What Are the Functions of Commerce and Forms of Trade?

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Commerce is the large-scale organized system of activities, functions, procedures and institutions directly related to the exchange (buying and selling) of goods and services among two or more parties within local, regional, national or international economies.

The activities of commerce facilitate a smooth flow of goods from the producers to the end consumers. It removes hindrances such as person, place, risk, time, and finance arising out of the distribution process.


Trade is the voluntary exchange of goods and services between economic actors. Since trade is consensual, it benefits all parties involved.

Traditionally, economic theory assumed that factors of production (e.g., capital and technology) did not flow easily over national borders. However, recently this has changed as technology and capital flow more freely from country to country.

This has been referred to as trade creation, which enhances global welfare because it creates more efficient production. In addition, it reduces the import costs for consumers in one member of a trade bloc who can buy products from another member at lower prices because they do not have to pay trade barriers such as tariffs.


Banking is a financial industry that helps people and businesses store and invest their money. It also makes loans to individuals and companies.

Banks accept deposits and issue demand deposit certificates (CDs), which pay interest to the depositor. They also offer a range of other services such as credit cards, automatic teller machines (ATMs), individual retirement accounts, and home equity loans.

However, some have argued that banking should be separate from commerce. They believe that mixing the two could benefit commercial firms by allowing them to tap into banks’ reputational capital. Alternatively, it may lead to problems with competition.


Insurance is a risk-transfer mechanism wherein an insured person or company can get financial help in times of loss or damage. This helps them reduce the stress caused due to losses and also gives a sense of assurance to the policyholder.

It is important to know that a business must carry at least four general types of insurance: liability, property, employment and auto. In addition, a company should obtain trade credit insurance to cover its trading partners’ losses in the event that they default on payment.

Insurance companies determine the risk they are exposing themselves to by examining a number of factors that contribute to the likelihood of certain events. This process is called actuarial analysis.


Warehouses are facilities where goods can be stored before being distributed. They can be used by big companies with many products or small businesses that need a safe place to store their stock.

Warehousing can also help companies smooth out price fluctuations by keeping a buffer of inventory, and investing in stock when prices are favourable. These processes help keep customers happy and bring repeat business with lower costs and higher profits.

Warehouses can also perform other functions on behalf of the owner such as processing, grading and branding. They can also assemble products, localise them, and make product bundles for various markets.


Advertising is a process of communicating information to people about a product. It involves the use of words, images and symbols that stimulate desire.

It is an economic process-it helps a product to become known and facilitates exchange between those who need it and those who can satisfy this need.

The main objective of advertising is to increase sales of a product. It accomplishes this through securing greater consumption, attracting new buyers and introducing new uses for the commodity.

Advertising also assists in creating demand for a commodity by highlighting its features and suggesting new uses for it. It is used to secure a steady flow of business for a manufacturer or advertiser and increases its overall revenue over time.

What Are the Functions of Commerce and Forms of Trade?

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