Hilltop Training Center Chinhamapere
Junior Secondary School
Commerce Study Guide
Introduction to Commerce
Production
- Production is the provision of goods or services to satisfy human needs and wants. Goods are
tangibles like motor vehicle, clothes groceries etc. On the other hand, services are things that
cannot be touched like legal advice, entertainment and teaching.
- Needs are things which people can hardly live without, that, is they are critical in sustaining
human life. These include food, shelter, clothing, water, oxygen etc.
- Wants are an extension of human needs which are critical in improving standards of living.
People can live without them, for example, Television (TV), Digital versatile disks (DVD), home
theatre systems etc.
- Producers provide goods and services for example fisherman, farmer, doctors, at a profit.
Consumers make use of money to obtain these.
Direct Production
This is a situation where human beings try to satisfy their needs and wants using their efforts. For
example producing own food, farmer producing for own consumption, sewing own clothes and
build own houses. In this economic set up, the standard of living is very low due to lack of
specialization.
Indirect Production
Is a set up, where individuals concentrate in producing what they know best. Production is mainly
for sale not for own use for example commercial farmers, professional builders etc.
- People work in occupations they are proficient in and leave those occupations they are not
skilled in to those with necessary expertise.
Commerce
- This is concerned with the buying and selling of goods, the exchange of commodities and their
distribution.
- Commerce is made up of trade and aids to trade.
- Trade can either be home or international.
- For trade to roll aids to trade are necessary. These include banking, insurance, warehousing,
advertising, transport and communication.
Chain of Production
- This defines the various stages through which a product passes before it reaches the final user.
- At each stage, consumption occurs.
When the final product is bought by the final consumer, it is called a consumer good, but if bought for
further use for example milk to produce yoghurt it is a producer good.
FACTORS OF PRODUCTION
- These are resources that are needed to produce goods and services.
- They are land, labour, capital and entrepreneurship.
- These are paid a price for their contribution towards production, i.e. rewards to factors of
production.
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Branches of Production
(a) Extractive it involves the extraction of raw materials from the land or sea. This includes fishing,
mining, agriculture and forestry.
(b) Manufacturing - converts the raw materials into semi or finished goods for example oil is
processed to give diesel, petrol etc.
(c) Constructive - uses production from manufacturing to build roads, bridges, houses etc. Also
includes industries that assemble components to produce finished products.
(d) Commerce – trade and aids to trade.
(e) Direct services – services which are provided and consumed at the same time for example
teaching, nursing etc.
Divisions of Production
- Production can be divided into: Industry, Commerce and Direct Services.
Essay Questions
1. Using examples, distinguish between:
(i) Human wants and needs. [6]
(ii) Direct and indirect production. [6]
(iii) Goods and services. [8]
RETAIL TRADE
- Retail means “to cut off a piece” thus retailers are traders who buy in bulk and sell to consumers
in smaller pieces or quantities.
- A retailer may buy a cartoon of candles but would later on sell the candles in either single
packets or even one candle at a time.
- Its important to note that retail prices are usually higher than wholesale price because of their
markups to cover for more expenses they incur.
- Retailers are, however, located in convenient places and offer a variety of merchandise.
Examples of retailers: supermarkets, General dealers, tuck shops, hawkers.
Services offered by Retailers/Functions
Retailers are middlemen, linking the providers of goods, for example, wholesalers and manufacturers
with the consumers of the goods. Thus their functions or services are to either of the two groups.
Breaking of bulks , providing variety, convenient location, providing local supplies,dealing
with complaints, offering credit,delivery, giving advice
Types of Retailers include:
1. Multiple shops/chain store
2. Department stores
3. Independent stores
4. Supermarkets
5. Hypermarkets
6. Cooperative Retail stores
