Nature, Purpose and scope of Business — OCM STD 11 Commerce — Question
Gujarat BoardEnglish MediumSTD 11 CommerceOCMNature, Purpose and scope of Business5 Marks
Question
What is Trade ? Explain its main characteristics.
✓
Answer
introduction :
Initially man was self – reliant. Due to various researches, education, and awareness his needs have increase remarkably, as a result man started depending on other to fulfill his needs. From man’s dependent condition, emerged and began the barter system. Due to some of its limitations as medium of barter, finance was invented and against finance, thing were exchange that is trade. Through trade man started fulfilling his needs. Today man is so much interwoven with the activities of trade that it is difficult to separate him from trade.
What is Trade? :
Between two individual or two nations exchange of things against money with the objective of profit is trade.
Some call it an activity of purchase and sale of thing or product or service, other thing or service is exchange which is called barter.
When there was no invention of money in the ancient time man ‘s needs were fulfilled through barter.
As per general concept : “ Exchange any object against finance and barter of finance against any object is trade.“
As per broad concept : “ purchase of a product with a view to earning profit and to self it again is a trade
Example :
when you purchase a jeans pant from a shopkeeper and pay for it and thus you fulfill your need for pant. On the other hand.
The shopkeeper gets money out of which he earns profit. In the same way you pay electricity bill and get services of electricity.
Thus, barter of things against money and money against thing is trade and objective of profit is implied in it.
Characteristics of trade :
Main characteristics of trade are as under.
Two parties :
Two parties are in trade e.g. purchase of a product or services (one who makes payment ) and the seller o f a product or services (One who services payment ). Trade is not possible without two parties.
Activity of exchange :
Exchange between two parties, is necessary in trade.
Money against product or services or product or service against money is required in trade.
A part of economic activity :
Trade is a part of economic activity.
The objective of trader is to earn profit. In certain dealing, if the seller does not earn profit even then it is called trade because its aim and objective is to earn more profit by attracting more customers.
Transfer of ownership :
In trading there is an exchange of product against money so the owner of the product of seller changes and purchaser owns that product, thus transfer of ownership occurs.
Gaining of consideration is necessary :
Consideration means benefit gained by seller and purchase of product of sale or purchase of product.
The purchases gets benefit of product against money.
It is called consideration.
When the seller gets money against product, it is called consideration, In other words, when any product is given free of charge without taking considerations of then it is not ‘ trading ‘ but it is ‘ gifts ‘.
Continuity :
One or two transaction of Barter of product against money can not be called ‘ trade ‘.e.g. sale of used old newspaper twice or thrice a year, sale of sold used T.V or furniture is carried out against money, yet it is not considered ‘ trade;.
When such transactions are carried out frequently it is called trade.
Continuity of one type of transportation should be maintained in a trade.
Product and services :
In trade against money not only product but also services are battered.
Against money banking, transportation, warehouse, agents. insurance services are obtained. Individual and institutions too provide this type of services.
So it can be said that they too in the ‘trade’ of providing services against money.
Legal Activity :
Barter of any product against money is called ‘trade’. Prohibited product can not be traded. e.g. wine, opium, charas, cocaine narcotic etc.
Conclusion :
Normally general public hold the idea of trading as only purchase and sale.
But in reality this activity holds special characteristics.
That is why each purchase – sale activity can not be called trading activity/.
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