BO/U1 Topic 7 Distinction between business, commerce and Trade
Following are the main characteristics of a business:
1. Every business deals in goods and services.
2. The profit motive in the business is essential.
3. Element of risk is also involved in business.
4. In a business there should be a series of deal.
5. People should do the business for money. Free consumption of goods is not included in business.
Commerce includes all those activities which are helpful in transferring goods from the place of production to the consumer. For example purchases, sale, transportation’s, banking, insurance, storage and advertisement are the activities which come within the scope of commerce. Manufactured goods do not reach directly from the producer to the consumer. For example wholesaler purchases the goods from producer and uses the transportation to transfer these to his store. He also hires the services of bank and insurance company. Then he sells the goods to retailer. A consumer purchases the goods from retailer. So there are many obstacles in the way of producer an consumer.
Trade is an important part of commerce. All those activities are included in the trade which are helpful for the exchange of goods between the producer and consumer. The exchange of goods can be direct or indirect. Those factors which removes the obstacles in the exchange of goods are included in the scope of trade. Trade can be carried out inside and outside the country. Within the country trade has two kinds.
Whole sale retail: Trade with the foreign countries is either in the form of exports or in the form of imports.
|Meaning||Trade means the exchange of goods and services between two or more parties in consideration of money or money’s worth.||Commerce means exchange of goods and services between the parties along with the activities such as insurance, transportation, warehousing, advertising etc that completes that exchange.|
|Type of Activity||Social Activity||Economic Activity|
|Frequency of Transactions||Isolated||Regular|
|Link||Between buyer and seller||Between producer and consumer|
|Demand and supply side||Represents both||Represents only the demand side|