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A bird's eye on Relationship of Commerce and Economics


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The origin of commerce is deeply rooted in the economics activities of mankind. In the words of Evelyn Thomas. “Economics is the study of man `s behavior in earning his living. To earn this living. Men enter into a wide variety of occupations concerned with the production of the goods and services. That is needed by the community in which they live”.



Economics provide a theoretical background to analyze the effort of human being in earning their livelihood through the operations of production and the processes of exchange. Economics scientifically studies the sum total of all economics activities and help in arriving at broad principles or laws that characterize the human behavior under different sets of circumstances. In commerce these very activities are studies from the occupational point of view and lays down norms for systematically carrying them out. Commerce can rightly be described as practical economics or business economics.

Commerce and economics are inter-related subjects. Commerce is concerned with man’s behavior in the pursuit of wealth. The word ‘wealth’ has a different connotation in economics. It consist of those goods and services which have three characteristics (i) utility –power to satisfy a wants (ii) limitation of quantity –scarcity in availability (iii) power of being transferred –capable of having its ownership transferred from one person to another. A commodity which satisfies all the conditions has value and is wealth from economic point of view. Any commodity which does not have value, even though very useful, will not be called wealth because it does not satisfy all the three conditions. The air and sunshine are essential for man but do not have any price because there supply is abundant.
In economics it is investigated how wealth is produced and how it is transferred between man and man and one community to another and finally how it is used or consumed by those who possess in economics these matter are studied from the point of view of mankind in general, whereas in commerce they are considered from the point of view of the business man.

All these factor which add value i.e. capacity to command price. To existing goods play there parts in producing wealth. Matter can neither be created nor destroyed. Its form can be altered. And it may be transferred from one man to other and from one place to other where they are more acceptable. The production of cotton goods, beside growing and weaving, includes bleaching and printing and also there transportation and distribution to the ultimate consumer. A trader who brings the commodity from a place where it has less utility to a place where it has more demand creates place utility in them similarly. Other persons such as retailer. Transport workers, insurance agents. Are all doing their parts greater or lesser degree? To operate the vast productive machine and to increase the value of raw materials and other commodities. The goods may be produced in anticipation of demand. These will have to be stored at the time when these are not needed. This is possible with the help of warehousing. The running of a business and transporting the goods involve risk. Unless otherwise the risk is covered the producers and traders will not increase the volume of their work. So insurance services help in increasing the volume of production and distribution. The activities of various mercantile agents in the chain of distribution. Linking manufacturers on the end and ultimate consumer on the other end are a part of commerce.

It is a well known fact that human wants are unlimited. The resources to satisfy these wants are limited. It is not possible to satisfy all the wants. Robbins has defined has economics as a study of human behavior as a relationship between ends and scarce means which have alternate uses. In Robbins’s view the resources can be employed differently to satisfy more and more wants. Commerce creates place utility in goods. The goods produced anywhere are brought to a place where these are needed it is not only that goods are made available to the consumers but these are supplied at competitive prices. There is specialization in production of goods. Certain prices or countries specialize in producing certain goods. These goods will be produced at a reasonable price. With the help of commerce these goods are made available at all those prices where these are needed. The development at trade at international level solve the problem of choice too, the availability of deferent goods enables the consumer as per his choice. The scarce resources of the consumer are put to best use.

The economic development of the society and the development of commerce are inter linked. The rapid increase in population his increase the demand for all type of goods. The increase the purchasing power of consumers is creating demand for various goods and services. All this has given inputs to commerce. To meet the ever increasing in demand, production is carried on a large scale. The advancement in science and technology has brought the era of mass production. The division of labour and scientific management has increased productivity and profitability. The specialization in every activities has tremendously increased the economic activities i.e. production, consumption, exchange distribution. The improvement in transport and communication faculties has increased the volume of trade. The production is now undertaken for international markets. The setting up of exchange banks, financial institutions, insurance companies, warehouses. Advertisement agencies, etc. indicate the development of commerce.


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