Functions of the Wholesaler

len Alfred Ajibola - Wed, 12th February, 2020 @ 15:56: PM

Topics in Economics

Advantages of Inflation Disadvantages of Inflation Concept of Inflation in Economics Scheme of work for Economics, SS1, First Term Scheme of work for Economics, SS1, Second Term Scheme of Work for Economics, SS1, Third Term Functions of the Wholesaler Advantages and Disadvantages of the Wholesaler Wholesale Market: Who is a Wholesaler? Characteristics of the Wholesaler Retail Market: Who is a Retailer and Examples of Retailers Market: Types of Market Market - What is a Market in Economics? Elasticity of Supply: Types of Supply Elasticity Supply Elasticity: Elasticity of Supply explained Demand Schedule - Types of Demand Schedule Demand: What is Demand? Law of Demand Concept and Types of Cost Supply, Supply Curve and Law of Supply What is a Black Market, Its advantages and disadvantages

Academic Questions in Economics

Please check out our Test Your Knowledge page to see all Questions and Answers

The concept of  Ceteris Paribus Assumption in economics states that _____.

  • A. Supply and Demand are antagonistic

  • B. When given two choice of similar products with the same price (assuming all other factors are constant), you will prefer to buy that with a lower price

  • C. Supply and Demand are agonistic

  • D. When given two choice of dissimilar products with the same price (assuming all other factors are constant), you will prefer to buy that which you need most

  • E. When given two choice of similar products with the different prices (assuming all other factors are constant), you will prefer to buy that with a lower price

  • F. When given two choice of dissimilar products with the different prices (assuming all other factors are constant), you will prefer to buy that with a lower price

The willingness of a person to buy a specific quantity of goods or services at a given price and time is termed _____.

  • A. Scale of preference

  • B. Economies of scale

  • C. Opportunity Cost

  • D. Cost

  • E. Supply

  • F. Demand

Costs generally treated as expenses in business are termed _____.

  • A. Fixed cost

  • B. Variable cost

  • C. Sunk cost

  • D. Direct cost

  • E. Private cost

  • F. Outlay cost

When an entrepreneur pays cash (money) for materials needed for production, such money is termed as an _____ cost.

  • A. Accounting

  • B. Entrepreneurship

  • C. Economic

  • D. Outlay

  • E. Opportunity

  • F. Incremental

A government mandated maximum price for goods or services is termed _____.

  • A. Price height

  • B. Price maxima

  • C. Price ceiling

  • D. Price level

  • E. Price finale

  • F. Price top-zone

The quantity of supplied services or goods will increase as the price increases and they will decrease as the price decreases provided all other factors remain constant.

The above statement is attributed to the _____.

  • A. Law of price increase and price decrease

  • B. Law of product quantity

  • C. Law of demand

  • D. Law of supply

  • E. Law of quantity demanded and supplied in relation to price

  • F. Law of purchases on services and goods

The following statements are true concerning explicit opportunity cost except _____.

  • A. They are recorded in the accounts book

  • B. It is a type of cost

  • C. They may also be referred to as 'out of pocket' cost

  • D. They are utilized as factors of production

  • E. Money spent on wages, salaries and raw materials are examples of explicit opportunity cost

  • F. Explicit opportunity cost are always utilized for investment

Needs / Wants

Cost (Naira)



 Console Game






 Smart watch





Which of the following statement is incorrect concerning the table?

  • A. Ipod is the least important need of the individual

  • B. If the individual has 200,000 Naira at hand, then the laptop, iPad, smart watch and iPod will all be considered as opportunity cost

  • C. If the individual has 480,000 Naira, he or she will purchase all the items in the table

  • D. Console game is the most important need of the individual

  • E. The table shows a scale of preference

  • F. The individual needs an ipod



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Functions of the Wholesaler:

The wholesalers are traders that act as a link between the producers or manufacturers and the retailers. For this reason, they may also be referred to as the intermediary or middleman.

You can read on the Advantages and Disadvantages of the Wholesaler here.

By definition, the wholesaler is a trader that buys goods in large quantities from the producers (or manufacturers) and sells lesser quantities to the retailers.

Please read more on the Wholesaler here.

The wholesaler performs the following functions:

1. Storage Function

The wholesaler will typically own or rent a storage facility to preserve the goods which he/she buys (in large quantities) from the manufacturers.

The use of storage facility is crucial to the wholesaler's business because he/she may end up selling the goods purchased from the producer after some period of time. To this end, the wholesaler will need a storage facility to keep such goods intact.

You can read on the Problems of Agriculture in Nigeria here.

Note: The term wharehouse describes the place where the wholesalers keep large quantities of goods.

2. Distributive Function

The wholesalers buys goods from the manufacturers and distributes them to other locations. Through this process, they expand the market for such product.

Please read on the concept of Market in Economics here.

As an instance, one of the appliances in your home (or even your phone) may not be manufactured in your country or state. It is in fact the distributive function of the wholesaler that gets those products into your country or state.

Please read more on Foreign Trade here.

3. Transportation Function

It is the duty of the wholesalers to provide transport facilities in order to move goods from the producers' factory to various warehouses (owned or rented by the wholesaler) and from these warehouses to the retailers location.

The goods are transported in bulk quantities by the wholesaler in order to minimize the cost of transport.

Please read on the Advantages and Disadvantages of Road Transport here.

Note: In most cases, the wholesaler will own the transport facilities but sometimes, they may be rented.

4. Middleman

The wholesaler always function as a middleman between the producers and the retailers. He buys goods in large quantities from the producers and sells in smaller quantities to the retailers.

Please read on the Characteristics of the Wholesalers here.

5. Provides Useful Information

The wholesaler provides useful and valuable information to the producers and retailers.

