Question

The auxiliaries to trade help to remove the various bottlenecks such as place, time, person, risk & exchange. Explain how.

Answer 1

There are a lot of activities that are required to facilitate the purchase and sale of goods. These are called services or auxiliaries to trade and include transport, banking, insurance, communication, advertisement, packaging and warehousing. Commerce, therefore, includes both, buying and selling of goods i.e., trade as well as auxiliaries such as transport, banking, etc.

Commerce provides the necessary link between producers and consumers. It embraces all those activities, which are necessary for maintaining a free flow of goods and services. Thus, all activities involving the removal of bottlenecks in the process of exchange are included in commerce. The bottlenecks may be in respect of persons, place, time, risk, finance, etc.

The hindrance of persons is removed by trade thereby making goods available to the consumers from the producers. Transport removes the bottlenecks of place by moving goods from the places of production to the markets for sale. Storage and warehousing activities remove the bottleneck of time by facilitating holding of stocks of goods to be sold as and when required. Goods held in stock as well as goods in course of transport are subject to the risk of loss or damage due to theft, fire, accidents, etc.

Protection against these risks is provided by insurance of goods. Capital required to undertake the above activities is provided by banking and financing institutions.

Advertising makes it possible for producers and traders to inform consumers about the goods and services available in the market. Hence, commerce is said to consist of activities of removing the hindrances of persons, place, time, risk, finance and information in the process of exchange of goods and services.