COMMERCE 101

INTER-RELATIONSHIP AMONG PRODUCTION, SPECIALIZATION & EXCHANGE

      Happy New Week Everyone, This is a Beautiful Week and Thank God we are Alive. Let's Get Started!!!.

       Exchange is as a result of Specialization and Production. They are related in the sense that Production is enhanced by the broken down processes that are performed by different people. Division of Labor and Specialization creates room for Mass Production.

Since individuals are not capable of producing all his requirements, the need for exchange arises.

                          HISTORY OF DIVISION OF LABOR

One of the Forefathers of Economics, Adam Smith who further explained the Theory of Division of Labor in 1776, in his book “The Wealth of Nations.” Adam Smith visited a place where Pins were made and found out that Pin-Making involved eighteen different processes at that time.

He also found out that one man was coordinating all the processes of Pin-Making alone; as a result of this rigorous and slow process he was producing 20 pins per day. Adam Smith came to a conclusion that if these Eighteen Pin-Making Processes were handled by different people, more pins will be produced.

      The idea of Division of Labor thought out by Smith was applied as a result, 48,000 Pins were

produced per day. This was how the Application of Modern Division of Labor came into existence in our present day.

                                    HOME TRADE

HOME TRADE is the act of buying and selling goods within a country. It is also known as DOMESTIC or INTERNAL TRADE. In this Home Trade the same currency is used for exchange. Home Trade comprises of:

1.      Retailing.

2.     Wholesaling.

RETAIL TRADE

Retail Trade is the act of selling goods and services to the final consumer in small quantities. Retailing is the final link in the chain of distribution of goods and services.

The Retailer is a person whose business is to purchase goods from the wholesaler or producer in small quantity, and sell in smaller units directly to the consumer. In order words, A Retailer is any trader who directs his efforts towards selling to the final consumers for the purpose of making profit and finishing the chain of production.

CHARACTERISTICS OF RETAIL TRADE

1.     Retailer sells in smaller units or quantities.

2.     They stock a wide variety of goods.

3.     They sell directly to the consumers.

4.     Retail Trade involves bringing the goods nearer to the consumers.

5.     They are the final link in the chain of Distribution.

6.     The Business location is open to the general consumers.

FUNCTIONS OF THE RETAILER

1.     The Retailer buys and stock variety of goods in order to satisfy the different tastes of the consumers.

2.     By selling in units, it saves the consumers the trouble of spending huge amount of money on a particular commodity.

3.     He gives Credit Facilities to consumers or customers (i.e. by allowing the customers to buy goods without immediate payment).

4.     Retailers are in the position to feed both the wholesalers and the producers with information about the market as well as the needs of the consumers.

5.     Retailers ensure that goods are brought to the door step of every consumer.

6.     He advice the consumers on how to use certain goods especially those that require technical knowledge.

           

FACTORS TO BE CONSIDERED WHEN SETTING-UP A RETAIL TRADE

1.     Capital- Before setting up a business, money at hand will determine the type and the size of a business and must be considered first.

2.     Site of the Business- This should be taken into consideration based on the focus of the retailer, which is the consumer. Therefore, He should be located near the consumers.

3.     Terms of Trade- The Retailer should decide whether the business should be conducted on cash or credit basis. Combination of the two should also be considered.

4.     Prices- The Retailer should consider whether his prices will be higher in order to make higher profits at a time or adopt the policy of small profit, quick turnover which may give him more profit.

5.     Source of Supply- The Trader should decide whether to buy directly from the wholesaler or producer which ever suits his purpose.

ANSWERS TO D QUESTIONS:

Hope you tried the Questions of Last week? LOLZ, Well below are the answers to the questions.

1.  D- It has nothing to do with goods and services.

2.  A- Profit.

3.  B- Chatting.

4. B- Changing the form of a Product (Which has to do with Production).

5. C- Production.

6. C- Transport.

7. D- Warehousing.

8. A- Commerce.

9. A- All Resources Provided by Nature.

10. D- Producer & Consumer Goods.

This brings us to the end of Today's Session. Hope this was very helpful to you, leave a comment of what you think of this Tutorial and of your Questions below. Have a Blessed Day and Remember You are Amazing. God Bless.