  • To the producers, they provide details on the acceptance of their products and ways to bring about its improvement.
  • To the retailers, they provide information relating to the advantages and benefits of the product's usage. They also give clues to retailers on various reasons why the consumers should buy their product.

Please read on Outbound Marketing here.

6. Specialization Function

The wholesalers are usually associated with the bulk purchase of a specific type of a product from a manufacturer (or a few related products from one or more manufacturers).

The wholesalers are very knowledgeable on the products they sell and as such are able to deal with issues concerning such products.

Please read on the Concept of Business and Business Studies here.

7. Financing Function

The wholesalers are likely to pay in advance for the manufacturer's product since they buy in large quantities.

Note: Since the wholesaler make payments in advance, this will aid the producers to better understand the level of demand for their products.

Please read on Demand and Law of Demand here.

Conversely, the wholesalers will accept to sell their products on credit to the retailers. They do this in order to promote the product and its sales. Retailers who receive products on credit will make payments after sales have been made.

8. Price Stability Function

The wholesalers are known to sell goods at a stable price in accordance to what they had purchased from the manufacturers. They are able to achieve this because they buy goods in large quantities; and will therefore sell at similar prices to the retailers.

Please read on Supply Elasticity here.

If the cost of production increases from the ends of the producers, the wholesalers will buy at a higher price and sell at an increased but stable price to the retailers. The different retailers will therefore sell at a similar price to the final consumers since they all bought the specific goods from the wholesaler. For instance, sachet Peak Milk will sell at similar prices at various retail stores.

9. Risk Bearer and Shock Absorbers

Although the producers, wholesalers and retailers are also risk bearers with regards to the sale of a product, the wholesalers will in addition act as a shock absorber especially in the movement and distribution of goods.

Also, due to unforeseen circumstances, the demand of goods may change (negatively) and the wholesalers will have to bear this probable risk.

Note: The wholesaler takes upon himself or herself the risk of damage during the process of moving goods (in transit) and their storage.

Please read on the Characteristics of Business here.

Another instance of risk shouldered by the wholesalers will come in the form of bad debts, especially by the retailers who got goods on credits and are unable to pay.

Similarly, the wholesalers may get substandard goods from the producers after making payments in advance. That's also a form of bad debt.

You can read on the Disadvantages of Money here.

10. Packaging and Branding

Certain wholesalers will need to assemble and brand the goods purchased from the manufacturers.

  • For instance, a company may buy different parts of a car from another country; and may further the car's production by reassembling, branding and packaging them to the taste and standard of the consumers.
    Please read on the Concept of Marketing here.

The wholesalers may also put their trademark, logo or brand name after branding and packaging had been done.

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Alfred Ajibola is a Medical Biochemist, a passionate Academician with over 7 years of experience, a Versatile Writer, a Web Developer, a Cisco Certified Network Associate and a Cisco CyberOps Associate.

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Amazing facts in Economics


A Black market is said to take place when there is illegal buying and selling of goods and services.

Black markets usually take place outside the government's rader and without government's knowledge so as to avoid tax or any other government regulations.

Black market presents the avenue for government prohibited goods like hard drugs, war weapons and firearms to be bought by criminals.

A black market can also occur on the web for cyber criminals or those who are involved in computer hacking. To achieve their malicious aim, these individuals will go into the dark web and purchase or rent their respective hacking tools for a fee. Normally, payments are made in crypto currencies.

However, a black market isn't generally considered as bad. Infact, it has its advantages and disadvantages.

Please read more on black market here

Below are some advantages of black market:

  • Goods and services are sold at a cheaper price.

  • It helps some people make plenty of money.

  • The illegal sales of human organs, for example, the sale of human kidneys have aided in saving some lives.

  • Some people actually depend on black market for their daily bread.

  • Some of the proceeds from black market may been utilized towards the economic growth of a Nation. For instance, schools and hospitals had been from money made from black market.

The law of supply states that:

The quantity of the supplied services or goods will increase as the price increases and they will decrease as the price decreases provided all other factors remain constant.

These constant factors are very important when stating the supply law. They include:

  • The price of Input resources

  • The kind of technology used during production

  • The number of suppliers

  • The number of buyers; and so on.


A graph that shows the relationship between the price of a product or service, and its quantity supplied is the supply curve.

Supply curve can be defined as a graphical representation of the direct relationship between the prices of goods and services and the quantity supplied (of such goods and services) within a particular period of time provided all other factors remain constant.

Len Academy - Supply CurvePlease read more on the law of supply and supply curve here

Consider the table below:

Needs / Wants

Cost (Naira)



 Console Game






 Smart watch




The above table shows us what a scale of preference would look like.

A scale of preference can be defined as the list of a person's needs or wants written in an order of importance.

You will observe that the person puts his most important needs or wants at the top of the list. Further down the list are his less important needs.

Now, let's imagine that this individual has 170,000 Naira to spend. According to the above scale of preference, the followings can be deduced;

  • A phone will be considered to be the most important; and it costs 50,000. He buys the phone.

  • A console game according to this person is next in importance; and it costs 120,000. He buys the console game.

Another question worth asking is:

  • What happens to his other needs?

This is where the term 'Opportinity Cost comes into play.

Please read more on scale of preference and opportunity cost here.

Scale of Preference can be defined as the list of a person's needs or wants written in an order of importance. 📜✍️

When you have a limited amount of money and could only buy some of the items on your list (the top items on the list); then the remaining items that you didn't buy will be generally considered as your opportunity cost.

Opportunity cost can be defined as the value of the best alternative that a person could have achieved or bought but couldn't achieve after the best choice had been achieved.

Opportunity cost are of two types. They are:

  1. Explicit Opportunity Cost
  2. Implicit Opportunity Cost

Please read on scale of Preference, Opportunity cost and the types of Opportunity cost here