindrances are minimized and a smooth flow of trade happens between the producer and the consumer.