Commerce · Lesson 1

Meaning and scope of commerce, occupations, production and division of labour

JAMBWAECNECO

What the syllabus asks

JAMB: 1 Commerce (meaning, scope, characteristics, functions; e-commerce/e-business); 2 Occupation (meaning, importance, types, factors determining choice); 3 Production (factors, characteristics and rewards; division of labour and specialisation; primary, secondary, tertiary; relationship between production, specialisation and exchange)

WAEC: 1 Introduction (definition, history, scope and functions of commerce and e-commerce); 2 Occupation (types, factors, career opportunities); 3 Production (meaning, factors, types, division of labour: types, advantages, disadvantages, limitations; inter-relationship between production and exchange)

NECO: 1 Introduction (definition, history, scope and functions of commerce and e-commerce); 2 Occupation (types, factors, career opportunities); 3 Production (meaning, factors, types, division of labour: types, advantages, disadvantages, limitations; inter-relationship between production and exchange)

What you will learn

Define commerce and e-commerce and distinguish commerce from trade, industry and economics.
State the scope, characteristics and functions of commerce.
Trace the history of commerce from barter to electronic payment.
Define occupation and classify occupations with Nigerian examples.
Explain factors that determine the choice of occupation and career opportunities in commerce.
Identify the factors of production, their characteristics and rewards.
Distinguish between primary, secondary and tertiary production.
Explain division of labour and specialisation, their types, merits, demerits and limitations.
Explain the relationship between production, specialisation and exchange.

Key points

Commerce = trade (home and foreign) + aids to trade (banking, insurance, transport, communication, advertising, warehousing, tourism).
Aids to trade remove hindrances of persons, place, time, risk, finance and knowledge.
E-commerce: buying, selling and paying electronically; e-business is ICT in all business activities.
Commerce creates place, time and possession utility; industry creates form utility.
Barter fails: double coincidence of wants, indivisibility, no measure or store of value, no standard of deferred payment.
History: subsistence → barter → commodity money (cowries, manillas) → coins and notes (naira 1973) → banks → electronic money.
Occupation: lawful activity to earn a living. Industrial (extractive, manufacturing, constructive), commercial, services (direct, indirect).
Choice of occupation: education, interest, capital, pay, prestige, family, environment, security, government policy.
Factors and rewards: land–rent, labour–wages, capital–interest, entrepreneur–profit.
Production is complete only when goods reach the consumer.
Primary = extraction; secondary = manufacturing and construction; tertiary = commerce and services.
Division of labour: stages done by different workers; specialisation: concentrating on one line.
Division of labour raises output and lowers cost but causes monotony, interdependence and loss of craft.
Limited mainly by size of market, also nature of product, capital, standardisation, transport.
Specialisation → surplus → exchange → wider market → more specialisation: commerce is the link.

Start here: Meaning and scope of commerce

Think of a bag of rice bought in a shop in Onitsha. A farmer in Kebbi grew the paddy. A mill in Kano husked and polished it. A wholesaler bought a lorry-load, a transporter carried it south along the highway, a bank lent the wholesaler money, an insurance company covered the lorry against accident, a warehouse stored the bags, a radio jingle told people about the brand, and a retailer finally sold one bag to your mother. Every step after the farm and the mill is part of commerce.

Commerce is defined as all the activities involved in the buying and selling of goods and services, together with all the services that help that buying and selling to take place. In short:

Commerce = Trade + Aids to trade

Trade

Trade is the actual buying and selling. It is divided into:

Home (domestic) trade: buying and selling within one country, e.g. a trader in Aba buying shoes from a factory in Aba and selling them in Port Harcourt. Home trade is further divided into retail trade (selling in small quantities to final consumers) and wholesale trade (buying in bulk from producers and selling in smaller lots to retailers).
Foreign (international) trade: buying and selling between countries. It has three branches: import trade (buying from other countries, e.g. Nigeria importing machinery), export trade (selling to other countries, e.g. Nigeria exporting crude oil, cocoa and sesame) and entrepôt trade (re-export trade: importing goods in order to export them again, often after sorting or repacking).

Aids to trade

Aids to trade (also called auxiliary services) are the activities that remove the obstacles to trade. Each one solves a particular problem:

Aid to trade	Hindrance it removes	Nigerian example
Trade (middlemen)	Persons: producers and consumers are far apart and do not know each other	Market women at Mile 12 Market, Lagos
Transport	Place: goods are made in one place and needed in another	Trucks, rail freight, ships, air cargo
Warehousing	Time: goods are produced at one time and needed later	Grain stores, bonded warehouses at the ports
Insurance	Risk: goods and businesses may be lost by fire, theft or accident	Motor, fire and marine insurance
Banking	Finance: traders need money and a safe means of payment	Loans, transfers, POS payments
Advertising	Knowledge: consumers do not know what is available	Billboards, radio jingles, social-media adverts
Communication	Distance in passing information	Phone calls, e-mail, WhatsApp orders
Tourism	Brings buyers to places and creates demand for local goods and services	Visitors to Obudu, Yankari, Osun-Osogbo

The scope of commerce therefore covers trade (home and foreign) and all the aids to trade. Some textbooks add the legal and institutional framework (laws, government agencies, trade associations) because trade cannot work smoothly without them.

Scope of e-commerce

E-commerce covers online shopping (e.g. ordering from an online store), online payment (cards, bank transfers, mobile wallets), electronic banking, online advertising, electronic data interchange between firms, online marketplaces and delivery tracking. It cuts across both trade and aids to trade.

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Practice questions

1. Commerce is best defined as

all activities involved in the distribution and exchange of goods and services
the making of goods in factories
the growing of food crops
the study of money

Show answer

A: all activities involved in the distribution and exchange of goods and services
Commerce = trade plus aids to trade.

2. Which of these is an aid to trade?

Mining
Farming
Fishing
Banking

Show answer

D: Banking
Banking, insurance, transport, warehousing, communication and advertising aid trade.

3. Which occupation is classified as commercial?

Teaching
Bricklaying
Retailing
Lumbering

Show answer

C: Retailing
Commercial occupations are trade and aids to trade; teaching is a direct service.

4. A teacher, a doctor and a police officer render

constructive services
direct services
indirect services
extractive services

Show answer

B: direct services
They serve people personally.

5. Turning crude oil into petrol is

manufacturing (secondary production)
extraction
commerce
a direct service

Show answer

A: manufacturing (secondary production)
Changing the form of goods is manufacturing.

Key words

Commerce: All activities involved in the distribution and exchange of goods and services: trade plus aids to trade.
Trade: The buying and selling of goods and services; divided into home trade and foreign trade.
Aids to trade: Services that make trade possible: banking, insurance, transport, communication, advertising, warehousing and tourism.
E-commerce: Buying, selling and paying for goods and services over the internet or other electronic networks.
E-business: The use of ICT to carry out all business activities, including buying, selling, recruitment, accounting and customer service.
Barter: The direct exchange of goods for goods (or services) without money.
Double coincidence of wants: The barter requirement that each party wants exactly what the other offers, at the same time.
Occupation: Any lawful activity a person engages in to earn a living.
Extractive occupation: Work that takes natural resources from land, water or air, e.g. farming, fishing, mining, lumbering.
Direct service: A personal service paid for directly by the person who receives it, e.g. a doctor or hairdresser.
Indirect service: A service provided for the community and paid for by government, e.g. the police, public school teachers.
Production: The creation of goods and services to satisfy human wants, including moving them to the consumer.

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