1.1 The basics of commerce Commerce and trade Commerce = trade + 1. . ....................... to trade involves advertising 2. . ....................... consumers offer create supply 3. . ....................... elastic 14 7. . ....................... warehousing can be set 4. . ....................... to affect: influenzare available: disponibile to deliver: consegnare endless: infinito goods: beni income: reddito to match: incontrare to meet: soddisfare to set: fissare warehousing: immagazzinaggio willing: desideroso 6. . ....................... distribution insurance 5. . ....................... Definitions Commerce is used to indicate the action of exchanging products; it is a general term which refers to both the activity of purely buying and selling called trade and all those services to trade which make it possible and facilitate this exchange, such as: Advertising: the way to inform consumers about products; Banking: the financial assistance given to companies and individuals; Distribution: the network which makes products available to consumers; Insurance: the protection from all the risks involved during trade; Transport: the different ways of delivering goods ; Warehousing : the storing of goods. A market-led economy Commerce exists because some people request products and other people try to meet these requests. In such a system, people become consumers, using up what they buy and then asking for something else, and/or producers, putting together resources to manufacture what is asked for; this creates an endless cycle of production and consumption also called a cycle of supply and demand which is what governs a market-led economy, that is a system which aims to satisfy the needs of the market. The law of supply and demand While demand is the amount of a product consumers want to buy, supply refers to the amount of a product producers can offer. These two market forces set prices: if demand increases, prices increase, if supply is higher than demand, prices fall. In fact, when demand is high, producers usually charge higher prices because they are sure they will sell; however, if prices become too high, sales decrease because consumers are not willing to spend that much. Therefore, to satisfy consumers with a price they are prepared to spend and, at the same time, maximise their own profits, producers aim to charge a market-clearing price. Elastic and inelastic demand When supply matches demand, the market reaches an equilibrium. When demand is stable, and not affected by other economic factors such as price, fashion trends or income , it is inelastic (this happens for basic goods like bread, for example), instead, it is called elastic when it varies according to these economic factors.